Brosamler v The Queen, 2012 TCC 204

2012 TCC 204 · Tax Court of Canada

Originally published on IncomeTaxAct.ca on 2 February 2014. The law may have changed since; check the current text in the tax wiki.

Estate of Late Gunnar Brosamler v The Queen, 2012 TCC 204

There were two main issues in this appeal:

1 - Whether capital losses realised by the estate upon disposition of capital property in the first year of the estate could be used, pursuant to paragraph 164(6)(c) of the ITA, as capital losses of the deceased’s terminal year against gains on the same properties.

2 - Whether probate and legal fees added to the ACB of properties, for a secondary probate in BC, OR ought to be deducted as an outlay or expense for the purpose of disposing of the properties.

The taxpayer, a resident of Germany, died in Germany with the result that three BC properties owned by him were deemed disposed by the ITA.

The executrix (who is also the sole beneficiary under the will) of his estate determined that, due to the large capital gains on the deemed disposition and the burden of the inheritance tax payable in Germany, two properties had to be sold to raise about $3 Million.

Two properties were sold within the first year following the death of the deceased, and each case a capital loss was realised. The legal representative elected pursuant to paragraph 164(6)(c) of the ITA, such that capital losses realised by the estate were deemed to be capital losses of the deceased in his final taxation year.

The Court held that probate and legal fees incurred for the estate to gain title to properties such that they could be sold as a right to property that could be registered under the Land Title Act, are property added to the ACB of the properties as cost of acquiring them. As such, losses due to the above amounts are also properly carried back to the terminal year pursuant to paragraph 164(6)(c) of the ITA.