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Tax Policy Comparison:
PERSONAL TAXATION #7
| Tax Policy Comparison: PERSONAL TAXATION #7 |
Conservative Party | Liberal Party |
|---|---|---|
| POLICY | “Canada First Reinvestment Tax Cut” – A Broad-Based Capital Gains Tax Deferral When Proceeds Are Reinvested in Canada | N/A |
| DATE | 30-Mar-25 | N/A |
| URL | View Policy Video | No Policy to View |
| DESCRIPTION & COMMENT | This proposal is a broad based capital gains tax deferral for all taxpayers who realize capital gains and reinvest the proceeds in Canadian based assets from July 1, 2025 – December 31, 2026 (although the video and policy annoucement does hint that this proposal could be made permanent if the economic impact is as large as they expect it could be).
This is a “big bang” tax idea. And has the potential to drive large economic activity. Of course, the devil will be in the details. For example, what types of property will be considered “Canadian”? The obvious will be Canadian stocks and real estate. There is precedent under the Act with the definition of “taxable Canadian property” (that could likely be easily modified to suit this proposal). When will the proceeds need to be reinvested in the Canadian property? 45 days? 90 days? 3 months? 6 months? If there are future capital gains inclusion rate increases, will the lower inclusion rate apply when there is an ultimate monetization that is not eligible for the deferral? Presently, there is very limited deferral opportunities for realized or deemed capital gains under the Act. The two most obvious ones are section 44 and 44.1. Section 44 provides rules for deferring the recognition of capital gains when a taxpayer disposes of a capital property and acquires a replacement property within a specified period. This section is particularly relevant for taxpayers who have disposed of a property involuntarily (e.g., due to expropriation, theft, or destruction) or have disposed of a “former business property” (generally, land and a building used in a business). Little used section 44.1 (because of the very restrictive requirements) provides deferral opportunities on the disposition of shares of certain small business corporations when they reinvest in eligible small business corporation shares. In the U.S., broad based capital gains deferral has been in existence for decades (although it has been narrowed in recent years). Section 1031 of the U.S. Internal Revenue Code allows taxpayers to defer capital gains taxes on the exchange of “like-kind” real property, facilitating the reinvestment of proceeds into similar types of property. The primary purpose of section 1031 is to promote investment continuity and economic growth by allowing taxpayers to defer taxes and reinvest in productive assets, although it is limited to real property exchanges and excludes personal property and principal residences. The cries for Canada to introduce a U.S. style “like-kind” exchange rule have been around for a long time but have always fallen on deaf ears. The Conservative proposal appears to be introducing a broader based, but limited time, Canadian equivalent. This proposal announcement by the Conservatives is very exciting and has the potential to generate decent economic activity! |
N/A |
Tax Policy Comparison:
PERSONAL TAXATION #7
Tax Policy Comparison: Personal Taxation #7
Conservative Party
Date: March 30, 2025
Summary:
“Canada First Reinvestment Tax Cut” – A Broad-Based Capital Gains Tax Deferral When Proceeds Are Reinvested in Canada
Description & Comment:
This proposal is a broad based capital gains tax deferral for all taxpayers who realize capital gains and reinvest the proceeds in Canadian based assets from July 1, 2025 – December 31, 2026 (although the video and policy annoucement does hint that this proposal could be made permanent if the economic impact is as large as they expect it could be).
This is a “big bang” tax idea. And has the potential to drive large economic activity.
Of course, the devil will be in the details. For example, what types of property will be considered “Canadian”? The obvious will be Canadian stocks and real estate. There is precedent under the Act with the definition of “taxable Canadian property” (that could likely be easily modified to suit this proposal). When will the proceeds need to be reinvested in the Canadian property? 45 days? 90 days? 3 months? 6 months? If there are future capital gains inclusion rate increases, will the lower inclusion rate apply when there is an ultimate monetization that is not eligible for the deferral?
Presently, there is very limited deferral opportunities for realized or deemed capital gains under the Act. The two most obvious ones are section 44 and 44.1.
Section 44 provides rules for deferring the recognition of capital gains when a taxpayer disposes of a capital property and acquires a replacement property within a specified period. This section is particularly relevant for taxpayers who have disposed of a property involuntarily (e.g., due to expropriation, theft, or destruction) or have disposed of a “former business property” (generally, land and a building used in a business). Little used section 44.1 (because of the very restrictive requirements) provides deferral opportunities on the disposition of shares of certain small business corporations when they reinvest in eligible small business corporation shares.
In the U.S., broad based capital gains deferral has been in existence for decades (although it has been narrowed in recent years). Section 1031 of the U.S. Internal Revenue Code allows taxpayers to defer capital gains taxes on the exchange of “like-kind” real property, facilitating the reinvestment of proceeds into similar types of property. The primary purpose of section 1031 is to promote investment continuity and economic growth by allowing taxpayers to defer taxes and reinvest in productive assets, although it is limited to real property exchanges and excludes personal property and principal residences.
The cries for Canada to introduce a U.S. style “like-kind” exchange rule have been around for a long time but have always fallen on deaf ears. The Conservative proposal appears to be introducing a broader based, but limited time, Canadian equivalent.
This proposal announcement by the Conservatives is very exciting and has the potential to generate decent economic activity!
View Policy Video
Summary:
“Canada First Reinvestment Tax Cut” – A Broad-Based Capital Gains Tax Deferral When Proceeds Are Reinvested in Canada
Description & Comment:
This proposal is a broad based capital gains tax deferral for all taxpayers who realize capital gains and reinvest the proceeds in Canadian based assets from July 1, 2025 – December 31, 2026 (although the video and policy annoucement does hint that this proposal could be made permanent if the economic impact is as large as they expect it could be).
This is a “big bang” tax idea. And has the potential to drive large economic activity.
Of course, the devil will be in the details. For example, what types of property will be considered “Canadian”? The obvious will be Canadian stocks and real estate. There is precedent under the Act with the definition of “taxable Canadian property” (that could likely be easily modified to suit this proposal). When will the proceeds need to be reinvested in the Canadian property? 45 days? 90 days? 3 months? 6 months? If there are future capital gains inclusion rate increases, will the lower inclusion rate apply when there is an ultimate monetization that is not eligible for the deferral?
Presently, there is very limited deferral opportunities for realized or deemed capital gains under the Act. The two most obvious ones are section 44 and 44.1.
Section 44 provides rules for deferring the recognition of capital gains when a taxpayer disposes of a capital property and acquires a replacement property within a specified period. This section is particularly relevant for taxpayers who have disposed of a property involuntarily (e.g., due to expropriation, theft, or destruction) or have disposed of a “former business property” (generally, land and a building used in a business). Little used section 44.1 (because of the very restrictive requirements) provides deferral opportunities on the disposition of shares of certain small business corporations when they reinvest in eligible small business corporation shares.
In the U.S., broad based capital gains deferral has been in existence for decades (although it has been narrowed in recent years). Section 1031 of the U.S. Internal Revenue Code allows taxpayers to defer capital gains taxes on the exchange of “like-kind” real property, facilitating the reinvestment of proceeds into similar types of property. The primary purpose of section 1031 is to promote investment continuity and economic growth by allowing taxpayers to defer taxes and reinvest in productive assets, although it is limited to real property exchanges and excludes personal property and principal residences.
The cries for Canada to introduce a U.S. style “like-kind” exchange rule have been around for a long time but have always fallen on deaf ears. The Conservative proposal appears to be introducing a broader based, but limited time, Canadian equivalent.
This proposal announcement by the Conservatives is very exciting and has the potential to generate decent economic activity!
View Policy Video
Liberal Party