Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 118885
November 17, 2011
Dear [Client]:
Subject:
GST/HST RULING
Sale of real property by surviving joint tenant
We are writing in response to your letter of October 9, 2009, to the [...] Region GST/HST Rulings Centre concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of [#] parcels of land by your client, [...] [Individual A]. Your letter was forwarded to this office for reply.
Effective July 1, 2010, HST applies at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand that
1. [Individual A] and [...] [Individual B] held (otherwise than as a partnership) title in joint tenancy to [#] parcels of land in [...] [Province X], until [Individual B's] death on [mm/dd/yyyy].
2. The parcels bear the following legal descriptions, respectively:
a) PID [...]
b) PID [...]
c) PID [...]
d) PID [...]
e) PID [...]
f) PID [...]
g) PID [...]
h) PID [...]
They are hereafter referred to collectively as "the Properties".
3. Parcel PID [...] [XYZ] is [#] acres and contains the couple's residence, which was built in 1979.
4. [Individual B] was a farmer who, as a sole proprietor, grew hay and provided grazing services for horse and cattle owners. All of the Properties (with the exception of that portion attributable to the couple's residence) were used exclusively by him in those activities. [Individual B] was never a GST/HST registrant.
5. Upon [Individual B's] death, [Individual A] became the sole owner of the Properties in fee simple and continued to reside in the residence.
6. [Individual A] is not and has never been a GST/HST registrant and she has not reported any farming income or other business income related to the Properties on her income tax returns.
7. All of [Individual B's] farming activities ceased upon his death.
8. [Individual A] did not subdivide the Properties during the time [Individual A] was registered on title to the Properties, either as a joint tenant or as sole owner.
9. [Individual A] did not file an election under subparagraph 9(2)(b)(ii) or paragraph 9(2)(f) of Part I of Schedule V to the ETA in respect of any of the Properties.
10. On mm/dd/yyyy, [Individual A] entered into a written Contract of Purchase and Sale, with Addendums, to sell the Properties to [...] [the Purchasers]. The Contract of Purchase and Sale stipulates that the purchase price is $[...] and that GST will not apply to the sale. The sale completed on [mm/dd/yyyy].
11. The Seller Statement of Adjustments completed by [...] [the Notary] breaks the aforementioned purchase price into two components: the "sale price" of $[...] and the "Federal Tax (GST) on transaction" of $[...].
12. [Individual A] has provided written third party authorization for your firm in relation to this ruling request.
Ruling Requested
You would like to know if the GST was payable on the sales of the Properties by [Individual A] to [the Purchasers].
Ruling Given
Based on the facts set out above, we rule that the sales of the Properties by [Individual A] to [the Purchasers] were not subject to the GST.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
For GST/HST purposes, a residential complex includes a residential unit and the land immediately contiguous and subjacent to the building that is reasonably necessary for the use and enjoyment of the unit as a place of residence. Generally, the Canada Revenue Agency (CRA) considers land up to 1/2 hectare to form part of the residential complex. In determining whether land in excess of 1/2 hectare forms part of the residential complex, a person must clearly show that the excess land is necessary for the residential unit to properly fulfill its function as a residence and not simply be desirable. Land that is used for non-residential purposes, such as for farming, will not be considered to form part of the residential complex, even if the real property is less than 1/2 hectare in size. For more information on determining the amount of land that is necessary for a residential complex, please see GST/HST Policy Statement P-069, Land Allowance for Residential Complexes.
Where a supply of real property includes a residential complex and other real property that is not part of the residential complex, as is the case in [Individual A's] sale of parcel PID [XYZ], subsection 136(2) will apply to deem the supply of the residential complex and that other part of the real property to be separate supplies for GST/HST purposes and that neither supply is incidental to the other. The tax status of the sale of each portion must be determined separately.
Section 2 of Part I of Schedule V to the ETA generally exempts a sale of a residential complex made by a person who is not a builder of the complex where the person has not claimed an input tax credit in respect of the last acquisition by the person of the complex or in respect of an improvement thereto. This provision applies to exempt the sale by [Individual A] of the residential complex portion of parcel PID [XYZ].
Subsection 9(2) of Part I of Schedule V to the ETA generally exempts a supply of real property made by an individual, unless one of the exclusions to the exemption applies. As none of those exclusions apply to the sale by [Individual A] of the portion of [parcel] PID [XYZ] that is not part of the residential complex, or to her sales of the remaining Properties, the sales are not subject to the GST.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 604-691-4122. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Lynn Birnie
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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