Half A Loaf Is Better Than None!

The Federal Court of Appeal's (FCA) recent French language decision in the appeal of Gervais considered the use of a sale structure commonly referred to as the "half loaf." In general, this planning technique provides an opportunity to spouses to increase the use of the capital gains deduction (CGD) in cases where only one spouse owns property (and a disposition of which would give rise to an opportunity for use of the CGD). The Tax Court decision in Gervais of Jorre J. was largely based on the finding that a transfer of capital property from one spouse to another, that was immediately resold to an unrelated party, was on account of income and not capital. Readers should be forewarned: this case has not yet been officially translated and the writer's grasp of Canada's second official language has become rusty. The facts of the case are as follows.