Section 73

Subsection 73(1) - Inter vivos transfers by individuals

Administrative Policy

14 March 2016 External T.I. 2016-0626781E5 - Neuman Type Situation

spousal rollover for Kieboom disposition of economic interest

In the scenario where a company owned by Mr. A ssues a share to Mrs. A for nominal consideration, and then pays a substantial dividend to Mrs. A, CRA indicated that if Kieboom applied, "Mr. A would be considered to have disposed of a… right to dividends in Opco to Mrs. A.” However, as the s. 73(1) rollover would apply, this disposition by Mr. A would be at cost.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) s. 15(1) might apply where spouse subscribes nominal consideration for Opco shares and receives a large discretionary dividend 214
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2) s. 56(2) likely non-applicable where spouse subscribes nominal consideration for Opco shares and receives a large discretionary dividend 242
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) Kieboom treated as entailing disposition of right to receive dividends 316

28 June 2012 External T.I. 2011-0427871E5 F - Application des paragraphes 98(3) 98(5) et 73(1)

s. 73(1) available on transfer of undivided interest from one separated spouse to the other following s. 98(3) wind-up of their rental partnership

Two spouses (Monsieur and Madame) were the members of a farming partnership. Upon their separation, the partnership began renting the land. The partnership is wound up as described in s. 98(3) with Madame then transferring her undivided interest in the land to Monsieur. Does s. 73(1) apply to this transfer? CRA responded:

Since the broad definition of "property" in subsection 248(1) may include an undivided interest in property, it may be capital property under subsection 73(1) if it meets the definition of "capital property" provided in section 54.

Thus, in the event that the partnership is dissolved, all the property is distributed to Madame and Monsieur immediately before it ceases to exist and that the other conditions set out in subsection 98(3) are otherwise satisfied, Madame's undivided interests in each property distributed that are capital property may be rolled over pursuant to subsection 73(1).

CRA went on to note:

Paragraph 74.5(3)(a) states, inter alia, that subsection 74.1(1) does not apply with respect to any income from a property that relates to the period throughout which the individual is living separate and apart from the individual’s spouse by reason of a breakdown of their marriage or common-law partnership. ...[P]aragraph 74.5(3)(b) allows spouses who are separated by reason of a breakdown of their marriage or common-law partnership to make an election in order to avoid the application of section 74.2.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) rental operation generating property income is a business for s. 98(5) purposes 171

June 1995 T.I. 950501 (C.T.O. "Meaning of 'entitled to receive'")

"The phrase 'entitled to receive' all of the income of the trust means to have a legal right to enforce payment of that income. For a spouse to have a legal right to enforce payment of all of the income of the trust, it is our opinion that discretion to receive all or part of the income of the trust must be solely in the hands of the spouse beneficiary ... . If, however, the trustee(s) of a trust may, under the terms of the trust agreement, restrict the payment to the spouse of any portion of the trust's income it is our view that the spouse is not 'entitled to receive' all the income ... . Our comments above would not change if the taxpayer's spouse were the sole trustee ... ."

5 April 1991 T.I. (Tax Window, No. 2, p. 27, ¶1196)

Where a spouse obtains an option to acquire a property from the other spouse and exercises the option after divorce, s. 73(1)(b) does not apply because the exercise of the option does not constitute a settlement of that right as envisioned by s. 73(1)(b). Where a spouse transfers property to the other spouse on the condition of being granted an option to reacquire the property after divorce, the original transfer will qualify, but not a subsequent transfer pursuant to the option.

Paragraph 73(1)(b)

See Also

Ellison v Sandini Pty Ltd, [2018] FCAFC 44

subjective belief of parties that family court orders were efficacious did establish that a share transfer to a spouse occurred “because of” them

Australian Family Court orders, that were made by consent between Mr and Ms Ellison, required a corporation (“Sandini” - that was controlled by Mr Ellison) in its capacity of the Ellison family trust to forthwith transfer 2.1M shares of a public company to Ms Ellison. However, Ms Ellison instead got Sandini to transfer those shares to a company controlled by her (“Wavefront”). This precluded rollover relief to Mr Ellison (under s. 126-15 of the Income Tax Assessment Act 1997 (Australia)) unless, among other mooted requirements, it could be considered that the beneficial ownership of those shares had already been transferred to her by Sandini “because of” the consent orders.

