Transferring Capital Losses To A Spouse At Death

by Tax Guy - Burlington Accountant on November 2, 2009 Print This Post Print This Post

A recent visitor to Canadian Tax Resource send in a question asking if a capital loss can be transferred to the surviving spouse after death.

“If the deceased spouse had a capital loss of $10,000 and passed away in 2006, can the surviving spouse (who is the sole beneficiary) claim the capital loss against her income?

Is there a time limit since the RRSP transferred already?”

Capital Gains & Losses

When you pass away, you are deemed to have sold all of your possessions at their fair market value. If there is a capital gain or loss on your assets, you will have a tax bill. To avoid a financial burden on the surviving spouse, the Income Tax Act allows the surviving spouse the receive all of the personal assets of the spouse at its original cost.

If your spouse passed away and owned some stocks worth $50,000 that you had originally paid $60,000 for, the you may assume ownership of the stocks with a cost base of $60,000. And if you sell the investments you can claim the capital loss.

The surviving spouse has a choice. He or she may also elect to allow the deemed sale at death to use or eliminate any taxes owing from the deceased spouse.

RRSPs and Death

RRSP’s are a little different because they do not generate capital gains or losses. However, the amounts withdrawn from the RRSP are fully taxed.

The surviving spouse again may elect to receive the RRSP without incurring tax or may elect to have a portion taxable.

Time Limits For Amendments

Generally speaking, you may make amendments to a tax return that has already been filed. A call to the CRA or a written letter may do the trick.

Time Limits On The Estate

The executor of an estate generally has a year known as the executor’s year to settle the final tax bill and other obligations of the deceased. During this year, the beneficiaries cannot demand distributions or settlement of the estate.

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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