Tax wiki
s. 72
PART I — Income Tax · DIVISION B — Computation of Income · SUBDIVISION F — Rules Relating to Computation of Income
Reserves, etc., for year of death
Not yet annotated · Text current to 2026-06-21 · section last amended 2013-06-26
Current text
Where in a taxation year a taxpayer has died,
paragraph 20(1)(n) does not apply to allow, in computing the income of the taxpayer for the year from a business, the deduction of any amount as a reserve in respect of property sold in the course of the business;
no amount is deductible under subsection 32(1) as a reserve in respect of unearned commissions in computing the taxpayer’s income for the year;
no amount may be claimed under subparagraph 40(1)(a)(iii), paragraph 40(1.01)(c) or subparagraph 44(1)(e)(iii) in computing any gain of the taxpayer for the year;
subsection 64(1) does not apply to allow, in computing the income of the taxpayer for the year, the deduction of any amount as a reserve in respect of the disposition of any property; and
subsection 64(1.1) does not apply to allow, in computing the income of the taxpayer for the year, the deduction of any amount as a reserve in respect of the disposition of any property.
Election by legal representative and transferee re reserves
(2)Where property of a taxpayer that is a right to receive any amount has, on or after the death of the taxpayer and as a consequence thereof, been transferred or distributed to the taxpayer’s spouse or common-law partner described in paragraph 70(6)(a) or to a trust described in paragraph 70(6)(b) (in this subsection referred to as the “transferee”), if the taxpayer was resident in Canada immediately before the taxpayer’s death and the taxpayer’s legal representative and the transferee have executed jointly an election in respect of the property in prescribed form,
any amount in respect of the property that would, but for paragraph 72(1)(a), (b), (d) or (e), as the case may be, have been deductible as a reserve in computing the taxpayer’s income for the taxation year in which the taxpayer died shall,
notwithstanding subsection 72(1), be deducted in computing the taxpayer’s income for the taxation year in which the taxpayer died,
be included in computing the transferee’s income for the transferee’s first taxation year ending after the death of the taxpayer, and
be deemed to be
an amount that has been included in computing the transferee’s income from a business for a previous year in respect of property sold in the course of the business,
an amount that has been included in computing the transferee’s income for a previous year as a commission in respect of an insurance contract, other than a life insurance contract,
an amount that by virtue of subsection 59(1) has been included in computing the transferee’s income for a preceding taxation year, or
for the purposes of subsection 64(1.1), an amount that by virtue of paragraph 59(3.2)(c) has been included in computing the transferee’s income for a preceding taxation year and to be an amount deducted by the transferee pursuant to paragraph 64(1.1)(a) in computing the transferee’s income for the transferee’s last taxation year ending before the death,
as the case may be;
any amount in respect of the property that could, but for paragraph 72(1)(c), have been claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing the amount of any gain of the taxpayer for the year shall,
notwithstanding paragraph 72(1)(c), be deemed to have been so claimed, and
for the purpose of computing the transferee’s income for the transferee’s first taxation year ending after the death of the taxpayer and any subsequent taxation year, be deemed to have been
proceeds of the disposition of capital property disposed of by the transferee in that first taxation year, and
the amount determined under subparagraph 40(1)(a)(i) or 44(1)(e)(i), as the case may be, in respect of the capital property referred to in clause (A); and
notwithstanding paragraphs 72(2)(a) (b), where any property had been disposed of by the taxpayer, in computing the income of the transferee for any taxation year ending after the death of the taxpayer,
the amount of the transferee’s deduction under paragraph 20(1)(n) as a reserve in respect of the property sold in the course of business,
the amount of the transferee’s claim under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in respect of the disposition of the property, and
the amount of the transferee’s deduction under section 64 as a reserve in respect of the disposition of the property
shall be computed as if the transferee were the taxpayer who had disposed of the property and as if the property were disposed of by the transferee at the time it was disposed of by the taxpayer.
Source: Justice Laws Website. Not an official version.
Historic text
Immediately preceding version, in force from 2004-08-31 to 2013-06-25:
Show the text in force 2004-08-31 to 2013-06-25
Reserves, etc., for year of death
72 (1) Where in a taxation year a taxpayer has died,
(a) paragraph 20(1)(n) does not apply to allow, in computing the income of the taxpayer for the year from a business, the deduction of any amount as a reserve in respect of property sold in the course of the business;
(b) no amount is deductible under subsection 32(1) as a reserve in respect of unearned commissions in computing the taxpayer’s income for the year;
(c) no amount may be claimed under subparagraph 40(1)(a)(iii), paragraph 40(1.01)(c) or subparagraph 44(1)(e)(iii) in computing any gain of the taxpayer for the year;
(d) subsection 64(1) does not apply to allow, in computing the income of the taxpayer for the year, the deduction of any amount as a reserve in respect of the disposition of any property; and
(e) subsection 64(1.1) does not apply to allow, in computing the income of the taxpayer for the year, the deduction of any amount as a reserve in respect of the disposition of any property.
Election by legal representative and transferee re reserves
(2) Where property of a taxpayer that is a right to receive any amount has, on or after the death of the taxpayer and as a consequence thereof, been transferred or distributed to the taxpayer’s spouse or common-law partner described in paragraph 70(6)(a) or to a trust described in paragraph 70(6)(b) (in this subsection referred to as the “transferee”), if the taxpayer was resident in Canada immediately before the taxpayer’s death and the taxpayer’s legal representative and the transferee have executed jointly an election in respect of the property in prescribed form,
(a) any amount in respect of the property that would, but for paragraph 72(1)(a), (b), (d) or (e), as the case may be, have been deductible as a reserve in computing the taxpayer’s income for the taxation year in which the taxpayer died shall,
(i) notwithstanding subsection 72(1), be deducted in computing the taxpayer’s income for the taxation year in which the taxpayer died,
(ii) be included in computing the transferee’s income for the transferee’s first taxation year ending after the death of the taxpayer, and
(iii) be deemed to be
(A) an amount that has been included in computing the transferee’s income from a business for a previous year in respect of property sold in the course of the business,
(B) an amount that has been included in computing the transferee’s income for a previous year as a commission in respect of an insurance contract, other than a life insurance contract,
(C) an amount that by virtue of subsection 59(1) has been included in computing the transferee’s income for a preceding taxation year, or
(D) for the purposes of subsection 64(1.1), an amount that by virtue of paragraph 59(3.2)(c) has been included in computing the transferee’s income for a preceding taxation year and to be an amount deducted by the transferee pursuant to paragraph 64(1.1)(a) in computing the transferee’s income for the transferee’s last taxation year ending before the death,
as the case may be;
(b) any amount in respect of the property that could, but for paragraph 72(1)(c), have been claimed under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing the amount of any gain of the taxpayer for the year shall,
(i) notwithstanding paragraph 72(1)(c), be deemed to have been so claimed, and
(ii) for the purpose of computing the transferee’s income for the transferee’s first taxation year ending after the death of the taxpayer and any subsequent taxation year, be deemed to have been
(A) proceeds of the disposition of capital property disposed of by the transferee in that first taxation year, and
(B) the amount determined under subparagraph 40(1)(a)(i) or 44(1)(e)(i), as the case may be, in respect of the capital property referred to in clause (A); and
(c) notwithstanding paragraphs 72(2)(a) (b), where any property had been disposed of by the taxpayer, in computing the income of the transferee for any taxation year ending after the death of the taxpayer,
(i) the amount of the transferee’s deduction under paragraph 20(1)(n) as a reserve in respect of the property sold in the course of business,
(ii) the amount of the transferee’s claim under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in respect of the disposition of the property, and
(iii) the amount of the transferee’s deduction under section 64 as a reserve in respect of the disposition of the property
shall be computed as if the transferee were the taxpayer who had disposed of the property and as if the property were disposed of by the transferee at the time it was disposed of by the taxpayer.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 72
- 1994, c. 7, Sch. II, s. 49
- 1998, c. 19, s. 12
- 2000, c. 12, s. 142
Earlier versions: Justice Laws point-in-time versions of the Act (from 31 August 2004), and CanLII (under “Versions”). On Justice Laws, each version of section 72 links to the one before it.
Enacting and amending legislation
- R.S., 1985, c. 1 (5th Supp.), s. 72; 1994, c. 7, Sch. II, s. 49; 1998, c. 19, s. 12; 2000, c. 12, s. 142; 2013, c. 34, s. 210(F)
Text before 2004 is found in the annual Statutes of Canada cited above. Application and coming-into-force provisions are not part of the consolidation; see the amending Acts.
Cross-references
Citation
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 72.