In fact, the trustee of the Ellison family trust was another company and, conversely, Sandini held its shares of the public company in its capacity of the sole trustee of a unit trust (“KRUT”) of which that other company, in its capacity of sole trustee of the Ellison family trust, was the sole beneficiary. In finding that the “because of” requirement in s. 126-15 was not satisfied, Jagot J stated (at paras. 192, 194):

Trigger events which occur not because the orders require it, but for some other reason (and even if the reason is a shared incorrect belief that the orders are being satisfied or that the parties agree the action means that they will treat the orders as satisfied), do not occur “because of” the orders within the meaning of the section; they occur “because of” some state of mind of the parties which may or may not be influenced by the orders. …

[T]he 21 September 2010 orders are inefficacious in all relevant respects. They purport to join Sandini in a capacity which it did not have (order 1). They purport to require Sandini in that non-existent capacity to do things (order 3). … The fact that Sandini did things in another capacity (as trustee of the KRUT Sandini transferred shares to Wavefront) does not mean that the orders were efficacious. It may mean that Mr Ellison and Ms Ellison agreed that Sandini should do these things and that they would treat this as satisfaction of the orders, but that agreement does not give the orders efficacy. The relevant point for present purposes is not the existence of an agreement between Mr Ellison and Ms Ellison subsequent to the making of the orders. It is whether it can be said that anything occurred “because of” the orders within the meaning of s 126-15.

Words and Phrases
because of
Locations of other summaries Wordcount
Tax Topics - General Concepts - Ownership family court order requiring the transfer of a portion of a larger bloc of shares likely did not result in a change in their beneficial ownership as the shares likely were not fungible 973
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition family court order did not effect a change in beneficial ownership of a larger bloc of shares held by the original owner (and in any event, the order named the wrong person) 744
Tax Topics - General Concepts - Evidence a court order could not be interpreted in light of extrinsic evidence 100

Subsection 73(1.01) - Qualifying transfers

Paragraph 73(1.01)(b)

Administrative Policy

6 October 2017 APFF Financial Strategies and Financial Instruments Roundtable Q. 1, 2017-0705221C6 F - Property transfers - common law partners in Québec

rollover under common-law partners' separation agreement irrespective of whether technically they have separation rights to settle

Respecting the rollover under ss. 73(1.01)(b), 146(16) and 146.3(14) provide to a common-law partner or a partner plan pursuant to a written separation agreement governing the division of the common-law partners’ assets in settlement of their rights arising on the breakdown of their relationship, CRA considered that, although there is no right in Quebec arising out of a common-law partnership (as per Éric v. Lola, 2013 SCC 5), it nonetheless “is not impossible for the annuitant to determine to create rights under a written separation agreement between the annuitant and the annuitant’s common-law partner or former common-law partner relating to the division of property ” – and that “such an agreement could be concluded at the time of separation, whether or not a common-law union agreement providing for the rights of each in the event of the union's failure had been previously signed.”

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 146 - Subsection 146(16) - Paragraph 146(16)(b) a common-law partners’ separation agreement can engage s. 146(16)(b) or 146.3(14) rollover even if technically they have no legal rights to settle 256
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(14) rollover pursuant to common-law partners' settlement agreement 96

27 September 2016 Internal T.I. 2015-0572901I7 - Deferral of employment benefit under ss. 7(8)

s. 7(10) deferred gain is triggered on a s. 73 rollover

The employment benefit associated with the exercise by Taxpayer A of the stock options was deferred under s. 7(8) (since repealed). Taxpayer A is transferring the shares to Taxpayer B as part of the settlement of rights arising out of their marriage. What are the consequences? The Directorate responded:

