This publication examines the deeming rules that apply when property is transferred between spouses or former spouses as a result of marriage breakdown. It analyzes the available exceptions under the Income Tax Act, with particular focus on the joint election mechanism that enables spousal rollover relief, allowing transfers to occur at tax cost rather than fair market value.
Under subsection 73(1) of the Income Tax Act, property transfers between spouses during marriage breakdown are subject to automatic rollover treatment, but specific conditions must be met to ensure the transfer occurs at adjusted cost base rather than fair market value.
The joint election mechanism provides an essential planning tool for divorcing couples and their advisors, allowing them to manage the tax consequences of property division and avoid unintended capital gains recognition.
Understanding the interplay between the attribution rules, the deeming provisions, and the available elections is critical for tax advisors structuring settlements in family law matters involving significant asset portfolios.
We implement Section 85 rollovers and related elections across all nine common law provinces.
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