3 March 1995 External T.I. 9429915 - TRANSFER ON DEATH OF JOINTLY-OWNED PROPERTY

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether the transfer on death of a joint interest in a capital property to the surviving spouse constitutes a deemed disposition to which subsection 70(5) applies.

Position TAKEN:

Yes.

Reasons FOR POSITION TAKEN:

Subsection 70(5) deals with transfers of capital property on death.

Capital property is any property the disposition of which would give rise to gain or loss.

Property includes things corporeal or incorporeal and includes rights of any kind.

		942991
XXXXXXXXXX	J.A. Szeszycki

Attention: XXXXXXXXXX

March 3, 1995

Dear Sirs:

Re: Deemed Disposition of a Joint Tenant's Interest in Property on Death

This is in reply to your letter of November 14, 1994 in which you requested our comments on the tax consequences resulting from the transfer on death of a joint-tenancy interest in a property to the other joint tenant of the property. We regret the delay in responding to your enquiry.

You have asked us to consider the basic scenario where a husband and wife are joint tenants of a capital property and the husband predeceases his wife with the result that the wife becomes the sole owner of the property. A significant capital gain has accrued over the period of ownership. In this context you have asked whether the deceased joint tenant is deemed to have disposed of his joint tenant's interest immediately before his death in accordance with subsection 70(5) of the Income Tax Act (the Act) and, if so, on what legal basis. It is your view that the nature of joint tenancy is that each tenant has an interest in the whole of the property such that, where the other joint tenant dies, the surviving tenant does not acquire any more property but rather the value of the existing property increases as a result.

The term "capital property" is essentially defined in section 54 of the Act as any property that would give rise to a capital gain or loss upon disposition. The term "property" is further defined in subsection 248(1) of the Act as any kind of property, including real or personal property and corporeal as well as incorporeal property. It also includes a right of any kind whatever, or a share or chose in action. Under a definition this broad, an interest in jointly held property in the circumstances is treated as capital property for income tax purposes, since the interest can be sold inter vivos and can give rise to a capital gain or loss. It is our view that paragraph 70(5)(a) of the Act will operate to deem the deceased to have disposed of his joint interest in the property immediately before his death for proceeds equal to its fair market value. For the same reasons, and in accordance with paragraph 70(5)(b) of the Act, the individual acquiring the property, deemed to have been disposed of under paragraph (a), acquires that property at its fair market value.

Under the circumstances, subsection 70(6) of the Act would also have application unless the legal representative on behalf of the deceased opts not to have that provision apply. In addition, depending on the specific facts, the attribution rules of sections 74.1 to 74.5 of the Act may also apply.

We hope our comments will be of some assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch