CRA applies ss. 69(1)(b)(ii) and s. 69(1)(c) to the gross rather than net FMV of gifted property subject to an encumbrance

If an individual donates an immovable worth $200,000 that is subject to a $100,000 charge and it qualifies as a gift under the relevant provincial law (here, of Quebec), CRA will consider the proceeds to the donor under s. 69(1)(b)(ii) and the cost to the done under s. 69(1)(c) to be $200,000, notwithstanding that presumably the amount of the gift is only $100,000.  In this regard, CRA stated that a real estate property is only one property, so that it apparently was resisting the temptation to think of this transaction as a sale of $100,000 of the property in consideration for the assumption of the $100,000 hypothec, and a gift of the balance of the property for $100,000.

Neal Armstrong. See summary of 9 June 2015 T.I. 2014-0519981E5 F under s. 69(1)(b)(ii).