Under certain circumstances, taxation rules state that a transfer of property has occurred, even without a purchase or sale.
A deemed disposition occurs when:
Fair market valuation. In the dispositions above the FMV is determined as the price a stranger (unrelated to the taxpayer) would pay for an asset on the open market. To get that value, it’s important to see appraisals or listings of similar assets sold recently on the open market.
Valuation days. Due to the history of the taxation of capital gains in Canada, numerous valuation days for various assets may also be used as proceeds of disposition. For example, capital gains were not taxable at all prior to 1972, so valuation was required at that time.
Excerpted from Jacks on Tax. © Knowledge Bureau, Inc. All rights reserved.