Income Splitting After Death

by Tax Guy - Burlington Accountant on March 18, 2009 Print This Post Print This Post

Question: My father passed in September of 2008 and he had both rental property and investments stocks. Do I still split the rental information and stock investments or do I need to calculate only until date of death?  Is it not wise to use up his lifetime capital gains allowance so that when my mother dies there will not be a huge tax payment to the government?  Does all automatically transfer to the surviving spouse?

The Lifetime Capital Gains Exemption

The general lifetime capital gains exemption (CGE) available to all individuals was eliminated by the government in 1992 and replaced by a new form of the CGE for persons who own qualified small business corporation (QSBCS).  If some of the property was QSBCS then, yes you may want to realize some of the gains to take advantage of the CGE.  There are specific rules and qualifications that must take place before claiming this exemption and it would be wise to discuss this with a tax professional in your area.

Tax Deferred Rollover to Spouse

Your father’s property will rollover to your mother on a tax deferred basis.  This means that your father’s assets transfer to your mother at their original adjusted cost base and there is no immediate tax consequence until the death of your mother or the sale of the said assets.

There are no capital gains on the family home on the death of your father or subsequent death of your mother.  Any RRSPs or RRIFs your father had would also not be subject to immediate tax as these also rollover to your mother on a deferred basis and would be included in her income upon her death.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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