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Principal Issues: [TaxInterpretations translation] If the estate executor sells a portion of the shares bequeathed by will to the spouse of the deceased, will the shares be eligible for the rollover under subsection 70(6)?
Position: In this case, no.
Reasons: To benefit from the rollover provided for in subsection 70(6), the property of the deceased must, in particular, have become vested indefeasibly in the spouse within 36 months after the deceased's death.
APFF - Financial Strategies and Financial Instruments Roundtable
2010 APFF Conference
Question 10 - Disposition of property deemed to be vested in the surviving spouse but dealt with by the estate of the taxpayer and imposition of a capital gain on the deceased
A taxpayer died and his spouse is the residuary beneficiary of his property and is an executor along with another person. At the time of death, the taxpayer owned 1,000 shares of a public corporation with a fair market value of $50,000 and an adjusted cost base of $10,000. The spouse accepted the estate without further formalities. However, as part of the settling of the estate, the executors proceeded with a sale of a portion of the shares of the corporation in order to pay off estate debts such as the debts of the deceased and the expenses of the estate.
If the executor of the estate, in order to pay the debts of the deceased, sell a portion of the shares bequeathed to the spouse, will the shares be eligible for the rollover provided for in subsection 70(6)?
A rollover for property distributed to a spouse is provided in subsection 70(6) and represents an exception to the rule for the deemed disposition at fair market value of the deceased taxpayer's property. To benefit from a rollover, a set of conditions must be satisfied, including that the deceased's property must have been vested indefeasibly in the spouse within the period ending 36 months after the death of the taxpayer.
In this case, where the executors of the estate sold bequeathed property to pay, among others things, the debts of the deceased or to cover the expenses of the estate, we are of the view that there would have been no indefeasible vesting. We consider that the legatees must be able eventually to receive their bequests in order to find indefeasible vesting. According to the facts described above, the shares were never transferred to the spouse, since they were already sold by the executors. Accordingly, we are of the view that a condition for the application of subsection 70(6) was not satisfied. Thus, subsection 70(5) must apply respecting such shares sold by the executors.
October 8, 2010
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