Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: What is the tax treatment on death of property, a cottage, held in joint tenancy?
Position: 70(5) applies but the gain may be reduced or eliminated if the principal residence exemption is claimed for one or more years.
Reasons: 70(5) applies to all capital property held by the deceased on death, including property held in joint tenancy
XXXXXXXXXX 2003-001373
Annemarie Humenuk
May 2, 2003
Dear XXXXXXXXXX:
Re: Tax Consequences on the Death of an Individual Holding Property in Joint Tenancy
This is in reply to your letter of April 11, 2003, in which you asked about the tax consequences that will apply on your death in respect of a cottage held in joint tenancy by you and your former spouse.
In particular, you asked whether your estate would be required to pay tax on any capital gain that arises because of the increase in value of the property since you acquired it.
All statutory references in this memorandum are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended.
Written confirmation of the tax implications inherent in a particular transaction is given by this Directorate only where the transaction is proposed and is the subject matter of an advance income tax ruling request. As noted in paragraph 15 of Information Circular 70-6R5, a ruling cannot be issued where the determination requested is primarily one of fact and the circumstances are such that all the pertinent facts cannot be established at the time of the request. However, we are prepared to provide the following general comments.
Generally upon the death of an individual, all the capital property of that person is considered to have been disposed of for its fair market value immediately before death under subsection 70(5) and the person who acquires the property is considered to have acquired it at that fair market value. This rule applies to the deceased person's interest in property held in joint tenancy even though each joint tenant in the property has an interest in the whole of the property such that, where one joint tenant dies, the surviving tenant does not acquire any more property but rather enjoys an increase in the value of the existing property.
However, as discussed with you on April 28, 2003, the amount of any capital gain realized on the final return of a deceased person as a result of the deemed disposition of a cottage may be eliminated or reduced by the principal residence exemption as explained in IT-120R5, Principal Residence, a copy of which is attached.
This opinion is provided in accordance with the comments in paragraph 22 of Information Circular 70-6R5.
We trust our comments will be of assistance.
Theresa Murphy
Section Manager
for Division Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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