The relief under s. 128.1(6)(c) for a returning Canadian is reduced if the (non-TCP) subject property has declined in value.

Individuals returning to Canada and electing under s. 128.1(6)(a) can retain the original adjusted cost base (ACB) of their taxable Canadian property (TCP) owned by them continuously from the emigration time. This avoids the property’s deemed disposition at the time of emigration, thereby cancelling the departure tax.

Furthermore, if a former Canadian resident returns to Canada after owning capital property that was not TCP during the period of non-residency, that taxpayer may elect under s. 128.1(6)(c) to adjust the proceeds of disposition upon emigration and the ACB arising on immigration of every property disposed of under s. 128.1(1)(b) upon re-establishing residence.

For example, the taxpayer, on departing Canada, has shares with an FMV of $1 million and an ACB of $100,000. That FMV declines to $500,000 at the time of return. S. 128.1(6)(c) allows the reduction of the proceeds of disposition at the time of immigration by the lesser of the initial capital gain upon emigration ($900,000) and the FMV of the property on immigration ($500,000). If the taxpayer then elects under s. 128.1(6)(c) to reduce the departure tax, the capital gain upon emigration becomes $400,000, i.e., ($1,000,000 - $500,000) - $100,000.

Thus, full tax deferral is allowed if the FMV remains at $1 million, but not if it decreases.

Neal Armstrong. Summary of Balaji Katlai and Jin Wen, “Disposition of Capital Property by Returning Residents: Relief and Exceptions,” Canadian Tax Focus, Vol. 15, No. 4, November 2025, p. 12 under s. 128.1(6)(c).