Transfers of property to a spouse or common-law partner or to a trust for a spouse or common-law partner

You generally do not have a capital gain or loss if you give capital property to your spouse or common-law partner, a spousal or common-law partner trust, or a joint spousal or common-law partner trust or an alter ego trust (for definitions of these trusts, see the T3 Trust Guide).

At the time you give the gift, depending on the type of property you give, you are considered to receive an amount equal to one of the following:

Your spouse or common-law partner, or the trust for your spouse or common-law partner or for yourself, is considered to have bought the capital property for the same amount that you are considered to have sold it for.

You may have transferred or loaned property to your spouse or common-law partner, a person who has since become your spouse or common-law partner, or a trust for your spouse or common-law partner. If that person or the trust sells the property during your lifetime, you usually have to report any capital gain or loss from the sale. You usually have to do this if, at the time of the sale you meet both of the following conditions:

  • you are a resident of Canada
  • you are both still married or living in a common-law relationship

If you are living apart because of a breakdown in the relationship, you may not have to report the capital gain or loss when your spouse or common-law partner sells the property. In such a case, you have to file an election with your income tax and benefit return. For more information, see Election to not report the capital gain or loss.

If you sold the property to your spouse or common-law partner or a trust for your spouse or common-law partner and you were paid an amount equal to the fair market value (FMV) of the property, there is another way to report the sale. Generally, you can list the sale at the property's FMV, and report any capital gain or loss for the year you sold the property. To do this, you have to file an election with your return. To make this election, attach to your return a letter signed by you and your spouse or common-law partner. State that you are reporting the property as being sold to your spouse or common-law partner at its FMV, and that you do not want subsection 73(1) of the Income Tax Act to apply.

If your spouse or common-law partner or the trust later sells the property, your spouse or common-law partner or the trust has to report any capital gain or loss from the sale.

A special situation exists if all of the following apply to you:

  • You owned capital property (other than depreciable property or a partnership interest) on June 18, 1971
  • You gave the property to your spouse or common-law partner after 1971
  • Your spouse or common-law partner later sold the property

In this case, certain rules apply when calculating your and your spouse's or common-law partner's capital gain or loss to remove any capital gains accrued before 1972. For more information, see IT209, Inter vivos gifts of capital property to individuals directly or through trusts, and its Special Release.

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