Dear Sirs:
Re: Attribution on Disposition of Identical Properties
This is in reply to your correspondence of June 14, 1991 concerning attribution of gains and losses on the disposition of identical properties.
You have asked us to consider the situation of a taxpayer who, after 1971, acquires shares from his spouse and subsequently purchases identical shares from an arm's length party at fair market value. When the taxpayer acquires the shares from his spouse, no election is filed pursuant to subsection 73(1) of the Act. The taxpayer, at a future time, disposes of some of the shares.
In our opinion, a reasonable method of dealing with attribution on a partial disposition of identical properties continues to be as follows. The costs of properties purchased after 1971, the gains or losses from which are attributable to another taxpayer, may constitute a separate or fourth group of properties and in the same manner as group three properties (as discussed in Interpretation Bulletin ITl99) contain as many lots as there are separate acquisitions of this nature. Groups one and three must be exhausted before any disposition may be considered to be of properties of groups two and four. At that point the taxpayer may decide whether a particular disposition is of properties of group two or of group four or is partly from each group. The adjusted cost base for each group is calculated separately. This position is unchanged from earlier correspondence on the same subject.
We trust the above comments are of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch