Dear sir:
This concerns your memo of November 14, 1995, to Mr. Don Dawson, regarding the GST status of a supply of land by a corporation to a municipality, where the municipality issues a tax receipt for the value of the property.
Facts
The facts of the case, as outlined in your memo and in the attached correspondence, are as follows.
1. XXXXX intends to donate XXXXX acres of land to the XXXXX (the County). XXXXX acres of the site contain an abandoned ammonia plant and the balance consists of farm land and wood lots. The land has been appraised at a value of approximately XXXXX dollars.
2. An attached letter for the County to the XXXXX, dated November 6, 1995, states that the ammonia plant is of no value, and has largely been demolished. The letter also states that there is some soil contamination, and that estimates of the costs of cleaning up the site are in the approximately XXXXX dollars.
3. The County intends to issue XXXXX an income tax receipt for the fair market value of the property. The letter from the County to the XXXXX indicated that XXXXX will receive nothing else in return for the supply of real property.
Question
What, if anything, is the value of the consideration for the supply? Specifically, since the tax receipt will give XXXXX the potential right to claim an income tax rebate or reduction, should this right be regarded as consideration for the supply of real property?
Response
On the basis of the facts that you have provided, our response is as follows.
Although a right to receive something from a third party can be regarded as consideration for a supply, and an amount can be regarded as consideration for a supply even if it is not ascertained at the time the supply is delivered to the recipient, it is the administrative policy of this Department that the issuing of an income tax receipt by a municipality for a gift of property is not regarded as consideration for the supply of that property. However, there may nevertheless be some form of consideration in respect of a supply that the supplier regards as a gift.
In the situation at issue, it would appear that, in exchange for the supply of real property, the County will grant XXXXX a right to avoid a legal liability to clean up the land, which XXXXX has presumably contaminated. This right should be regarded as consideration for the supply of real property. The letter from the County indicates that the clean-up costs are estimated to be approximately XXXXX dollars. However, I would suggest that such a minimal estimate of the cost of cleaning up a former chemical plant should be confirmed by an engineer's report or by a report from the XXXXX before it is used as the basis for calculating the benefit received by XXXXX[.] It is also important to determine whether any other consideration might have been received in exchange for the real property.
If the only consideration received is the right to avoid a legal liability, the transaction at issue consists of the barter of a taxable supply of real property in exchange for a taxable supply of intangible personal property.
You may wish to amend your letter of November 14, 1995, to the County, in light of these comments.
If you require any further information concerning this matter, please contact Mr. Don Dawson at 952-9211.
J.A. Venne
Director
Special Sectors
Rulings and Interpretations
File #11950-1
Ref. ss. 123(1)
Document #1524
Email this Content