Although subsection 7(8) was repealed in 2010 the deferral of the employment benefit continues to be permitted, for stock options exercised on or before March 4, 2010 4:00 P.M.(EST), until either the employee disposes of the share, dies, or becomes a non-resident. …[W]hen Taxpayer A transfers the shares to Taxpayer B…Taxpayer A will be required to include the deferred employment benefit in income in the year of the disposition. …

[W]here capital property is transferred by Taxpayer A to Taxpayer B in settlement of rights arising out of their marriage or common-law partnership (see paragraph 73(1.01)(b) and subsection 73(1)), Taxpayer A will be deemed to have disposed of the shares for proceeds equal to Taxpayer A’s adjusted cost base (ACB) of the shares immediately before the disposition. Pursuant to paragraph 53(1)(j) the ACB of the shares will be increased by the amount of any benefit deemed to have been received under paragraph 7(1)(a)….

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 7 - Subsection 7(8) deferred amount triggered on rollover 60

7 October 2016 APFF Financial Strategies and Financial Instruments Roundtable Q. 5, 2016-0651721C6 F - Application of subsections 146(16) and 73(1) after death

no rollover if transferor spouse dies before transfer pursuant to separation agreement made

Mr agreed in his separation agreement with Mrs to transfer to her a capital property. However, he died before the transfer was made. Does CRA still consider that s. 73(1) does not apply following death? CRA responded:

[A]ny particular capital property of an individual (other than a trust) is required to be transferred in circumstances to which subsection 73(1.01) applies. … Accordingly, since Mr. died before having completed the transfer of the capital property, that transfer instead was effected by his estate, which is a trust and does not comply with the requirements of subsection 73(1).

When queried on this, a Finance representative stated:

The Department of Finance is ready to consider the issue identified in the question to determine whether the rules give rise to anomalies in certain circumstances in tax policy terms, in the context of its on-going revision of the ITA rules.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 146 - Subsection 146(16) no tax deferred transfer if by estate 123

14 January 2013 External T.I. 2012-0469571E5 F - Settlement of rights arising out of marriage

transfer of appreciated property by recipient of court-ordered support to the payer of support qualified for rollover

Pursuant to a judgment for the divorce of X and Y, the Court awarded X an lump sum as support but, in order for this support obligation to be paid to X, the Court ordered X to transfer specified property to Y. Would this transfer by X be considered to be for settlement of rights arising out of the marriage of X and Y for the purposes of s. 73(1.01)(b)? CRA responded:

[W]here a court orders one spouse to pay maintenance to another then, as regards the spouse to whom the court has granted the support, this is a situation respecting an entitlement a right arising out of the marriage of such spouses … .

[T]he …. transfer [by X] was made under such a court order for the payment of maintenance to X and was intended to have the support granted to X under the court order be effected in in a more liquid form.

Paragraph 73(1.01)(c)

Administrative Policy

5 October 2018 APFF Roundtable Q. 3, 2018-0768841C6 F - Rollover under 73(1) and gifts to charities

the terms of an alter ego trust cannot permit charitable gifts before death

In the event that the terms of the deed of trust for one of the trusts intended to qualify under ss. 73(1.01) and (1.02) provide for the possibility of making gifts to a registered charity before the death of the individual (and/or spouse or common-law partner) would this have the effect of disqualifying the trust for the purposes of the s. 73 rollover, e.g., where no such gift in fact occurred? CRA responded:

Where the terms of a trust indenture provide for the possibility of making gifts to a qualified donee, that is to a person other than the taxpayers referred to in paragraph 73(1.01)(c), before the death of the latter, we are of the view that the condition set out in that paragraph is not satisfied.

The fact that no gift was made during the lifetime of the taxpayers referred to in paragraph 73(1.01)(c) does not change our position. Indeed, the mere possibility that a person other than the latter may, before their death, receive or otherwise obtain the use of any of the income or capital of the trust is sufficient to disqualify the trust for the purposes of the rollover provided for in subsection 73(1).

