Do I trigger capital gains tax if I gift property to a family member?

Yes, in most cases. Under the federal Income Tax Act, a gift of capital property — including real estate, shares, or a cottage — is treated as a "deemed disposition" at fair market value on the date of the gift. You are considered to have sold the property at its current market value even though no money actually changed hands. Any accrued gain up to that point becomes taxable to you in the year of the gift.

There is a limited exception for gifts to a spouse or common-law partner, where the property can "roll over" at cost rather than fair market value, deferring the gain until the spouse ultimately disposes of it. However, this spousal rollover is automatic and is sometimes not desirable — it can cause the future gain to be attributed back to you.

Transfers to children at fair market value on death through an estate work differently — the estate is deemed to dispose of the property at fair market value, and the resulting gain is reported on the deceased's terminal return. Planning gifts during your lifetime versus through your estate has real tax consequences and should be modelled in advance.