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Rollovers Under Subsection 70(6)

The death of a person causes a bunching of income recognition, usually for accrued but unrealized gains on capital property, that can result in significant tax liability for the deceased and the resulting estate. This is because the Income Tax Act deems a person to have sold and reacquired all of their capital property immediately before death at their FMV.

A rollover is available where property otherwise deemed disposed is transferred to the deceased person’s spouse or common-law partner. The rollover is in subsection 70(6), and applies where capital property is left by a taxpayer resident in Canada to that taxpayer’s spouse or common-law partner also resident in Canada. The rollover is automatic but can be elected out of. In some circumstances, it may be more advantageous to not have property rollover.

Interestingly, the term “spouse” is not defined in the Income Tax Act, but the phrase “common-law partner” is. The interaction of the definitions would appear to make it possible for a person to have both a spouse and one or more common-law partners at the same time.


Can the rollover provision in subsection 70(6) be applied to a transfer to a spouse and also to a common-law partner?


Provided all the conditions in subsection 70(6) are met, the rollover would automatically apply to the property transferred to each of the spouse and the common-law partner.


Pro Tip


The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.


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