16 November 2015 External T.I. 2014-0529361E5 - Spousal trust & life insurance

funding of life insurance policy is a benefit where proceeds to be paid to non-spouse

In finding that the use of income or capital from a purported spousal trust to pay life insurance premiums on spouse's life would disqualify trust from inception, CRA stated:

[T]he relevant legislation does not contain a requirement that the spouse “benefit” from the trust while alive... . [However] a trustee’s duty to maintain certain income producing or capital appreciating properties which may potentially benefit a spouse during their lifetime, is not...analogous to the payment of insurance premiums by the trustee to maintain rights to receive the insurance proceeds by the policy beneficiary after the death of the spouse. ...[W]e consider the payment of premiums by the trust to be property used to establish the residual beneficiaries’ rights to funds from the policy that will be realized after the death of the spouse.

6 May 2014 May CALU Roundtable, 2014-0523331C6 - CALU CRA Roundtable Q

transfer of taxpayer property to alter ego trust by taxpayer's attorney

Easingwood v. Cockroft, 2013 BCCA 182, found that an Attorney under a general power of attorney could establish an inter vivos trust on behalf of the grantor of the power. If an Attorney creates an alter ego or joint partner trust for the benefit of the grantor of the power, and transfers capital property of the grantor to the trust, will s. 73(1.01) apply? CRA responded:

Easingwood does not stand for the general proposition that an Attorney may create such trusts for the grantor of a Power of Attorney for Property. … CRA would expect that an Attorney that is contemplating the creation of an alter ego trust would seek the affirmation of the applicable court that the particular terms of the Power of Attorney for Property provide for such a power and that the terms of the proposed trust conform with the terms of the existing will and any other relevant agreements.

16 June 2014 STEP Roundtable, 2014-0523031C6 - 2014 STEP CRA Roundtable Question

"combination" requirement satisfied where predeceased spouse

The settlor of an inter vivos trust is entitled to receive all the trust income during his or her lifetime and, if survived by his or her spouse or common-law partner, such spouse or partner is entitled to all such income until death. Does this trust satisfy the requirement that the settlor and spouse/partner be "entitled" in "combination with the other" to receive all the trust income. CRA stated:

[I]f the terms of the trust provide that the taxpayer who transferred property to the trust was entitled to receive all of the income of the trust during his or her lifetime and the surviving spouse or common-law partner was only entitled to receive the trust's income after the death of the taxpayer and no other person could, before the later of those deaths receive or otherwise obtain the use of any of the income or capital of the trust, this in and of itself, would not prevent the trust from qualifying as a "joint spousal or common-law partner trust".

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Joint Spousal or Common-law Partner Trust "combination" requirement satisfied where predeceased spouse 171

25 June 2014 External T.I. 2012-0469331E5 - Blind Trust

blind trust

Upon being appointed to a public office an individual was required to settle a blind trust of which he was the beneficiary. What are the consequences of his death?

Assuming the blind trust was a trust, a transfer of capital property to the blind trust would be treated as a disposition of the property at fair market value, unless its terms satisfied the conditions in ss. 73(1.01)(c)(ii) and 73(1.02), in which case the transfer would qualify for the 73(1) rollover and the property would generally be subject to deemed disposition under s. 104(4)(a) at fair market value at the time of the settlor's death. These conditions are:

  • the settlor and the trust are resident in Canada at the time of the transfer;
  • only the settlor is entitled to receive or use all of the income or capital of the trust arising during the settlor's lifetime;
  • either the settlor has attained the age of 65 at the time the trust was created or the transfer of property to the trust does not result in a change of beneficial ownership in the property;
  • no person other than the settlor may have any absolute or contingent right as a beneficiary under the trust; and
  • the trust does not make an election under s. 104(4)(a)(ii.1).

Articles

Elie Roth, Tim Youdan, Chris Anderson, Kim Brown, "Classification of Trusts for Income Tax Purposes", Chapter 2 of Canadian Taxation of Trusts (Canadian Tax Foundation), 2016.

