CRA indicates that a taxpayer generally can file a s. 45(3) election at any time up to the filing-due date for the year of the property’s “actual” disposition (including under s. 70(5))

In 2014, the taxpayer converted his income-producing property to his principal residence and, in 2017, he filed an election under s. 45(3) respecting that change of use – but in 2020 filed a T1 adjustment request requesting the rescinding of the election and reporting a capital gain arising from the 2014 change in use.

CRA noted that (in the absence of a Ministerial demand for the election), the election was required to be made by the taxpayer’s filing due date for the taxation year in which the property was actually disposed of by the taxpayer. Since the taxpayer filed the s. 45(3) election by the filing-due date for his 2017 return and, in 2017, he had not yet actually disposed of the property, the election had been timely filed.

Regarding the 2020 request, the revocation of the election could be permitted pursuant to s. 220(3.2) by the Minister. If accepted, the taxpayer would not be liable to a penalty under s. 220(3.5), as the revocation was made prior to the election’s due date.

Where the taxpayer had instead died in 2019, without having yet filed the s. 45(3) election, the date “the property is actually disposed of by the taxpayer” under s. 45(3) is considered to be the date of the deemed disposition of the property on the taxpayer’s death pursuant to s. 70(5). Therefore, the relevant filing due date for making the election would have been that for 2019 terminal return.

Neal Armstrong. Summary of 26 September 2025 Internal T.I. 2022-0923881I7 under s. 45(3).