May 2017 Newsletter

This year’s Federal Budget was released on March 22, 2017 (the “Budget Day”). Although it was a relatively light budget, it contained some income tax measures. The income tax changes included the following:

Overview

Section 85 of the Income Tax Act (the “Act”) allows you to transfer property to a Canadian corporation without immediate tax consequences. The transfer is often called a “rollover”, because it can take place at the cost of the property, thereby avoiding the immediate recognition of accrued gains.

We all know the saying about death and taxes. Although both are certainties in life, your death will often result in additional tax payable for reasons discussed below.

Surviving spouse not entitled  to elect out of rollover on death

As discussed above, if you leave property to your spouse under your will, the property is subject to a tax-free rollover upon your death. However, your legal representative can elect out of the rollover, in which case the property is subject to deemed disposition at FMV and deemed acquisition by your spouse at FMV.