16 January 2004 GST/HST Ruling 39704 - Purchase and Sale of Real Property

Please note that the following documents, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ces documents, bien qu'exacts au moment émis, peuvent ne pas représenter la position actuelle de l'Agence.

Dear XXXXX

We are writing further to our letter XXXXX concerning the purchase of land by XXXXX(the "RM"). We apologize for the delay in responding.

XXXXX we determined that the land, legally described as XXXXX (hereafter the "Property") was subject to the GST. The present ruling deals with the value of the consideration on which the GST was applicable.

Statement of Facts

1. The RM is not registered for GST/HST purposes. It is not a registered charity as defined in the Income Tax Act. XXXXX (Company A) is a resident of Canada and is registered for GST/HST purposes.

2. The RM purchased the Property, located in XXXXX, from Company A. The closing date of the purchase was XXXXX

XXXXX.

3. The Property has certain structures located on it but none of them qualify as a residential complex. Company A had leased the Property to other persons prior to the purchase by the RM. The RM is to honor these leases subsequent to the purchase.

4. Under the Sale agreement, the total purchase price of the Property was $XXXXX plus GST of $XXXXX. A deposit was paid by the RM and under XXXXX the Sale Agreement, the balance of the purchase price was subject to adjustments included in XXXXX the Sale Agreement.

5. It is stated in XXXXX the Sale Agreement that XXXXX.

6. The Assignment Agreement indicates XXXXX.

7. XXXXX the Assignment Agreement states XXXXX XXXXX

XXXXX.

8. XXXXX the Assignment Agreement states XXXXX:

•   XXXXX XXXXX

•   XXXXX

•   XXXXX.

9. XXXXX the Assignment Agreement indicates XXXXX XXXXX.

10. The Vendor's Statement of Adjustments XXXXX indicates XXXXX XXXXX.

Issue

As explained in our ruling XXXXX XXXXX, the GST was required to be calculated at 7% on the consideration for the supply of the Property. The issue in the present case is whether the consideration on which the GST must be calculated is the purchase price as stated in the Vendor's Statement of Adjustments XXXXX, or the purchase price, net of the lease adjustment XXXXX.

Ruling Given

For purposes of the GST, the value of consideration for the supply of the Property is the purchase price net of the lease adjustment XXXXX.

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 (ETA), or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Yours truly,

Paul Hawtin
Rulings Officer
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate