Section 47

Subsection 47(1) - Identical properties

See Also

Gervais v. The Queen, 2015 DTC 1026 [at 105], 2014 TCC 119, rev'd supra 2016 CAF 1

no averaging with identical share inventory

The taxpayer purchased 1.04M preferred shares from her husband on income account at a cost of $1.04M and was gifted a further 1.04M shares on a rollover basis by him under s. 73 and on capital account, so that her cost was $0.04M.

As the purchased shares were acquired by her on income account, s. 47 did not apply so that her full $1M gain on resale of her shares for $2.098M was a capital gain on the gifted shares, and all of that capital gain was attributed to her husband.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares rollover followed by immediate resale 339

Administrative Policy

24 May 2001 External T.I. 2001-006904 -

"... We would consider a short sale entered into in order to hedge a taxpayer's position with respect to identical shares held on capital account to be a short sale that is on capital account. Additionally, if a taxpayer is eligible to make an election under subsection 39(4) and does so, the gain or loss on a 'short sale' of shares that are Canadian securities would be on account of capital. If the shares sold in a short sale transaction are capital property subsection 47(1) would apply to determine the taxpayer's cost of the shares sold at both ends of a short sale transaction if the shares acquired by the taxpayer under the terms of the short sale are otherwise identical to previously acquired shares held by the taxpayer. As a result, a gain or loss may arise on the sale of the borrowed shares as well as on the sale of the shares acquired for re-delivery to the lender."

20 July 2000 External T.I. 2000-003541 -

Specific numerical example illustrating the identical property provisions and the specific identification position described in Income Tax Technical News, No. 19.

2000 Ruling 2000 - 000749

An exchangeable share and a share of the U.S. parent are not identical properties.

15 October 1997 T.I. 972531

Discussion of inter-relationships between ss.7(1.3) and 47(1).

1997 Ruling 971700

In order to avoid averaging with the low ACB of shares currently held by them that are subject to an escrow agreement, employees of a public corporation transfer unexercised employee stock options to revocable trusts. Under the terms of each trust a registered charity is entitled in specified circumstances to receive a pecuniary bequest and the employee (and his estate) is otherwise the sole beneficiary, and the sole trustee. If the trust subsequently exercises the options, it borrows funds needed to pay the exercise price from the employee.

RC ruled that the trust and the employees will be separate and distinct taxpayers for the purposes of s. 47(1), and that s. 245(2) will not be applied.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) 121

2 July 1991 T.I. (Tax Window, No. 5, p. 14, ¶1324)

Identical properties acquired after December 31, 1971 to which the attribution rules apply constitute a separate pool from other identical properties acquired after December 31, 1971 for purposes of computing their adjusted cost base.

30 October 89 T.I. (March 1990 Access Letter, ¶1159)

RC is not in the practice of applying s. 47(1) in the situation where a taxpayer purchases his wife's 1/2 interest in their condominium.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.2 - Subsection 74.2(1) 39

IT-78 "Capital Property Owned on December 31, 1971 - Identical Properties"

IT-387R2 "Meaning of 'Identical Properties'"

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 54 - Superficial Loss 25