Joint spousal trust (p. 100)

Paragraph 73(1.01)(c) might seem to indicate that only one spouse can transfer property to a particular joint spousal trust. However, the CRA has expressed the position that a trust may qualify as a joint spousal trust when both spouses create the trust by the joint contribution of property, and either or both spouses subsequently transfer property to the trust. …[fn 160:…2001-0099055]

Subparagraph 73(1.01)(c)(ii)

Administrative Policy

21 April 2016 External T.I. 2015-0607451E5 F - Use of capital of a trust by a spouse

occupation of trust property (a residence) by individual’s spouse does not breach the capital-use requirement "under" the trust

An individual, who owned a principal residence that he occupied with his wife, transferred the residence to a trust referred to in s. 73(1.01)(c)(ii), the terms of which satisfied the conditions in s. 73(1.02). After the transfer of the residence to the trust, the wife continued to live with the individual. Does such occupation by her result in s. 73(1.01)(c)(ii) not being satisfied? CRA responded:

In a situation where a trust deed provides an individual the right to receive all of the income of the trust that arises before the individual’s death and no person except the individual may, before the individual’s death, receive or otherwise obtain the use of any of the income or capital of the trust, we are of the view that the fact that the individual permitted his spouse or common-law partner to live with him should not, by itself, result in the condition in subparagraph 73(1.01)(c)(ii) not being met.

14 March 2012 External T.I. 2011-0423291E5 F - Fiducie pour soi-même sans limite d'âge

joint protective trust would not satisfy s. 73(1.01)(c)(ii)

Two spouses (Mr. X and Ms. X) and their two adult children wish to contribute their jointly owned shares of Holdco to a newly-settled protective trust. Would the trust be treated as an alter ego trust without age requirement, so that the family's transfer of Holdco shares to the trust could be tax-free pursuant to s. 73(1)? After noting the requirement in s. 73(1.01)(c)(ii) that “after the transfer, no other person, other than the settlor of the trust, may receive or otherwise obtain the use of any of the income or capital of the trust,” CRA stated:

[T]he trust … could not qualify as an alter ego trust without age requirement since that trust would have several beneficiaries. For example, where Mr. X transfers his shares to the trust, Mr. X and the other three members of the Family would be entitled to the income of the trust. The transfer of the shares of Mr X would be for the benefit of persons other than himself and that would contravene the requirement stipulated … above.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 73 - Subsection 73(1.01) - Paragraph 73(1.01)(c) - Subparagraph 73(1.01)(c)(iii) - Clause 73(1.01)(c)(iii)(A) two spouses separate from their children can create a joint spousal or common-law partner trust 142
Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(1) - Testamentary Trust tainting effect of joint spousal or common-law partner trust on subsequent testamentary trust 201
Tax Topics - Income Tax Act - 101-110 - Section 107.4 - Subsection 107.4(1) - Paragraph 107.4(1)(a) joint protective trust would not satisfy paras. (a) and (e) of "qualifying disposition" 189

Subparagraph 73(1.01)(c)(iii)

Clause 73(1.01)(c)(iii)(A)

Administrative Policy

14 March 2012 External T.I. 2011-0423291E5 F - Fiducie pour soi-même sans limite d'âge

two spouses separate from their children can create a joint spousal or common-law partner trust

Two spouses (Mr. X and Ms. X) and their two adult children wish to contribute their jointly owned shares of Holdco to a newly-settled protective trust. Can Mr. X and Ms. X transfer the shares they hold in Holdco to a joint trust for the benefit of the spouse or common-law partner in order to benefit from the rollover under s. 73(1)?

.. 2001-0099055 … confirmed that two spouses may create a joint trust for the spouse or common-law partner and contribute property to the extent that the requirements of subsection 73(1), 73 (1.01) and 73 (1.02) are met. Thus, a transfer of ownership by one or both of the spouses to the trust would be eligible for the rollover under subsection 73(1).

