18 June 2001 External T.I. 2001-0078975 - VACANT LAND

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether there has been a change in use in the land.

Position: Cannot comment.

Reasons: Situation relates to completed transactions and requires a finding of fact whether the property was held on account of income or capital.

XXXXXXXXXX 	2001-007897
		Cornelis Rystenbil, CGA
June 18, 2001

Dear XXXXXXXXXX:

Re: Vacant Land

This is in reply to your letter of April 9, 2001, in which you requested our views on whether a deemed disposition has occurred in your particular situation. You stated that in XXXXXXXXXX, you, together with XXXXXXXXXX other individuals, purchased a XXXXXXXXXX property with the intention of building a principal residence on it after retirement. In XXXXXXXXXX, you entered into an agreement with a developer to subdivide this property into XXXXXXXXXX lots. XXXXXXXXXX lots were taken by the developer for his costs, and the remaining XXXXXXXXXX lots were allocated to each of the XXXXXXXXXX owners, that is, XXXXXXXXXX lots each. One lot was kept by each owner to build the principal residence on; the remaining lot was sold. You indicated that before the subdivision, all XXXXXXXXXX owners were on the title of the property as joint tenants. Your question is whether there has been a change in use of the lots on which the principal residences are being built.

Our comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request as set out in Information Circular 70-6R4 (enclosed). As the above situation involves completed transactions, we are not in a position to provide an advance ruling. We would also note that, even if the transactions had still been proposed, in accordance with paragraph 15(e) of Information Circular 70-6R4, we could not provide a ruling as the major issue in the above transactions is whether they are on account of capital or income.

A number of issues must first be resolved in establishing the tax consequences of the above transactions. For instance, it would to be necessary to determine whether, at the time of acquisition, the property was being held on account of capital or income (i.e., inventory in a business), and whether there has been any change in use in respect of the property. Such determinations are questions of fact, which require a review of all relevant facts of each particular case. The details and implications of the partition of property, as well as the apparent barter transaction with the developer, would also have to be considered. In light of the complexity of the tax issues involved in the above situation, you may wish to consider consulting with a tax advisor. We have nonetheless enclosed the following interpretation bulletins which may be of assistance to you, as they provide the views of the Canada Customs and Revenue Agency on many of the issues which may arise in your situation: IT-120R5, IT-153R3, IT-218R, IT-459 and IT-490.

We regret that we cannot be of further assistance.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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