Marginal note:Inter vivos transfers by individuals
73 (1) For the purposes of this Part, where at any time any particular capital property of an individual (other than a trust) has been transferred in circumstances to which subsection (1.01) applies and both the individual and the transferee are resident in Canada at that time, unless the individual elects in the individual’s return of income under this Part for the taxation year in which the property was transferred that the provisions of this subsection not apply, the particular property is deemed
(a) to have been disposed of at that time by the individual for proceeds equal to,
(i) where the particular property is depreciable property of a prescribed class, that proportion of the undepreciated capital cost to the individual immediately before that time of all property of that class that the fair market value immediately before that time of the particular property is of the fair market value immediately before that time of all of that property of that class, and
(ii) in any other case, the adjusted cost base to the individual of the particular property immediately before that time; and
(b) to have been acquired at that time by the transferee for an amount equal to those proceeds.
Marginal note:Qualifying transfers
(1.01) Subject to subsection (1.02), property is transferred by an individual in circumstances to which this subsection applies where it is transferred to
(a) the individual’s spouse or common-law partner;
(b) a former spouse or common-law partner of the individual in settlement of rights arising out of their marriage or common-law partnership; or
(c) a trust created by the individual under which
(i) the individual’s spouse or common-law partner is entitled to receive all of the income of the trust that arises before the spouse’s or common-law partner’s death and no person except the spouse or common-law partner may, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust,
(ii) the individual is entitled to receive all of the income of the trust that arises before the individual’s death and no person except the individual may, before the individual’s death, receive or otherwise obtain the use of any of the income or capital of the trust, or
(iii) either
(A) the individual or the individual’s spouse is, in combination with the other, entitled to receive all of the income of the trust that arises before the later of the death of the individual and the death of the spouse and no other person may, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust, or
(B) the individual or the individual’s common-law partner is, in combination with the other, entitled to receive all of the income of the trust that arises before the later of the death of the individual and the death of the common-law partner and no other person may, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust.
Marginal note:Exception for transfers
(1.02) Subsection (1.01) applies to a transfer of property by an individual to a trust the terms of which satisfy the conditions in subparagraph (1.01)(c)(ii) or (iii) only where
(a) the trust was created after 1999;
(b) either
(i) the individual had attained 65 years of age at the time the trust was created, or
(ii) the transfer does not result in a change in beneficial ownership of the property and there is immediately after the transfer no absolute or contingent right of a person (other than the individual) or partnership as a beneficiary (determined with reference to subsection 104(1.1)) under the trust; and
(c) in the case of a trust the terms of which satisfy the conditions in subparagraph (1.01)(c)(ii), the trust does not make an election under subparagraph 104(4)(a)(ii.1).
Marginal note:Interpretation
(1.1) For greater certainty, a property is, for the purposes of subsections (1) and (1.01), deemed to be property of the individual referred to in subsection (1) that has been transferred to a particular transferee where,
(a) under the laws of a province or because of a decree, order or judgment of a competent tribunal made in accordance with those laws, the property
(i) is acquired or is deemed to have been acquired by the particular transferee,
(ii) is deemed or declared to be property of, or is awarded to, the particular transferee, or
(iii) has vested in the particular transferee; and
(b) the property was or would, but for those laws, have been a capital property of the individual referred to in subsection (1).
Marginal note:Capital cost and amount deemed allowed to spouse, etc., or trust
(2) Where a transferee is deemed by subsection 73(1) to have acquired any particular depreciable property of a prescribed class of a taxpayer for an amount determined under paragraph 73(1)(e) and the capital cost to the taxpayer of the particular property exceeds the amount determined under that paragraph, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)
(a) the capital cost to the transferee of the particular property shall be deemed to be the amount that was the capital cost to the taxpayer thereof; and
(b) the excess shall be deemed to have been allowed to the transferee in respect of the particular property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition thereof.
Marginal note:Inter vivos transfer of farm property to child
(3) For the purposes of this Part, if at any time any land in Canada or depreciable property in Canada of a prescribed class of a taxpayer or any eligible capital property in respect of a business carried on in Canada by a taxpayer is transferred by the taxpayer to a child of the taxpayer who was resident in Canada immediately before the transfer, and the property was, before the transfer, used principally in a farming business in which the taxpayer, the taxpayer’s spouse or common-law partner or any of the taxpayer’s children was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot),
(a) where the property transferred was depreciable property of a prescribed class, the taxpayer shall be deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph 73(3)(a)(ii) nor (iii) applies, the proceeds of disposition otherwise determined,
(ii) if the proceeds of disposition otherwise determined exceeded the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) that proportion of the undepreciated capital cost to the taxpayer immediately before the time of the transfer of all of the depreciable property of the taxpayer of that class that the fair market value at that time of the property so transferred was of the fair market value at that time of all of the depreciable property of the taxpayer of that class,
the greater of the amounts referred to in clauses (A) and (B), or
(iii) if the proceeds of disposition otherwise determined were less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(b) where the property transferred was land, the taxpayer shall be deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph 73(3)(b)(ii) nor (iii) applies, the proceeds of disposition otherwise determined,
(ii) if the proceeds of disposition otherwise determined exceeded the greater of
(A) the fair market value of the land immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the land immediately before the time of the transfer,
the greater of the amounts referred to in clauses (A) and (B), or
(iii) if the proceeds of disposition otherwise determined were less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(b.1) where the property transferred was eligible capital property, the taxpayer shall be deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph 73(3)(b.1)(ii) nor (iii) applies, the proceeds of disposition otherwise determined,
(ii) if the proceeds of disposition otherwise determined exceeded the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the amount determined by the formula
4/3(A × B/C)
where
- A
- is the cumulative eligible capital of the taxpayer in respect of the business,
- B
- is the fair market value of the property immediately before the transfer, and
- C
- is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business,
the greater of the amounts referred to in clauses (A) and (B), or
(iii) if the proceeds of disposition otherwise determined were less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(c) section 69 does not apply in determining the proceeds of disposition of the depreciable property, the land or the eligible capital property;
(d) the child shall be deemed to have acquired the depreciable property or the land, as the case may be, for an amount equal to the proceeds of disposition determined under paragraph 73(3)(a) or 73(3)(b), respectively;
(d.1) where the property transferred was eligible capital property of the taxpayer, the child shall be deemed to have acquired a capital property, immediately after the transfer, at a cost equal to the proceeds of disposition determined under paragraph 73(3)(b.1), except that, where the child continues to carry on the business previously carried on by the taxpayer, the taxpayer’s spouse or common-law partner or any of the taxpayer’s children, the taxpayer shall be deemed to have acquired an eligible capital property and to have made an eligible capital expenditure at a cost equal to the total of
(i) the proceeds of disposition referred to in paragraph 73(3)(b.1), and
(ii) 4/3 of the amount determined by the formula
(A × B/C) - D
where
- A
- is the amount, if any, determined for F in the definition cumulative eligible capital in subsection 14(5) in respect of the business of the taxpayer immediately before the time of the transfer,
- B
- is the fair market value of the property immediately before that time,
- C
- is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business, and
- D
- is the amount, if any, included under subparagraph 14(1)(a)(iv) in computing the income of the taxpayer as a result of the disposition,
and for the purpose of determining at any subsequent time the child’s cumulative eligible capital in respect of the business, an amount equal to 3/4 of the amount determined under subparagraph 73(3)(d.1)(ii) shall be added to the amount otherwise determined in respect thereof for P in the definition cumulative eligible capital in subsection 14(5);
(d.2) for the purposes of determining after the time of the transfer
(i) the amount deemed by subparagraph 14(1)(a)(v) to be the child’s taxable capital gain, and
(ii) the amount to be included under subparagraph 14(1)(a)(v) or paragraph 14(1)(b) in computing the child’s income
in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined for Q in the definition cumulative eligible capital in subsection 14(5) the amount determined by the formula
A × B/C
where
- A
- is the amount, if any, determined for Q in that definition in respect of the business of the taxpayer immediately before the time of the transfer,
- B
- is the fair market value immediately before that time of the property transferred, and
- C
- is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business; and
(e) where the child is deemed to have acquired depreciable property of a prescribed class of the taxpayer for an amount determined under paragraph 73(3)(d) and the capital cost to the taxpayer of the property exceeds the amount determined under that paragraph, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),
(i) the capital cost to the child of the property shall be deemed to be the amount that was the capital cost to the taxpayer thereof, and
(ii) the excess shall be deemed to have been allowed to the child in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition thereof.
Marginal note:Inter vivos transfer of family farm corporations and partnerships
(4) For the purposes of this Part, where at any particular time after April 10, 1978 a taxpayer has transferred property to a child of the taxpayer who was resident in Canada immediately before the transfer, and the property was, immediately before the transfer, a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer (within the meaning assigned by subsection 70(10)), the following rules apply:
(a) the taxpayer shall be deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph 73(4)(a)(ii) nor (iii) applies, the proceeds of disposition otherwise determined,
(ii) if the proceeds of disposition otherwise determined exceeded the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the property immediately before the time of the transfer,
the greater of the amounts referred to in clauses (A) and (B), or
(iii) if the proceeds of disposition otherwise determined were less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(b) section 69 does not apply in determining the proceeds of disposition of the property; and
(c) the child shall be deemed to have acquired the property for an amount equal to the proceeds of disposition determined under paragraph 73(4)(a).
Marginal note:Disposition of a NISA
(5) Where at any time a taxpayer disposes of an interest in the taxpayer’s NISA Fund No. 2, an amount equal to the balance in the fund so disposed of shall be deemed to have been paid out of the fund at that time to the taxpayer except that,
(a) where the interest is disposed of to the taxpayer’s spouse or common-law partner, former spouse or common-law partner or an individual referred to in paragraph 73(1)(d) (as it applies to transfers of property that occurred before 1993) in settlement of rights arising out of their marriage or common-law partnership, on or after the breakdown of the marriage or common-law partnership, that amount shall not be deemed to have been paid to the taxpayer if
(i) the disposition is made under a decree, order or judgment of a competent tribunal or, in the case of a spouse or common-law partner or former spouse or common-law partner, a written separation agreement, and
(ii) the taxpayer elects in the taxpayer’s return of income under this Part for the taxation year in which the property was disposed of to have this paragraph apply to the disposition; and
(b) where the interest is disposed of to a taxable Canadian corporation in a transaction in respect of which an election is made under section 85, an amount equal to the proceeds of disposition in respect of that interest shall be deemed to be paid, at that time, to the taxpayer out of the taxpayer’s NISA Fund No. 2.
Marginal note:Application of s. 70(10)
(6) The definitions in subsection 70(10) apply to this section.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 73
- 1994, c. 7, Sch. II, s. 50, Sch. VIII, s. 29, c. 21, s. 34
- 1995, c. 3, s. 19
- 2000, c. 12, s. 142
- 2001, c. 17, s. 53
- 2002, c. 9, s. 28
- Date modified: