A deemed disposition is when tax law treats you as having sold a property at fair market value even though no actual sale occurred, triggering a capital gain or loss.
Certain events trigger a deemed disposition, the tax system pretends you sold a property at its fair market value, so any accrued gain is taxed even without a real transaction. The most common triggers are death (a deemed sale of most assets on the final return), emigration from Canada, and a change in use of a property.
Deemed dispositions can create a tax bill with no cash to pay it, which is why estate and departure planning matters. Some deemed dispositions can be deferred or offset, for example a spousal rollover on death defers the gain until the surviving spouse disposes of the asset.
On death, a person is deemed to have sold their investment portfolio at fair market value. The accrued $200,000 gain is taxed on the final T1 return, even though the heirs have not actually sold anything.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
Book a Free 15-Minute CallCommon questions regarding our compliance workflows and service guarantees.