Can a family farm be transferred between generations in Ontario without triggering immediate capital gains tax?

Often, yes, though this is a federal tax question rather than an Ontario one. The Income Tax Act generally treats a person's property as sold at its fair market value immediately before death, or on certain lifetime transfers, which can trigger capital gains — but qualifying farm property transferred to a child can, in the right circumstances, use a tax-deferred "rollover," meaning the tax that would otherwise be triggered is postponed rather than eliminated, typically until the child later disposes of the property.

Whether a specific transfer qualifies depends on how the property has been used, who's receiving it, and how the transfer is structured, and getting any of that wrong can mean an unexpected tax bill lands on the estate or the family instead of being deferred. This is squarely a federal tax planning matter, and the rules involve enough technical detail, around what counts as qualifying farm property and how the rollover interacts with corporate or partnership structures, that they should be worked through with an accountant or tax lawyer well before the transfer happens, not discovered afterward. Ontario estate and probate rules apply on top of this but don't change the federal tax analysis.