Page 172 - A Canuck's Guide to Financial Literacy 2020

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Deemed Disposition

According to Canadian tax law, a taxpayer is deemed to have disposed of all of their
property at the fair market value, immediately before death, even though a sale of assets
did not take place. This could include non registered assets, RRSPs/RRIFs, real estate,
cars, investments, shares in a private company, etc. This triggers capital gains and burdens
the estate with a potential tax liability that they’d have to be responsible for.

A terminal tax return must be filed by the executor in order to account for this deemed
disposition and the tax payable that’s triggered. However, you may defer the tax through:

▪ Rollover Provisions – Registering your assets in joint a, naming a qualifying
beneficiary on your registered investments, transferring assets into a spousal trust
▪ Exemptions – Taking advantage of tax planning tools such as Lifetime Capital
Gains Exemption
▪ Tax Elections – Contributing into a spousal RRSP, splitting income, filing additional
tax returns, using capital losses, etc.

Due Date of Final Tax Return

Individual Due Dates

▪ If the death of the taxpayer occurred between January 1st and October 31st, final
return is due on April 30th of next year.
▪ If the death occurs later in the year between November 1st to December 31st, the
final tax return is due within 6 months.

Business Owner Due Dates

If the deceased was running a business at time of death, the deadline to file a tax return is
as follows:

▪ If the death of the taxpayer occurred between January 1st and December 15th, final
return is due by June 15th of next year.
▪ If the death occurs later in the year between December 16th to December 31st, the
final tax return is due within 6 months.

Spousal Trust Due Dates

If upon death a spousal trust is set up through a deceased’s will, then final due date of the
tax return is 18 months after the date of death. Any taxes payable is due by due date
mentioned above.