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.
Principal Issues: Whether property can be considered to have vested indefeasibly in and transferred to a surviving spouse for the purposes of subsection 70(6), when the surviving spouse dies before the will is probated.
Position: Question of fact and law.
Reasons: See below.
2025 STEP CRA Roundtable – June 17, 2025
QUESTION 8 - Subsection 70(6) and Vested Indefeasibly
Spouse A and Spouse B are resident in Canada. Spouse A dies and the terms of Spouse A’s will provide that the assets of Spouse A (the “Property”) are left to Spouse B provided that Spouse B survives Spouse A by 30 days. Spouse B survives Spouse A by more than 30 days; however, Spouse B dies before the will is probated 8 months after the death of Spouse A. Consequently, there will not be an actual distribution or transfer of legal title of the Property to Spouse B until after the death of Spouse B.
In this circumstance, can subsection 70(6) of the Income Tax Act (“Act”) (footnote 1) apply to the deemed disposition of the Property by Spouse A immediately before their death?
CRA Response
Subsection 70(6) applies where capital property of a taxpayer who was resident in Canada immediately before their death is, as a consequence of the death, transferred or distributed, inter alia, to the taxpayer’s spouse or common-law partner who was resident in Canada immediately before the taxpayer’s death. In addition, the property must, generally, become vested indefeasibly in the spouse or common-law partner within 36 months after the death of the taxpayer.
By virtue of paragraph 248(9.2)(b), property will be deemed not to have vested indefeasibly in an individual (other than a trust), unless the property vested indefeasibly in the individual before the death of the individual.
Therefore, in order for subsection 70(6) to apply in this case, the Property must be transferred or distributed to Spouse B, as a consequence of the death of Spouse A, and the Property must vest indefeasibly in Spouse B before their death.
The Act does not define the term vested indefeasibly. Accordingly, its meaning must be construed within the context of the provisions where it is used. For the purposes of subsection 70(6), vested indefeasibly refers to the unassailable right to ownership of a particular property that, as a consequence of the death of the owner, has been transferred to a spouse or common-law partner of the deceased.
A property can vest indefeasibly in a beneficiary even if the title has not yet been transferred via a legal conveyance or by registration if, for example, there is a specific, non-contingent and uncontested bequest to a spouse or common-law partner after the death of the taxpayer, and if it is clear that there are sufficient assets available in the estate to allow for the distribution of the specific bequest. If a bequest is not specific, a property will only vest when it has been specifically identified and a beneficiary has an enforceable right to the property.
Whether the Property vested indefeasibly in Spouse B before the death of Spouse B, and whether the Property was transferred or distributed to Spouse B for the purposes of subsection 70(6), are questions of fact and law that can only be determined based on an analysis of all the relevant facts and circumstances, and the applicable law. However, the fact that Spouse B died before there was an actual distribution or transfer of legal title of the Property, but after the 30 day requirement in the will, would not, by itself, prevent the conditions of subsection 70(6) from being met.
Katie Campbell
2025-105494
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1. Unless otherwise expressly stated, every statutory reference herein is a reference to the relevant provision of the Act.
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