There are provisions in the ITA [13(4) and 44(1)] that allow the deferral of the capital gain in such situations. See link below. Usually the taxpayer will have to acquire a replacement property, and that effectively “takes over” the cost of the original property (see Example 3 of the Folio). If no replacement property is acquired, then the taxpayer must report the capital gain, but that can be delayed up to 2 years in certain cases. See paragraph 1.24 re: how to effect the election - might need to send a letter to CRA.