Two spouses who were the equal co-owners of their principal residence and second home effected the transfer of a ½ interest in the principal residence from him to her, and of a ½ interest in the second home from her to him, shortly before their divorce. In the course of a general discussion, CRA stated:
[P]aragraph 74.5(3)(b) allows spouses who are separated because of a breakdown of their marriage or common-law partnership to make an election in order to avoid the application of section 74.2.
… [T]he attribution rules in section 74.2 cease to apply after the divorce. Consequently, if a taxpayer disposes of a residence to which subsection 73(1) applies after the taxpayer’s divorce, the taxpayer’s former spouse does not have to make an election in order to avoid the application of the attribution rules set out in section 74.2, since those attribution rules automatically cease to apply after the divorce.