I have to transfer assets to my spouse as part of our Separation Agreement. Will the transfer trigger immediate income tax consequences for me?
Whether property can be transferred to your spouse without triggering immediate income tax liability depends on the type of property being transferred. In most cases, property can be transferred between spouses on a rollover basis, meaning no gains or losses arise, and the recipient receives the property at the transferor’s costs for income tax purposes, assuming both spouses are Canadian residents.
Some examples of assets which can be transferred on a rollover basis are: Registered Retirement Savings Plan (RRSPs); Tax-Free Savings Accounts (TFSAs); and, other forms of capital property. Note, in the case of a TFSA, the transferor’s contribution limit is not reinstated. Some assets which may not be transferred on a rollover basis are: Inventory or capital assets, in the case of a spouse who owns a business; or, speculative assets such as land holdings acquired to be resold at a profit.
For more information on potential income tax consequences of asset transfer to your spouse, contact a lawyer or consider obtaining an advance tax ruling for a proposed transaction from the Canada Revenue Agency.