Father made an inter vivos gift of the family residence his son and daughter, with bare ownership vesting in each of them as to 50%, while being granted a usufruct. Later, the son and daughter retroceded the property to the father by notarial deed. CRA noted that the retrocession resulted in a disposition of the capital interest of the son in the deemed s. 248(3) trust. The ACB of that capital interest was deemed under s. 107(1)(a) to equal the cost amount of the interest, which would equal the applicable share (i.e., 50%) of the FMV of the residence at the time of the gift. Furthermore as regards to determining the proceeds of disposition under s. 69(1)(b):
As a guide, the FMV of the interest can be determined from the FMV of the principal residence, taking into account an adjustment for the value attributed to the usufruct, if any. This means that only the FMV of the bare ownership of the residence must be determined. For simplicity, if we assume that no value is attributed to the usufruct, the FMV of the equity interest will be equal to the FMV of the principal residence at the time of the retrocession.
In your situation, it would be possible to compute a capital gain equal to the difference between the FMV of the principal residence at the time of the transfer … and the FMV of the property at the time of the transfer by your father …. The computed capital gain must be apportioned between you and your sister according to your respective shares, i.e., 50%.