… [O]nly Mr. X and Ms. X (to the exclusion of Child 1 and Child 2) could create a joint spousal or common-law partner trust under clause 73(1.01)(c)(iii)(A).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 73 - Subsection 73(1.01) - Paragraph 73(1.01)(c) - Subparagraph 73(1.01)(c)(ii) joint protective trust would not satisfy s. 73(1.01)(c)(ii) 174
Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(1) - Testamentary Trust tainting effect of joint spousal or common-law partner trust on subsequent testamentary trust 201
Tax Topics - Income Tax Act - 101-110 - Section 107.4 - Subsection 107.4(1) - Paragraph 107.4(1)(a) joint protective trust would not satisfy paras. (a) and (e) of "qualifying disposition" 189

Subsection 73(1.02)

Paragaph 73(1.02)(b)

Subparagaph 73(1.02)(b)

Administrative Policy

5 October 2012 Roundtable, 2012-0453911C6 F - Roulement à fiducie pour soi et faculté d'élire

trust deed provision that the settlor by will may designate beneficiaries upon death breaches s. 73(1.02)(b)(ii)

Would the s. 73 rollover on a transfer of capital property to a Quebec trust comply with s. 73(1.02)(b)(ii) be jeopardized if the trust deed provides that the settlor may by will designate related persons to become beneficiaries (in specified shares) upon death? CRA responded that by virtue of such a clause:

The settlor is no longer, after the transfer, the one and only person beneficially interested within the meaning of subsection 248(25) and, consequently … there would be an effective change of ownership for the purposes of subsection 73(1.02).

…[T]he presence of a similar clause in a trust indenture that would be governed by the common law would result in an effective change of ownership at the time of the transfer of property by the settlor to the trust.

Subsection 73(1.1) - Interpretation

Cases

Re Schroepfer (1985), 12 DLR (4th) 613 (Sask QC)

It was suggested that the s. 73(1) rollover would be available by virtue of s. 73(1.1) if a court decree made pursuant to the Matrimonial Property Act (Saskatchewan) merely specified that the taxpayer's spouse was entitled to a certain percentage of designated matrimonial property, and quantified the amount thereof, and the taxpayer then transferred assets, selected by him out of the pool of matrimonial assets, to the spouse to the extent of her interest as quantified.

Subsection 73(3) - When subsection (3.1) applies

Administrative Policy

11 June 2015 External T.I. 2014-0522641E5 F - Usufruct

creation of usufruct between father and son entails transfer of trust interest, not farm property

A father, who has carried on a farming business for a number of years, grants the bare ownership of the property for consideration to his son while retaining rights as the usufructuary. He continues to exploit the farm land and the, subsequently transfers his rights as usfructuary to his son for a stipulated sum. Do ss. 73(3) and 73(3.1) apply to the transfer of the bare ownership to the son?

After paraphrasing s. 248(3)(a), CRA stated (TaxInterpretations translation):

[T]he property which is transferred to the son is an interest in a deemed trust. … [T]he condition [in s. 73(3)(c)] is not satisfied when the taxpayer transfers a property described in paragraph 73(3)(c) to a trust.

After referring to IT-268R4, para. 13, CRA stated:

[T]he nature of a usufruct as well as the rights and obligations of usufructuary and bare owner are incompatible with such requirements.

See summaries under s. 108(7) and s. 110.6(1) – qualified farm or fishing property.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(7) creation of usufruct between father and son, resulting in deemed trust, did not entail property transfer to the deemed trust 284
Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Farm or Fishing Property termination of usufruct between father and son on farmland, which was a deemed trust, did not entail disposition of qualified farm property 226

IT268R4 ARCHIVED - "Inter Vivos Transfer of Farm Property to Child" 15 April 1996

Trusts for Minors

13. A parent may transfer property described in subsection 73(3)… or 73(4)… to a trust solely for the benefit of his or her minor child. However, for property transferred to such a trust to qualify for a rollover under either of those subsections the following additional conditions must be met:

(a) the trust must be irrevocable;

(b) the terms of the trust must provide for the property to be held in trust for the exclusive benefit of the child and there must not be any trust provision which could have the effect of depriving the child of any rights as the beneficial owner of the property; and

(c) the terms of the trust must provide for the distribution of the property to the child absolutely upon reaching a certain age and for the distribution of that property to the child's estate upon the child's death before that age.

