Spousal rollover — transferring property to your spouse tax-free
Inter vivos transfers by individuals to spouse or common-law partner
Section 73 allows an individual to transfer capital property to their spouse or common-law partner at the property's adjusted cost base (instead of FMV), deferring the capital gain until the spouse later disposes of the property.
Plain-language explanation
Section 73 provides an automatic "rollover" for capital property transferred between spouses. Instead of triggering a capital gain at FMV (as would normally happen on a disposition), the transfer happens at ACB — no gain is recognized at the time of transfer.
How the rollover works: - The transferor is deemed to have disposed of the property at ACB (no immediate gain) - The transferee (spouse) is deemed to have acquired it at the same ACB - When the spouse later sells, the full accrued gain (from the original owner's ACB) is recognized — but in the spouse's hands
The attribution rules — s.74.1: After the transfer, any income earned on the property (interest, dividends, rents) and capital gains realized on eventual sale are *attributed back* to the transferring spouse — they are taxed in the transferor's hands, not the spouse's. This anti-avoidance rule prevents income-splitting through spousal transfers.
Electing out: You can elect out of the s.73 rollover and instead transfer at FMV. This makes sense if: - You have a capital loss you want to crystallize - You want the attribution rules to stop applying immediately (transferring at FMV ends attribution on future gains)
At death (s.70): The automatic spousal rollover also applies to property transferred to a spouse at death (s.70(6)), deferring capital gains until the surviving spouse disposes of the property.
Example
Marina transfers shares (ACB $20,000, FMV $80,000) to her spouse under s.73. No gain recognized — both parties use $20,000 as the cost. Five years later, the spouse sells for $100,000. Capital gain: $80,000 — but attributed back to Marina under s.74.1 (taxed in Marina's hands, not the spouse's).
Common questions
Do I pay tax when I give property to my spouse? +
Not immediately, under the s.73 rollover. The transfer happens at ACB, so no capital gain arises. However, when your spouse eventually sells the property, the income and gain may be attributed back to you under s.74.1 — so you pay the tax then.
What is attribution and can I avoid it? +
Attribution (s.74.1) means that income and gains on property you transferred to your spouse are taxed in your hands, not theirs. To stop attribution, you can transfer at FMV instead of using the s.73 rollover, or loan money at the CRA prescribed rate (instead of giving it).
Does the spousal rollover apply to registered accounts? +
No. RRSP and TFSA transfers between spouses (e.g., after marriage breakdown or death) have their own rules. At death, the RRSP of a deceased person can roll to a surviving spouse's RRSP under s.146(8.1) without triggering income.
Key terms
Related sections
Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 73. — Read the official text on Justice Canada
These summaries are for educational purposes only and do not constitute legal or tax advice. Speak with a CPA for advice on your specific situation.