XXXXX
This concerns the E-mail memo of July 8, 1996, from XXXXX to Mr. Don Dawson, concerning the application of GST to supplies of real property that had been severed. We regret the delay in responding.
Facts
1. A parcel of land of approximately XXXXX acres was originally owned by XXXXX. Legal title to XXXXX acres was transferred to one of his sons, XXXXX, in 1960. The remaining XXXXX acres, although it had originally been part of a farm, was being used solely for the personal use and enjoyment of XXXXX and his family at the inception of GST.
2. XXXXX died in XXXXX, and willed the property to his three sons and his daughter, as tenants-in-common. XXXXX daughter subsequently died, but her estate retained ownership of a share in the property as a tenant-in-common, and the beneficiaries of her estate are all individuals.
3. In 1995, the XXXXX acre estate was severed into two parts, because it was discovered that a road right of way divided the property. The ninety acre parcel of land was formally surveyed, as was the XXXXX acres that had been severed by XXXXX in 1960.
4. One of the two parts of the XXXXX acres estate was sold in 1995, but no GST was collected, as it was assumed that the supply was exempt. Title to the other parcel of land remained in the hands of the three brothers and their sister's estate. They intend to sell it, without further dividing or severing it.
5. None of the individuals involved in this case are or have been engaged in any business that involves the supply of real property.
Questions
1. What is the GST status of the supply of land made in 1995?
2. What would be the GST status of the supply of the second parcel of land, if it were to be sold after April 23, 1996?
Response
1. The supply of land made in 1995 would be exempt of GST pursuant to section 9 of Part I of Schedule V to the Excise Tax Act (ETA), as there is nothing that would exclude the supply from that exempting provision.
2. Provided that it is not further divided, the supply of the second parcel of land would be exempt of GST pursuant to section 9 of Part I of Schedule V to the ETA, as there is nothing that would exclude the supply from that exempting provision.
Explanation
You indicated that the heirs are concerned that any subsequent supply of either part of the severed ninety acres might be taxable, because of the proposed amendment to section 9 of Part I of Schedule V to the ETA. Their concern was that the severance of XXXXX acres by XXXXX in 1960 would be counted as a severance by the heirs in 1995, because the land was not formally severed until 1995. However, since the severance was registered on title in 1960 by XXXXX, it is a severance by XXXXX and not by his heirs. The one severance made by the heirs to date would not exclude the supply of either parcel of land from the exempting provisions under the proposed amended section 9 of Part I.
If you require any further information concerning this matter, please contact the undersigned at (613) 952-9211.
Don Dawson
Policy Officer
Real Property Unit
Financial Institutions
and Real Property Division
GST Rulings and Interpretations
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