CRA accepts that a nominee can be a “participant” in a real estate JV if it also has a small beneficial interest

CRA has made it clear (e.g., in Notice 284) that it will no longer accept that a real estate nominee can be a valid “operator” of a real estate joint venture (unless its role, in fact, is much more than that of nominee). CRA has now confirmed that the nominee will qualify as a “participant” in the joint venture if, in addition to holding 100% of the registered title to the real estate, it also holds a “small” beneficial co-ownership interest (e.g., 0.001%?) – and, as a participant, it could then be designated as the JV operator. CRA did not discuss what would be required for purchases, and rentals or sales, to be considered to be made by the nominee on behalf of the other co-owner(s).

When asked to confirm the questioner’s understanding that CRA will be publishing its position that where an agreement is a joint venture at law, it is a joint venture for purposes of the s. 273 JV election,” notwithstanding any provision in the particular agreements governing the joint venture which may state otherwise,” CRA stated:

[W]e will confirm the position that a joint venture at law is considered to be a joint venture for purposes of the joint venture election under section 273 in a planned publication. Where particular joint venture agreements contain provisions that cause us to question the status of the joint venture, the agreements will be examined.

This likely indicates that CRA accepts the proposition that whether there is a JV is determined by reference to the Williston criteria set out in Westcan and is not significantly affected by the labels the parties attach to their relationship. Perhaps the pending publication will also comment on Medallion.

Neal Armstrong. Summary of 8 March 2018 CBA Commodity Tax Roundtable, Q.11 under s. 273(1).