25 McArthur Road,
Place Vanier, 10th Floor, Tower C
XXXXX Vanier, ON
XXXXX K1A 0L5
XXXXX
XXXXX Case: HQR0000458
XXXXX NCS: 11950-1
July 28, 1997
Dear XXXXX
This is in response to a letter from XXXXX of the XXXXX of December 4, 1996, with attachments, concerning the application of the Goods and Services Tax (GST) in regards to paragraph 9(2)(c) of Part I of Schedule V to the Excise Tax Act (the Act). We apologize for the delay in our response.
Pursuant to a letter from XXXXX of October 30, 1996 and my conversations with him on July 11, 1997 and July 23, 1997, our understanding of the facts is as follows:
Statement of Facts
1. The vendor in this transaction is the owner of Lots x and xx Concession xx in the XXXXX , referred to herein as parcel A.
2. The vendor has completed one severance of the property for sale to a third party where the severed lot is recognized as a lot line adjustment or lot addition to abutting property owned by a third party.
3. To easier understand the transaction, we will use the following explanation: the vendor owned parcel A of land while a third party owned parcel B of land, parcel B is adjacent to parcel A, and the vendor severed a part of parcel A to sell it to a third party so that the third party could increase the lot size of parcel B.
4. The remaining part of parcel A has been subdivided into two parts.
5. The net effect of the above transactions is that the vendor has brought about two successful severance applications.
6. One part of the parcel of land that has been subdivided is intended for sale and is currently vacant and unused. It is assumed that the vendor, XXXXX , and the purchasers XXXXX are neither related individuals nor a former spouse to the opposite party.
7. The remaining part of the parcel of land that has been subdivided is being retained and used by the vendor as a personal dwelling and for raising horses.
Interpretation Requested
XXXXX question is whether the initial severance of parcel A, completed with the intention of enlarging parcel B, is to be included as "subdivided or severed into parts" as described in the exclusion to the exemption for GST purposes in paragraph 9(2)(c) of Part I of Schedule V to the Act.
Specifically XXXXX would like to know if the sale of part of parcel A to XXXXX is taxable for GST purposes.
Interpretation Given
It is the Department`s position that the sale of the part of the parcel of land that constitutes Lot 2 and 3, Concession 5, referred to herein as parcel A, is taxable at a rate of 7% pursuant to subsection 165(1) of the Act as it is excluded from exemption as per paragraph 9(2)(c) of Part I of Schedule V to the Act.
Explanation
In considering paragraph 9(2)(c) of Part I of Schedule V to the Act, the Act does not define terms such as "parcel", "subdivide" and "sever". Accordingly, reference must be made to other sources of definitions.
Pursuant to Black's Law Dictionary (6th edition), subdivide means "to divide a part into smaller parts; to separate into smaller divisions".
Pursuant to Merriam Webster's Collegiate Dictionary (10th edition), subdivide means "to divide the parts of into more parts".
The Concise Oxford Dictionary (7th edition) defines subdivide to mean "divide again after first division".
The Ontario Registry Act defines a "plan of a subdivision" in section 1. This definition expresses the common understanding in the legal real estate community of the word "subdivision" in relation to land. A "plan of subdivision" is: "a plan by which the owner of land divides the land into areas designated on the plan". In other words, a large parcel of land is divided into smaller parcels on a plan of survey.
The word "sever" is not defined in the Act nor in the Ontario Registry Act or Planning x Act. From the dictionary definitions, and from use of the word in case law, it seems to have the same meaning as the broader meaning of "subdivide".
Pursuant to Black's Law Dictionary (6th edition) sever means "to separate; to cut of from something; or to disjoin".
Pursuant to Merriam Webster's Collegiate Dictionary (10th edition), sever means "to remove; to become separated".
The Concise Oxford Dictionary (7th edition) defines sever to mean "part; disunite".
The Ontario Real Estate Law Guide (CCH), at p. 3768 refers to the case of RE Kilbourn and Committee of Adjustments (1975), 8 OR(2d)142. A testator divided a parcel into 4 parts by will. The Court referred to this as a severance.
In XXXXX lands may be subdivided either by plan of subdivisions or by application for consent to a severance. Generally, if only small number of lots are contemplated, and no new roads are to be created, an owner will prefer the severance method because it is faster and less expensive. The local Committee of Adjustments, or Planning Committee, may consider an application for consent provided a plan of subdivision is not considered necessary for the orderly development of the municipality. The plan or survey registered against the title is a plan of reference, wherein the new lots are given a description by reference to that plan. A plan of subdivision is generally used in larger parcels where more lots are being created and where roads are required. The plan is registered on title and the legal description of each lot is related to the plan number.
Black's Law Dictionary (10th edition) defines "parcel" as follows: " A part or portion of land. A part of an estate. 'Parcel' as used with respect to land generally means a contiguous quantity of land in the possession of an owner. ... A continuous quantity of land in possession of, owned by, or recorded as property of the same claimant, person or company. ... Term may be synonymous with 'lot'." "Parcels" is defined as "a description or property, formally set forth in conveyance, together with the boundaries thereof, in order to provide for easy identification."
Merriam Webster's Collegiate Dictionary (10th edition) defines "parcel" as a "fragment, portion; to divide into parts".
The Concise Oxford Dictionary (7th edition) defines "parcel" as a" piece of land, especially as part of estate".
In this case, Lots 2 and 3, Concession 5 in the XXXXX constitute part of a parcel of land that was subdivided or severed into more than two parts by the vendor. It is the Department's position that, although the initial parcel of land was severed and sold to the third party to increase his/her lot size, this transaction does in fact constitute a severance for GST purposes. There was a further subdivision of the remaining part of the parcel of land that divided the vacant lot that is presently being sold and the lot on which the vendor raises horses and resides in a personal dwelling.
The sale of real property is exempt from the GST if it does not meet any of the exclusions listed in Schedule V to the Act. In this case the sale of the vacant land meets the criteria noted in subparagraph 9(2)(c)(i) of Part I of Schedule V to the Act and is therefore taxable at a rate of 7%.
If you require any further information concerning this matter, please contact me at (613) 952-9214.
Yours truly,
Doris Rist
A/Rulings Officer
Financial Institutions and Real Property
GST/HST Rulings and Interpretations
Legal References: Dept. of Justice 311642v.5, case RE Kilbourn and Committee of Adjustments (1975)
Authority: ETA, XXXXX ITA
Reference: XXXXX HQR0000107, ETA sched. VI/9(2)(c) [Act and explanatory notes], XXXXX IT-153R3,
| b.c.c.: |
Originator's Desk Copy
NCS Subject Code(s) 1I
Registration Number: na
District Chief, Audit
H.Q. Quality Assurance
hard copy - RF GST XXXXX |
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