CRA finds that a forfeited land-sale deposit was proceeds of a security interest rather than of taxable Canadian property

CRA considers that a sales deposit forfeited to a vendor represents proceeds of a contractual right. If the sale which did not close was of land in a common law province, doesn’t this mean that the forfeited deposit was proceeds of taxable Canadian property to a non-resident vendor given that the sales contract represented an equitable interest in land?

Not so. CRA considers that the disposition is of "a security interest derived by virtue of an agreement for sale," so that the disposed-of interest is deemed by s. 248(4) not to be an interest in real property, i.e., s. 116 (and presumably s. 115(1)(b)) would not apply.

Neal Armstrong. Summary of 16 March 2015 Memo 2013-0479861I7 under s. 248(4).