18 May 2004 GST/HST Ruling 49026 - Supplies between a real estate broker and a mortgage specialist

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

This is in reply to your letter XXXXX in which you request a review of XXXXX the above matter XXXXX. The following facts are based on your letters XXXXX. All references are to the Excise Tax Act (ETA).

Statement of Facts

1. XXXXX purchased XXXXX separately titled and contiguous parcels of land from XXXXX. The parcels were originally registered on XXXXX. Taken together, these lots contained approximately XXXXX acres of land. XXXXX acquired the lots for XXXXX own personal use and enjoyment and that of XXXXX.

2. Shortly after the original purchase, XXXXX conveyed XXXXX while at the same time conveying to XXXXX a XXXXX% interest in the remaining lots, the latter of which the XXXXX held as joint tenants. XXXXX held all of the aforementioned land for their personal use and enjoyment.

3. XXXXX constructed and lived in a residential complex located on XXXXX, which they used as their principal residence until their respective deaths. A small, personal use garage was located on XXXXX. The construction of the complex entailed bringing the appropriate municipal services to XXXXX.

4. XXXXX did not engage in any business or commercial activity in respect of the subject land. Apart from XXXXX made no improvements to any of the lots.

5. XXXXX were sold to XXXXX, for XXXXX own personal use and enjoyment. These lots remained unimproved.

6. XXXXX severed and sold the XXXXX to a non-arm's length party. The purchaser constructed a residential complex thereon.

7. XXXXX was sold to XXXXX and XXXXX. XXXXX built a personal residence on the land. XXXXX provided personal aid to XXXXX as they advanced in age.

8. XXXXX died in XXXXX thus became the sole owner of the lots previously held in joint tenancy with XXXXX. Subsequent to XXXXX death, XXXXX continued to use all of the subject land, namely XXXXX (see point 6 above) for XXXXX personal use and enjoyment.

9. XXXXX helped XXXXX to maintain XXXXX property until XXXXX death XXXXX, at which time the property passed to XXXXX estate for disposal.

10. As the residential complex was dated and the garage in ruins, the estate undertook to demolish and remove those structures in order to make the underlying property more attractive to potential purchasers.

11. XXXXX was sold "as is" to XXXXX who proceeded to construct a residential complex thereon.

12. Before commencing construction of the complex, XXXXX were required to bring municipal services to XXXXX, including water, storm sewers and sanitary sewers. Since this required the closure of an adjacent road for XXXXX days, the municipality XXXXX approached the estate trustees and suggested that these services be brought to XXXXX at the same time as XXXXX to avoid a similar disruption in the future. Although not required to do so, the estate undertook the installation of the aforementioned services.

13. In an effort to make the small areas of land encompassing XXXXX more attractive to potential purchasers, the estate consolidated them with XXXXX. The resulting parcel (the "Consolidated Parcel") was then subdivided into two new lots, XXXXX was subsequently transferred to XXXXX, in partial settlement of the estate. XXXXX personal use and enjoyment.

14. In disposing of the lots, the estate engaged no outside agents nor listed the property, instead relying on "for sale" signs placed on the lots and word-of-mouth.

15. The estate has now sold XXXXX. The proceeds from the sale of XXXXX were reported for income tax purposes as a capital gain. XXXXX, together comprising XXXXX, had been designated as XXXXX principal residence and were reported as such for income tax purposes.

16. The estate did not file an election under subparagraph 9(2)(b)(ii) of Part I of Schedule V to the ETA. The estate is not a GST registrant.

Ruling Requested

The sales of XXXXX were not made in the course of a business and were exempt supplies pursuant to section 9 of Part I of Schedule V.

Ruling Given

The sales of XXXXX were not made in the course of a business and were exempt supplies pursuant to section 9 of Part I of Schedule V.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the ETA or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above or any other GST or HST matter, please do not hesitate to contact me at (613) 952-8816.

Yours truly,

Paul Hawtin
Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/05/17 — RITS 49728 — Coupons