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:
Where property is acquired by a taxpayer in a non-arms length transaction and is subsequently used to earn rental income will subsection 1102(14) of the Regulations cause that property to be immediately after the transfer property of the same prescribed class as it was to the transferor?
Position:
Yes.
Reasons:
Paragraph 1100(14)(d) of the Regulations stipulates that where there is a non-arm's length transfer the property will be placed in the same prescribed class or separate prescribed class as that of the transferor.
Upon commencing to use the property to earn rental income subsection 1101(1ac) would apply to cause each property to be transferred to a separate class.
970422
XXXXXXXXXX S. Tevlin
Attention: XXXXXXXXXX
April 10, 1997
Dear Sirs:
Re: Subsections 1102(14) and 1101(1ac) of the Income Tax Regulations (the "Regulations")
We are writing in response to your letter dated February 14, 1997 wherein you requested that we clarify the comments made by Revenue Canada with respect to a hypothetical situation described in a technical interpretation letter dated August 1990.
You have asked that we confirm that it is Revenue Canada's interpretation that with respect to the stated facts, as outlined in your letter, paragraph 1102(14)(d) of the Regulations would apply to Company B and that upon the commencement of the rental of the properties by Company B, the buildings would then be transferred into separate classes pursuant to subsection 1101(1ac) of the Regulations.
It is our opinion that on the initial transfer paragraph 1102(14)(d) of the Regulations would apply to Company B and immediately upon Company B commencing to rent the buildings those buildings would be reclassified in separate prescribed classes in accordance with subsection 1101(1ac) of the Regulations and subsection 13(5) of the Act.
The foregoing comments are given in accordance with the practice referred to in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996 and are not binding on Revenue Canada, Taxation.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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