Words and Phrases - "actually disposed of"

In 2014, the taxpayer changed the use of his property from income-producing to use as his principal residence. In 2017, he filed an election under s. 45(3) respecting that change of use. In 2020, he submitted a T1 adjustment request to amend his 2013 tax return to rescind the s. 45(3) election made in 2017 and to report the capital gain arising from the deemed disposition on the change in use that occurred in 2014.

CRA noted that (in the absence of a Ministerial demand for the election), the election was required to be made by the taxpayer’s filing due date for the taxation year in which the property was actually disposed of by the taxpayer. Since the taxpayer filed the s. 45(3) election by the filing-due date for his 2017 return and, in 2017, he had not yet actually disposed of the property, the election had been timely filed.

Regarding the 2020 request, the revocation of the election could be permitted pursuant to s. 220(3.2) by the Minister. If accepted, the taxpayer would not be liable to a penalty under s. 220(3.5), as the revocation was made prior to the election’s due date.

Where the taxpayer had instead died in 2019, without having yet filed the s. 45(3) election (and without the s. 70(6) rollover applying), CRA indicated that the date “the property is actually disposed of by the taxpayer” under s. 45(3) is considered to be the date of the deemed disposition of the property on the taxpayer’s death pursuant to s. 70(5). Therefore, the relevant filing due date would be that for 2019 terminal return.