Income Tax Act — I-3.3 135.2
e eligible trust, and to own the unit at the time that is immediately before the death; (b) for the purpose of paragraph (f) of the definition eligible trust in subsection (1), the estate is deemed not to have acquired the unit from the trust; and (c) for the purposes of paragraphs (8)(b) and (c), the estate is deemed to have acquired the eligible unit on and as a consequence of the death. Eligible unit — gain (loss) (7) If a person disposes of an eligible unit in a trust that is an eligible trust at the time of the disposition (a) the gain, if any, of the person from the disposition is (i) deemed not to be a capital gain, and (ii) to be included in computing the person’s income for the person’s taxation year that includes that time; and (b) the loss, if any, of the person from the disposition is (i) deemed not to be a capital loss, and (ii) to be deducted in computing the person’s income for the person’s taxation year that includes that time. Death of a participating farmer (8) If, immediately before an individual’s death, the individual owns an eligible unit that the individual acquired as a participating farmer from an eligible trust (a) the individual is deemed to dispose (referred to in this subsection as the particular disposition ) of the eligible unit immediately before death; (b) if paragraph (d) does not apply, (i) the individual’s proceeds from the particular disposition are deemed to be equal to the unit’s fair market value immediately before the particular disposition, (ii) the gain from the particular disposition is deemed to be included, under subsection 70(1) and not under any other provision, in the individual’s income for the individual’s taxation year in which the individual dies, (iii) subsection 159(5) applies in respect of the individual who has died (determined as though a reference in that subsection to subsection 70(5.2) includes a reference to subsection 70(1) in the application of subsection 159(5) to the gain from the particular disposition) in respect of the particular disposition, and (iv) the person who acquires the eligible unit as a consequence of the individual’s death is deemed to have acquired the eligible unit at the time of the death at a cost equal to the individual’s proceeds, described in subparagraph (i), from the particular disposition; (c) paragraph (d) applies if (i) the individual is resident in Canada immediately before the individual’s death, (ii) the individual’s graduated rate estate acquires the eligible unit on and as a consequence of the death, (iii) the individual’s legal representative elects in prescribed form in the course of administering the individual’s graduated rate estate that paragraph (b) not apply to the individual in respect of the particular disposition, (iv) the election is filed with the individual’s return of income under this Part for the individual’s taxation year in which the death occurred, (v) the estate distributes the eligible unit to the individual’s spouse or common-law partner at a time at which it is the individual’s graduated rate estate, (vi) the individual’s spouse or common-law partner is resident in Canada at the time of the distribution, and (vii) the estate does not dispose of the unit before the distribution; and (d) if this paragraph applies, (i) the individual’s gain from the disposition is deemed to be nil, (ii) the cost amount to the estate of the eligible unit is deemed to be nil, (iii) any amount that is included in the estate’s income (determined without reference to this subparagraph and subsections 104(6) and (12)) for a taxation year from a source that is the eligible unit is, notwithstanding subsection 104(24), deemed (A) to have become payable in that taxation year by the estate to the spouse or common-law partner, and (B) not be have become payable to any other beneficiary, (iv) the distribution is deemed to be a disposition by the estate of the eligible unit for proceeds equal to the cost amount to the estate of the unit, (v