Post-Mortem Planning For Private Corporation Shares

Deemed Disposition at Death of Capital Property at Fair Market Value

Paragraph 70(5)(a) of the Income Tax Act (Canada)¹ (the "Act") deems a taxpayer to have, immediately before the taxpayer's death, disposed of each capital property of the taxpayer and received proceeds of disposition equal to the fair market value ("FMV") of the capital property immediately before the taxpayer's death. As a result, the taxpayer's estate will realize accrued capital gains under paragraph 39(1) (a) and accrued capital losses under paragraph 39(1)(b) in respect of the taxpayer's capital property (and recapture under subsection 13(1) in respect of the taxpayer's depreciable capital property), and notwithstanding that there is no actual disposition for consideration of the taxpayer's capital property at death. One-half of any such capital gains (each a taxable capital gain under paragraph 38(1)(a)) must be netted against one-half of any such capital losses (each an allowable capital