Peter K. Noack (613)957-8963
April 11, 1988
Dear Sirs:
We reply to your letter of March 28, concerning the application of subsection 70(6.2) of the income Tax Act (Act) to a portion of a real property passing to the spouse of a deceased taxpayer in circumstances where subsection 70(6) of the Act would apply. You suggest that an election under subsection 70(6.2) of the Act could be made to have the rules in subsection 70(5) apply to a portion of the real property equivalent to the deceased's allowable capital gains exemption. Your specific question is whether the reference in subsection 70(6.2) of the Act to any property can be interpreted as a reference to a portion of a property.
Subsection 70(6.2) of the Act provides that the mandatory provisions of subsection 70(6) of the Act do not apply to any property in respect of which the legal representative of the deceased taxpayer has elected to have subsection 70(5) of the Act apply. Paragraph 70(5)(a) of the Act deems a taxpayer to have disposed, immediately before his death, of each property owned by him at that time that was a capital property. Where the property involved is real estate, we interpret the words "each property" in paragraph 70(5)(a) of the Act to mean all of a specific property that is described in a deed registered in the name of the deceased. We do not agree that the reference to each property in that paragraph can be taken to mean a portion of that property. In our opinion, paragraph 70(6.2) of the Act does not permit an election in respect of an arbitrary portion of a separately registered real property.
We hope the above comments will assist you.
Yours truly,
for Director Financial Industries Division Ruling Directorate