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Adjusted cost base (ACB) - usually the cost of a property, plus any expenses to acquire it, such as commissions and legal fees.
The cost of a capital property is its actual or deemed cost, depending on the type of property and how you acquired it. It also includes capital expenditures, such as the cost of additions and improvements to the property. You cannot add current expenses, such as maintenance and repair costs, to the ACB of a property.
For more information on ACB, see IT456, Capital Property - Some Adjustments to Cost Base, and its Special Release.
If the deceased filed Form T664 or T664 (Seniors), Election to Report a Capital Gain on Property Owned at the End of February 22, 1994, the ACB of the property may change. For more information, see Capital Gains.
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Administrator - There may not be a will, or the will may not name an executor. In this case, a court will appoint an administrator to handle the deceased's estate. An administrator is often the spouse, common-law partner, or the next of kin.
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Advantage - see Eligible amount of the gift.
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Annuitant - generally, an annuitant is the person for whom a retirement plan provides a retirement income. In certain circumstances, the surviving spouse or common-law partner may qualify as the annuitant when, because of the death, he or she becomes entitled to receive benefits out of the retirement plan.
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Annuity payment - a fixed periodic payment that a person has the right to receive, either for life or for a specific number of years. These payments represent a partial recovery of financing and a return (interest) on the capital investment.
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Arm's length transaction - a transaction between persons each of whom acts in his or her own self-interest. Related persons are not considered to deal with each other at arm's length. Related persons include individuals connected by a blood relationship, marriage or common-law partnership, or adoption (legal or in fact). Also, a corporation and a shareholder who controls the corporation are related.
Unrelated persons usually deal with each other at arm's length, although this might not be the case if, for example, one person is under the influence or control of the other.
For more information on arm's length, see IT419, Meaning of Arm's Length.
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Capital cost allowance (CCA) - in the year you buy a depreciable property (defined later in this Glossary), such as a building, you cannot deduct the full cost. However, since this type of property wears out or becomes obsolete over time, you can deduct its capital cost over a period of several years. This deduction is called CCA. You cannot claim it for the fiscal period that ends on the date of death.
When we talk about CCA, a reference is often made to class. You usually group depreciable properties into classes. You have to base your CCA claim on the rate assigned to each class of property.
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Capital property - includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. You usually buy it for investment purposes or to earn income. Capital property does not include the trading assets of a business, such as inventory. Some common types of capital property include cottages; securities such as stocks, bonds, and units of a mutual fund trust; and land, buildings, and equipment used in a business or rental operation.
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Common-law partner - this applies to a person who is not your spouse, with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. He or she:
- has been living with you in a conjugal elationship for at least 12 continuous months;
- is the parent of your child by birth or adoption; or
- has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.
An individual immediately becomes your common-law partner if you previously lived together in a conjugal relationship for at least 12 continuous months and you have resumed living together in such a relationship. Under proposed changes, this condition will no longer exist. The effect of this proposed change is that a person (other than a person described in b) or c) above) will be your common-law partner only after your current relationship with that person has lasted at least 12 continuous months. This proposed change will apply to 2001 and later years once it becomes law.
Reference to “12 continuous months” in this definition includes any period that you were separated for less than 90 days because of a breakdown in the relationship.
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Deemed disposition - expression used when a person is considered to have disposed of a property, even though a sale did not take place.
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Deemed proceeds of disposition - expression used when a person is considered to have received an amount for the disposition of property, even though the person did not actually receive that amount.
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Depreciable property - usually capital property used to earn income from a business or property. The capital cost can be written off as CCA over a number of years.
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Eligible amount of the gift - under proposed legislation, this is generally the amount by which the fair market value of the gifted property exceeds the amount of the advantage, if any, received for the gift.
Under proposed legislation, the advantage is generally the total value of all property, services, compensation, or other benefits to which you are entitled as partial consideration for, or in gratitude for, the gift. The advantage may be contingent or receivable in the future, and given either to you or a person not dealing at arm's length with you.
Under proposed legislation, for gifts made after February 18, 2003, the advantage also includes any limited-recourse debt in respect of the gift at the time it was made. For example, there may be a limited recourse debt if the property was acquired though a tax shelter that is a gifting arrangement. In this case, the eligible amount of the gift will be reported in box 13 of Form T5003, Statement of Tax Shelter Information. For more information on gifting arrangements and tax shelters, see T4068, Guide for the Partnership Information Return.
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Executor - This is someone a will names to act as the legal representative to handle a deceased's estate.
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Fair market value (FMV) - usually the highest dollar value that you can get for your property in an open and unrestricted market between a willing buyer and a willing seller who are acting independently of each other.
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Liquidator - In Quebec, the liquidator is responsible for distributing assets of all estates. For estates with a will, the liquidator's role is similar to an executor's. For estates without a will, the liquidator acts as the administrator of the estate.
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Locked in - this means that the beneficiary who is to receive the property has a right to absolute ownership of it. No future event or development can take this right away. In order for a property to be locked in:
- for a spousal or common-law partner trust, it has to become locked in before the surviving spouse or common-law partner dies; and
- for an individual, it has to become locked in before the individual dies.
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Non-arm's length transaction - a transaction between persons who were not dealing with each other at arm's length at the time of the transaction.
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Qualified donee - generally includes:
- a registered Canadian charity;
- a registered Canadian amateur athletic association;
- a Canadian tax exempt housing corporation that only provides low-cost housing for seniors;
- a municipality in Canada or, for gifts made after May 8, 2000, a municipal or public body performing a function of government in Canada;
- the United Nations (UN) or an agency of the UN;
- a prescribed university outside Canada;
- a charitable organization outside Canada to which the Government of Canada has made a donation in 2005 or 2006; and
- the Government of Canada, a province, or a territory.
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Spouse - this applies only to a person to whom you are legally married.
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Testamentary spousal or common-law partner trust - a trust created by the deceased's will, or a court order in relation to the deceased's estate made under any law of a province or territory that provides for the relief or support of dependants. The surviving spouse or common-law partner is entitled to all the income of the trust that arises before he or she dies. No one else can receive or use the trust's income or capital before the surviving spouse's or common-law partner's death.
For more information, see IT305, Testamentary Spouse Trusts.
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Testamentary debts - debts or liabilities of all kinds that an individual incurred and did not pay before death. It also includes amounts payable by the estate because of death.
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Undepreciated capital cost (UCC) - generally, UCC is equal to the total capital cost of all the properties of a class minus any capital cost allowance claimed in previous years. When property of the class is disposed of, you also have to subtract from the UCC one of the following two amounts, whichever is less:
- the proceeds of disposition of the property (either actual or deemed) minus the related outlays and expenses to sell it; or
- the capital cost of the property.
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