5 April 1991 Ministerial Correspondence 9103654 F - Spousal Rollover Rules

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.

We are writing in reply to your letter of February 5, 1991, wherein you requested our views as to whether the spousal rollover rules, under paragraph 73(1) (b) of the Income Tax Act (the" Act") would apply in the following two situations.

1.     During the marriage, Mr. and Mrs. A entered into a contract whereby Mr. A is granted an option to acquire capital property owned by Mrs. A.

     Mr. A exercises the option after the dissolution of their marriage. Mrs. A therefore sells the subject property to Mr. A pursuant to the contractual agreement.

2.     At the time of the dissolution of the marriage, Mr. A gives capital property to Mrs. A in settlement of her rights arising out of the marriage.  As a condition to the transfer, Mrs. A grants an option to Mr. A to acquire the capital property any time after the divorce.  Mr. A exercises his option after the divorce.  Mrs. A therefore sells the subject capital property to him at that time.

Our Comments

1.     It is our opinion that paragraph 73(1)(b) of the Act would not apply in this situation because the opinion granted to Mr. A by Mrs. A does not constitute a right arising out of their marriage nor does the exercise of the option constitute the "settlement" of that right as envisioned by paragraph 73(1)(b) of the Act.  In this regard, rights arising out of a marriage would, in our view, be rights arising from a marriage contract and/or rights arising out of provisions in the family law legislation of the applicable province.

2      In this situation, it is our view that the transfer of the capital property from Mr. A to Mrs. A coupled with granting of the option by Mrs. A to Mr. A would be considered to be, in and by itself, a completed transaction in "settlement of rights arising out of their marriage" for purposes of paragraph 73(1)(b) of the Act.  It follows, therefrom, that paragraph 73(1)(b) of the Act would not apply to the subsequent exercise of the option resulting in the reacquisition of the capital property by Mr. A from his former spouse.

We trust our comments are of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch