When you inherit property, investments, or other assets in Canada, capital gains tax may apply when you eventually sell them, but the tax timing and your cost base depend on specific CRA rules. Here's what you need to know: inherited assets are deemed to be acquired at their fair market value on the date of death, which becomes your cost base for tax purposes. This means you typically don't pay capital gains tax on the increase in value that occurred while the deceased person owned the property. However, if you later sell the inherited asset for more than its fair market value at the time of death, you will owe capital gains tax on that difference. The CRA applies a "deemed disposition" rule to the estate of a deceased person. This means that on the date of death, all capital assets are treated as if they were sold at their fair market value, even though no actual sale occurs. This is a critical concept for inheritance. For most asset types, this deemed disposition happens but no tax is owing at that moment (it's just on paper).
Not immediately at inheritance. However, capital gains tax may apply when you eventually sell the inherited property for more than its fair market value on the date of death. The fair market value at death becomes your cost base, so you only pay tax on gains that occur after you inherit it.
The fair market value is determined on the date of death of the person who left you the asset. This value becomes your adjusted cost base (cost basis) for tax purposes. If you later sell the asset for more than this amount, the difference is a taxable capital gain.
Inherited real estate is subject to capital gains tax on gains occurring after you inherit it, unless it qualifies as a principal residence. If the deceased person's home was their principal residence, it's exempt from capital gains tax both at death and when you sell it (if you designate it as your principal residence).
TFSA balances pass tax-free to your estate without capital gains tax. RRSP and RRIF balances face different rules, and may trigger immediate tax unless they pass to a surviving spouse, in which case a rollover may defer the tax.
No. The CRA requires you to use the fair market value on the date of death as your cost base, not the original purchase price. This protects you from being taxed on gains that occurred before you inherited the asset.