26 September 1996 T.I. 962503 (C.T.O. "Transfer of Farm Property to Child")

Where a transfer of farm property described in s. 73(3) occurs for no consideration, or for consideration less than the land's adjusted cost base, the transferring farmer cannot utilize any unused portion of the capital gains deduction.

17 February 1994 External T.I. 5-932117 -

It is not necessary that a particular asset be used in farming at a point in time immediately prior to the transfer. However, using the asset for some purpose other than farming for an extended period prior to the date of transfer could cause the asset to be considered to have been used primarily for some other purpose rather than having been used primarily in the business of farming.

16 December 1993 T.I. 931610 (C.T.O "Remainder Interest in Land")

A remainder interest in land is "land" for purposes of s. 73(3) if the requirements in IT-268R3, para. 9 are satisfied and, if all other conditions under that subsection are met, the provisions of s. 73(3) will apply on its transfer and the provisions of s. 43.1(1) will not.

19 September 89 T.I. (February 1990 Access Letter, ¶1118)

Where a farmer gifts farm land to his son, s. 69 will not apply because of s. 73(3)(c). Therefore, the "proceeds of disposition otherwise determined" will be nil, with the result that the land would be transferred at the farmer's adjusted cost base.

Paragraph 73(3)(b)

Paragraph 73(3)(c)

Administrative Policy

10 November 2014 External T.I. 2014-0536851E5 F - Terre à bois et Plan d'aménagement forestier

mere absence of a FMP does not preclude the rollover

In response to a request for clarification regarding the forest management plan ("FMP") criterion in s. 73(3)(c), CRA stated:

The mere absence of a FMP does not prevent the woodlot from being used primarily in a farming business, but the taxpayer must demonstrate that one of the persons listed in paragraph 73(3)(c) was actively engaged on a regular and continuous basis. …

However, where there is a FMP, the taxpayer must simply demonstrate that one of the persons listed in paragraph 73(3)(c) was involved in the farming business to the extent required by the FMP.

Subsection 73(4) - When subsection (4.1) applies

Administrative Policy

8 February 2018 External T.I. 2016-0670841E5 - Inter-generational rollover of farm property

rollover is available where one individual working on properties of multiple corps or partnerships

The transfers of Canadian farming property or of shares of a family farm or fishing corporation or an interest in a family farm or fishing partnership by a Canadian taxpayer on a rollover basis under s. 70(9.01), 70(9.21), 73(3.1) or 73(4.1) to a child reference a requirement that the taxpayer have been “"actively engaged on a regular and continuous basis" in the farming (or fishing) business. CRA confirmed that the fact that the individual owns multiple farm properties and farm corporations, would not, in and of itself, limit his ability to transfer the properties or shares on a rollover basis pursuant to these provisions, nor would the fact that he works on more than one farm, by itself, indicate that he was not actively engaged on a "regular and continuous basis" on any of the farms.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 70 - Subsection 70(9) intergenerational transfer of a farming business can occur where one individual worked on more than one farm 195
Tax Topics - Income Tax Act - Section 70 - Subsection 70(10) - Share of the Capital Stock of a Family Farm or Fishing Corporation one individual's work can qualify multiple farming corps 132

87 C.R. - Q.71

Property transferred to a trust solely for the benefit of a minor will qualify for the rollover.

Subsection 73(4.1) - Inter vivos transfer of family farm or fishing corporations and partnerships

Administrative Policy

2013 Ruling 2012-0472721R3 - Inter-vivos share transfer under 73(4) and (4.1)

sale for low-rate promissory notes

Rulings that, subject to s. 69(11), s. 73(4.1)(a)(i) and s. 73(4.1)(b) applied to the transfer of shares of Farmco by Individuals 1 and 2 to a child of each in consideration for promissory notes bearing interest at the prescribed rate and to be forgiven by the estate of Individual 1 or 2, as the case may be, in the event of death.