24 August 2000 GST/HST Ruling 30070 - Sale of Real Property

Dear XXXXX:

Thank you for your letter of September 28, 1999 with attachments, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the sale of real property.

Your letter was sent to our XXXXX and has been forwarded to us for a response.

Please note that as of November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency.

Statement of Facts

Based on the information provided in your letter, the plot plan provided by XXXXX XXXXX, and the telephone conversation between XXXXX XXXXX and XXXXX XXXXX of the XXXXX on November 4, 1999, our understanding of the facts is as follows:

1. You purchased approximately 27 acres of land XXXXX XXXXX in the Province of XXXXX in the 1980s with the intent of building your personal residence on it.

2. The land consisted of several separate parcels as described in fact #5 (original parcels).

3. You have severed a number of the original parcels into new parcels as described in fact #5 (new parcels).

4. You then consolidated some of these new parcels with some of the original parcels to create two new lots and three remainder areas. (Please refer to fact #6 and fact #7.)

5. The original parcels were altered as follows:

XXXXX has been severed, creating parcels A, M and U.

XXXXX has been severed, creating parcels B, N, T, C, and R.

XXXXX has been severed, creating parcels D and P.

XXXXX has been severed, creating parcels E and Q.

XXXXX has been severed, creating parcels G and S.

Lot F, H, J, and A-1 remain unchanged.

6. Lot 1 is a consolidation of Lot F and Parcels G, T, C, E and U.

7. Lot 2 is a consolidation of Lot H, and Parcels M, N, P, Q, R and S.

8. You are not in the business of buying and selling property.

9. The land has not been used primarily in the course of a business and is not being sold in the course of a business.

10. You are selling Lot 1 to a person who is neither a former spouse nor a person who is related to you and who is acquiring Lot 1 for his/her personal use and enjoyment.

Ruling Requested

You have requested a ruling as to whether the sale of Lot 1 is subject to the HST.

Ruling Given

Based on the facts set out above, we rule that the sale of Lot 1 is a taxable supply of real property as it is excluded from the general exemption provided for in section 9 of Part I of Schedule V to the Excise Tax Act (ETA) by virtue of paragraph 9(2)(c) of that section.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Explanation

Section 9 of Part I of Schedule V provides that a supply of real property by way of sale by an individual is exempt from the HST.

Paragraph 9(2)(c) of Part I of Schedule V excludes from exemption, and renders taxable, a supply of a part of a parcel of land, which parcel the individual subdivided or severed into parts. There are two exceptions to this rule. Where the parcel of land was subdivided or severed into only two parts and the individual did not subdivide or sever that parcel from another parcel of land, paragraph (c) does not apply. This paragraph also does not apply in the case of a subdivision or severance where the recipient of the supply is an individual who is related to, or is a former spouse of, the individual supplier, and the recipient is acquiring the part for his/her personal use and enjoyment. Further, for the purposes of determining whether the land has been subdivided or severed, where the individual supplies a part of a parcel of land to a person who has the right to acquire the land by expropriation, such as a municipality or utility commission, that part and the remainder of the parcel will not be considered to have been subdivided or severed from each other by the individual.

In this case, you are selling parts of parcels of land which parcels were subdivided by you into more than two parts. As a result, the sale of Lot 1 is subject to the HST as it is excluded from the exemption in section 9 of Part I of Schedule V to the ETA by reason of paragraph 9(2)(c) of Part I of Schedule V.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8816.

Yours truly,

Anne Kratz
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate