Does the phrase “the amount in respect of which a deduction under section 110.6 was claimed in respect of the transferor’s gain from the disposition shall be deemed to be” deem a transferor to have claimed a capital gains exemption where a capital gains reserve is taken in respect of the disposition of shares to which section 84.1 applies, even where the transferor does not claim or intend to claim in the future any capital gains exemption in respect of the disposition?
CRA responded:
Subsection 84.1(2.1)…essentially treats the transferor as having claimed, to the extent that the transferor has unused capital gains exemption room in the year in which the disposition took place, a capital gains deduction on the disposition, irrespective of whether such exemption was actually claimed, because the reserve could potentially be eligible for a capital gains exemption when brought into income in the future. … [T]he effect…is to treat a capital gain on a property to be sheltered by the capital gains exemption when there is unused capital gains exemption room in the year of the disposition regardless of whether such capital gains exemption room has been saved to cover a capital gain that could be realized on a disposition of other properties in a subsequent year.