19 April 1991 Income Tax Severed Letter

19(1)                         5-910731
                                        P. Spice
                                        (613) 957-8953

April 19, 1991

19(1)

We are writing in reply to your letter of March 11, 1991, in which you ask whether a transferee spouse under paragraph 72(2)(b) of the Income Tax Act (the "Act") can claim a capital gains exemption with respect to capital gains reserved under subparagraph 40(l)(a(iii) by the deceased transferor.

A capital gains exemption under section 110.6 of the Act available for the 1988 and subsequent taxation years in respect of gains from dispositions occurring after 1984. Provided these conditions are satisfied, a transferee spouse is eligible to claim such an exception for the capital gains to which a reserve was applied by the deceased spouse. It is irrelevant that the deceased spouse claimed a section 110.6 exemption on the part of the gain on which the reserve was not claimed.

These comments are an expression of opinion only and are not binding on the Department. We hope, however, that they are of assistance.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Legislative and Intergovernmental
  Affairs Branch
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