Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether, for purposes of subsection 44(1), a court ordered severance partition and forced sale and empowering the bankruptcy Trustee to execute the sale on behalf of the creditors would constitute a disposition of the property under statutory authority as referred to in the definition of "proceeds of disposition" in paragraphs 13(21)(d) and 54(d).
Position TAKEN:
Yes.
Reasons FOR POSITION TAKEN:
Position is consistent with previous opinion regarding a forced sale under the Business Corporations Act.
950158
XXXXXXXXXX Wm. P. Guglich
Attention: XXXXXXXXXX
July 26, 1995
Dear Sirs:
Re: Forced Transfer of Property
This is in reply to your letter of January 17, 1995 and the further submission dated July 7, 1995 concerning a forced sale of property.
You have described a situation where rental properties are owned by four co-tenants. One of the co-tenants has become bankrupt. The court appointed Trustee for the bankrupt estate has sought and received court approval for severance partition and sale of property. The court order of the sale provides that upon the sale or within three months, the "non bankrupt" co-tenants can receive proceeds by way of property interest in other (co-owned) buildings which were not subject to the court ordered sale. The court ordered sale is made under the Partitions Act.
It is your view that for purposes of paragraph 44(1)(a) of the Income Tax Act (the "Act"), a court ordered severance and forced sale, and empowering the court ordered Trustee to execute the sale on behalf of the creditors would constitute a disposition of the property under statutory authority as referred to in the definition of "proceeds of disposition" in paragraphs 54(d) and 13(21)(d). Subsection 44(1) would therefore in your view apply entitling the non-bankrupt co-tenants to elect respecting the recaptured capital cost allowance and capital gain.
It appears that the interpretation you seek relates to a proposed transaction to be undertaken by specific taxpayers and, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada, Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can offer the following general comments.
Our Views
It is our opinion that where there is under the Partitions Act a court ordered severance partition and sale of the property by a bankruptcy Trustee, proceeds in the form of undivided interests in other buildings, received by the non-bankrupt co-tenants could be considered compensation received for property taken under statutory authority. These proceeds would be described in paragraph (d) of the definition of "proceeds of disposition" in section 54 and subsection 13(21) of the Act.
Provided the undivided interests in the buildings sold were capital property of the non-bankrupt co-tenants, it is our opinion that the non-bankrupt co-tenants would be entitled to elect pursuant to subsection 44(1) of the Act provided all other conditions therein are met.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of IC 70-6R2 and are not binding on Revenue Canada.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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