Principal Issues: Allocation of a capital gain resulting from the sale of a residential investment property owned jointly by spouses, following a marriage breakdown, in a case where one spouse releases his or her interest in the proceeds of disposition directly to the other spouse in partial payment of an equalization payment, as required under a court order.
Position: The capital gain is allocated between the spouses based on their respective ownership interests in the property at the time of disposition. Proceeds of disposition are not reduced by the release of one spouse's interest in the proceeds of disposition to the other spouse by reason of a court order or otherwise.
Reasons: Wording of section 54, paragraph 40(1)(a), subsection 248(1) definition of "disposition", court jurisprudence