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.
942355
XXXXXXXXXX B. Kerr
Attention: XXXXXXXXXX
January 30, 1995
Dear Sirs:
Re: Commercial and Residential Rental Properties
This is in response to your letter of September 7, 1994, wherein you requested an advance tax ruling.
The situation described in your letter, involves a married couple that have title to some residential and commercial properties in the form of joint tenancy. It has been proposed to transfer the title to various properties from joint tenancy to tenants in common, such that each spouse has an undivided one-half interest in the property. Your concern is whether such a transaction would result in a deemed realization or capital gain.
Our Comments
The situation described in your letter involves actual proposed transactions with identifiable taxpayers. Assurance as to the tax consequences of actual proposed transactions will only be given in the context of an advance income tax ruling. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R2 dated September 28, 1990, and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, Taxation. However, we can offer the following general comments.
Paragraph (e) of the definition of "disposition" in section 54 of the Income Tax Act (the "Act") makes it clear that for purposes of subdivision c of Division B of Part I, the Act is interested only in dispositions that involve a change in beneficial ownership. This is also the Department's view in respect of depreciable property for purposes of the definition of "disposition of property" in subsection 13(21) and the sale of trading assets under paragraph 12(1)(b) of the Act.
Since possession, use and risk are the primary attributes of beneficial ownership, registration of legal title alone is of little significance in determining the date of disposition. Factors that are strong indicators of the passing of ownership include: physical or constructive receipt, entitlement to income from the property, assumption of responsibility for insurance coverage, and commencement of liability for interest on purchaser's debt that forms part of the sale price.
In our view, provided that immediately after the conversion each co-tenant retains their proportionate undivided interest in the property, the mere change in the type of ownership from joint tenancy to tenants in common of real property would not constitute a disposition for purposes of determining income from business or property or a capital gain, nor would it be considered a partition of property for the purpose of the rules in subsections 248(20) and (21) of the Act.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
