We received money for breach of Crossing Agreement and damages to our property do I report this as a capital gain as I haven't sold the property and we are co-owners?

[roskoniko]

After negotiations we agreed to $15,000 as payment for the Breach of the Crossing Agreement and the damages caused to our property.

I have not sold my property.

Is this considered a Capital Gain.  

If yes as we are co-owner's we would each claim it on Schedule 3,

 Proceeds of disposition $7,500 each

 Expenses lawyers fee ($1,067)

I would leave adjusted cost base and year of acquisition blank

[TurboTax-Terry · Accepted solution]

Any portion of the lump sum payment for property affected, damaged or destroyed is generally considered to be proceeds of disposition or taxed as capital and may result in a capital gain or loss to the farmer. 

CRA generally accepts any reasonable portion of the adjusted cost that the taxpayer wishes to attribute to the proceeds if the property that is disposed is relatively small in relation to the entire property. (This would then reduce the remaining ACB of the property)

If a portion of the payment is specifically related to damage to growing crops, then that amount is taxed as income rather than capital. (If no crops are involved it is considered as Capital)

If the amount relates to a penalty assessed against the contravener it could be that portion is considered as a “Windfall” and non-taxable.