Use of a spousal trust now precludes use of the spouse’s capital gains deduction for trust property

Two suggested drawbacks of using a spousal trust are that (i) any capital gains deduction (CGD) otherwise available to the surviving spouse can only be claimed where the spousal trust sells qualified property during the lifetime of the spouse (which often would defeat the testator's intentions), and (ii) having regard to the repeal of s. 110.6(12) for 2016 and subsequent taxation years, there is no ability to use the spouse's CGD on death.

Neal Armstrong. Summary of Dane ZoBell, "Spousal Trusts Have Limited CGD Access," Canadian Tax Focus (Canadian Tax Foundation), Vol. 8, No. 1, February 2018, p. 15 under s. 104(21.2).