3 April 1997 GST/HST Interpretation HQR0000423 - Subdivided or Severed Land

                                                                        April 3, 1997

Dear XXXXX

This is in response to an E-mail message dated November 19, 1996, from Mr. XXXXX asked a question concerning the interpretation of section 9 of Part I of Schedule V to the Excise Tax Act (ETA).

Facts

Our understanding of the facts of the case is as follows:

An individual subdivided a parcel of vacant land adjacent to her personal residence into four lots. She sold one of these four lots in XXXXX[.] In endeavoring to sell the remaining three lots, the individual has discovered that this parcel of land can only be sold if the three lots are consolidated into a single lot. The municipality will not issue a building permit unless the parcel is consolidated into one lot. Although the individual had at one time subdivided this parcel of land into four parts, at the time that the remainder of the parcel is eventually sold, the individual will have disposed of the entire parcel through the sale of only two lots - the lot sold in XXXXX and the newly consolidated lot that is now offered for sale.

The individual will not be selling the consolidated lot in the course of a business. The subject property is not capital property used primarily in a business of the individual vendor.

Interpretation Requested

XXXXX states that the exclusion from the section 9, Part I, Schedule V exemption found in paragraph 9(2)(c) initially applied to this property when the individual vendor subdivided the parcel into four lots. However, at the time that the consolidated lot is sold, the parcel would have consisted of only two parts. Mr. XXXXX asks for clarification as to whether the paragraph 9(2)(c) exclusion applies to the sale of the consolidated lot.

Interpretation Given

Section 9 of Part I of Schedule V to the ETA was amended through Bill C-70 which received Royal Assent on March 20, 1997. New paragraph 9(2)(c) excludes from the exemption the sale of part of a parcel of land that had been subdivided or severed by an individual vendor where the subdivision or severance resulted in the parcel of land being divided into more than two lots. The wording of paragraph 9(2)(c) is unambiguous in this respect:

a supply of a part of a parcel of land, which parcel the individual ... subdivided or severed into parts, except where

(i) the parcel was subdivided or severed into two parts and the individual ... did not subdivide or sever that parcel from another parcel of land, or

(ii) the recipient of the supply is an individual who is related to, or is the former spouse of, the individual ... and is acquiring the part for the personal use or enjoyment of the recipient ...

Had this paragraph been meant to convey the meaning that the results (i.e., two parts or more than two parts) of the action of subdivision or severance by the individual vendor should be examined only at the time of sale there would have been a reference to that particular point in time. There is no such reference. If, at any time, an individual vendor had subdivided a parcel of land into more than two lots, the individual's supply by way of sale of each of the subdivided lots, or of a part of a parcel consolidated from the previously subdivided lots will be excluded from the exemption. This change to section 9 of Part I of Schedule V to the ETA is effective for supplies made on or after April 24, 1996. In the present fact scenario, the individual vendor had subdivided a parcel of land into four separate lots. The fact that she subsequently consolidated three of the divided lots into a single lot to facilitate the sale of the land does not negate the original subdivision. Therefore, the sale of the consolidated lot will attract GST unless it is sold, for personal use or enjoyment, to a relative or former spouse of the individual vendor. By virtue of paragraph 9(2)(c), the sale of the consolidated lot will be excluded from the exemption found in subsection 9(2) of Part I of Schedule V to the ETA.

Should you have any further questions or require clarification on the above or any other Excise/GST matter, please do not hesitate to contact me at (613) 954-8852.

Yours truly,

Heather MacLeod
A/Rulings Officer
Financial Institutions and Real Property
GST Rulings and Interpretations