Section 75.1 — Income Tax Act: Gain or loss deemed that of transferor

Where subsection 73(3) or (4) applied to the transfer of property (in this subsection referred to as “transferred property”) by a taxpayer to a child of the taxpayer, the transfer was made at less than the fair market value of the transferred property immediately before the time of the transfer, and in a taxation year, the transferee disposed of the transferred property and did not, before the end of that year, attain the age of 18 years, the following rules apply: the amount, if any, by which the total of the transferee’s taxable capital gains for the year from dispositions of transferred property exceeds the total of the transferee’s allowable capital losses for the year from dispositions of transferred property, shall during the lifetime of the transferor while the transferor is resident in Canada, be deemed to be a taxable capital gain of the transferor for the year from the disposition of property, the amount, if any, by which the total determined under subparagraph 75.1(1)(d)(ii) exceeds the total determined under subparagraph 75.1(1)(d)(i) shall, during the lifetime of the transferor while the transferor is resident in Canada, be deemed to be an allowable capital loss of the transferor for the year from the disposition of property, and any taxable capital gain or allowable capital loss taken into account in computing an amount described in paragraph 75.1(1)(d) or the amount described in paragraph 75.1(1)(e) shall, except for the purposes of those paragraphs, to the extent that the amount so described is deemed by virtue of this subsection to be a taxable capital gain or an allowable capital loss of the transferor, be deemed not to be a taxable capital gain or an allowable capital loss, as the case may be, of the transferee. For the purposes of this section, child of a taxpayer includes a child of the taxpayer’s child and a child of the taxpayer’s child’s child.