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XXXXX
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Case: HQR0000091
XXXXX File: 11870-3
Doc: 3233
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October 16, 1996
Dear XXXXX
Thank you for the Facsimile letter of August 7, 1996 from XXXXX concerning the application of the Goods and Services Tax (GST) to the sale of real property XXXXX by your client, XXXXX[.] Our understanding of the facts is as follows:
Statement of Facts
1. In 1995,XXXXX purchased two adjacent lots, with XXXXX intention at the time was to subdivide these lots into three new lots (identified as XXXXX) and to build three new homes for sale.
2. XXXXX engaged the services of XXXXX to oversee this subdivision and construction.
3. The City required the demolition of one of the above dwellings for subdivision purposes, without which both houses would encroach upon the middle lot. According to XXXXX, there may only be one principal building on one lot. As a result, the dwelling at XXXXX, which straddled lots XXXXX was demolished in August 1995, and the subdivision plan was approved by the city. However, no By-law exists requiring the demolition of the second dwelling, although the subdivision would leave it straddling lots XXXXX and XXXXX[.]
4. Because of cash flow problems, XXXXX sold lot XXXXX and closed the sale on XXXXX[.] The purchasers, XXXXX asked their lawyer to contact the Department to establish the tax status of the sale.
5. The Standard Purchase and Sale Agreement, dated XXXXX states in XXXXX that the purchase price includes any buildings, improvements, etc., as viewed by the buyer at the time of inspection.
6. All parties confirm that the house straddling lots XXXXX and XXXXX was not demolished until after XXXXX[.] All agree that the XXXXX were to assume responsibility for all costs relating to the demolition, although no written agreement in this regard exists between XXXXX and the XXXXX[.]
7. The XXXXX contracted with XXXXX for both the demolition of the existing house and the construction of their new home on Lot XXXXX.
GST Treatment
Based on the information provided, our interpretation is as follows:
The sale of lot XXXXX is exempt from GST under section 2 of Part I of Schedule V to the Excise Tax Act (the Act).
Rationale
All the requirements of the above cited section 2 are met:
i) Lot XXXXX contains a residential complex, because a part of a detached house, now vacant but last occupied as a place of residence, qualifies as a residential unit under paragraph (f) of the definition of "residential unit" in subsection 123(1) of the Act. A residential unit qualifies as a residential complex under subparagraph (b)(ii) of the definition of "residential complex" in the same subsection 123(1) of the Act.
ii) XXXXX the seller, is not a builder of the residential complex. It purchased the used residential complex in 1995 on a GST exempt basis, and made no improvements to the complex.
Should you have any further questions or require clarification on the above, please contact the undersigned at (613) 952-9587.
Yours truly,
Bao Tran
Policy Officer
Financial Institutions & Real Property
GST Rulings & Interpretations
b.c.c.: H.Q. Quality Assurance
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