📄 T2076 – Valuation Day Value Election for Capital Properties Owned on December 31, 1971

Form T2076 is used to elect the fair market value (FMV) of certain capital property as of December 31, 1971, commonly referred to as Valuation Day. This election is relevant for taxpayers who owned capital property before Canada introduced capital gains taxation in 1972.

📌 Why December 31, 1971 Matters

Capital gains tax was introduced in Canada effective January 1, 1972. As a result, any increase in value of capital property prior to that date is generally not subject to capital gains tax. To ensure fairness, taxpayers were permitted to establish the fair market value of their property on December 31, 1971.

The elected amount becomes the property's adjusted cost base (ACB) for future capital gains calculations, potentially reducing taxable gains when the property is disposed of.

🧾 Who Should File Form T2076?

You may need to file Form T2076 if:

You owned capital property on December 31, 1971.
You disposed of (or are deemed to have disposed of) that property in a later tax year.
You wish to elect the fair market value on Valuation Day instead of using historical cost.

This commonly applies to:

Real estate (excluding principal residences already fully exempt)
Shares and securities
Investment properties
Certain business assets

📊 How the Election Works

The election allows you to:

Determine the fair market value (FMV) of the property on December 31, 1971.
Use that FMV as the new adjusted cost base for calculating capital gains.
Exclude pre-1972 appreciation from taxation.

Important: The elected amount cannot create or increase a capital loss. Special transitional rules under the Income Tax Application Rules may apply in complex cases.

🗓 Filing Deadline

The election must generally be filed by the due date of the income tax return for the year in which the property is first disposed of after 1971.

Late filing may result in penalties or the election being invalid unless relief provisions apply.

📐 Determining Fair Market Value (FMV)

To support your election, you should retain documentation showing how the December 31, 1971 value was determined. Acceptable evidence may include:

Professional appraisal reports
Comparable market sales data
Historical stock exchange pricing records
Corporate financial statements (for private shares)

In the case of publicly traded securities, historical price data from recognized stock exchanges may be used.

🏠 Special Considerations for Real Estate

For real property owned on Valuation Day:

Land and buildings must be valued separately.
Improvements made after December 31, 1971 are added to the adjusted cost base.
Principal residence exemptions may still apply depending on occupancy history.

💡 Practical Example

If you purchased shares in 1965 for $10,000 and their fair market value on December 31, 1971 was $18,000, you may elect $18,000 as the adjusted cost base. If you later sell the shares for $50,000, the taxable capital gain would be calculated from $18,000 rather than $10,000 — excluding pre-1972 appreciation.

⬇️ Download Form T2076

📚 Related Guidance

Income Tax Application Rules (transitional provisions for pre-1972 property)
CRA Guide T4037 – Capital Gains
Information Circulars regarding historical elections and adjustments

⚠️ Important Notes

✔ The election applies on a property-by-property basis.

✔ Accurate documentation is essential in case of CRA review.

✔ Professional tax advice is recommended for complex asset structures or corporate holdings.