The beneficiaries are NOT subject to inheritance tax. The Estate and Inheritance Taxes were rescind in 1970’s by the government and the Capital Taxes were introduced.
Upon death, one has to pay Capital Gain Taxes on the value of appreciation of all his capital property (e.g. house, investments, rental properties, art) at their fair market value. Capital loss (any decline in value of deceased’s assets) can be applied against actual or deemed capital gains in the year of one’s death or the preceding three taxation years.

Capital losses are not allowed (personal use properties such as a home or cottage are exempt) and remaining losses may be claimed against any source of income on the deceased’s final tax return or the return for the prior year. The claim of the loss is subject to adjustment for previous claims of the capital gains exemption.

There is this exception when the property is transferred to a spouse or common-law partner as per will. In this circumstance, the property passes without recognition of accrued gains or losses. This is usually the case unless the executor elects to realize them which is often done if one has unused tax credits.

(Chartered accountants based in Mississauga and Etobicoke)