Mr. Patel, 78, recently passed away, leaving his entire estate to his wife, Mrs. Patel, 75, as per his will. His assets included a non-registered investment portfolio with a fair market value of $800,000 and an adjusted cost base of $300,000. Which statement accurately describes the tax implications of this transfer?

Question: Mr. Patel, 78, recently passed away, leaving his entire estate to his wife, Mrs. Patel, 75, as per his will. His assets included a non-registered investment portfolio with a fair market value of $800,000 and an adjusted cost base of $300,000. Which statement accurately describes the tax implications of this transfer?

Answer options:

• A capital gain of $500,000 will be realized by Mr. Patel's estate, with half being taxable. ✅ A spousal rollover will occur, deferring the capital gain until Mrs. Patel disposes of the assets or dies.
• Mrs. Patel will inherit the portfolio at its fair market value of $800,000, creating a new adjusted cost base.
• The transfer qualifies for a full tax exemption due to the spousal relationship.

Correct answer: A spousal rollover will occur, deferring the capital gain until Mrs. Patel disposes of the assets or dies.

Explanation: When capital property is transferred to a surviving spouse upon death, a spousal rollover generally applies. This defers the recognition of any capital gains until the surviving spouse disposes of the property or passes away, maintaining the original adjusted cost base for tax purposes.