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: What are the income tax implications of using the proceeds of disposition from the disposition, at a gain, of industrial condominium units to purchase or build a property for the purpose of renting the property?
Position: Replacement rules do not apply.
Reasons: From the limited information submitted, the properties being sold and those being purchased all seem to be "rental property" excluded from the definition of "former business property".
XXXXXXXXXX 2002-012493
Jacques E. Grisé
March 5, 2002
Dear XXXXXXXXXX:
Re: Replacement Property
This is in reply to your letter of February 21, 2002, requesting a ruling with respect to the gain from the disposition of several industrial condominium units held as capital property.
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 submitted in the manner set out in Information Circular 70-6R4, Advance Income Tax Rulings, dated January 29, 2001. However, in accordance with paragraph 22 of this circular, we will provide the following general comments, which are not binding on the Canada Customs and Revenue Agency ("CCRA") with respect to any specific taxpayer.
In general terms, the taxable capital gain realized on the disposition of a capital property in a taxation year, must be included in the income of the individual disposing of the property. However, the capital gain from the disposition of a capital property (other than by involuntary disposition) that is a "former business property" may be reduced or deferred if a capital property that is a replacement property is acquired within a certain period of time (the replacement rules). Neither the former business property nor the replacement property can include a "rental property" for the replacement rules to apply. Since you are contemplating the purchase of a rental property with the proceeds from the disposition of the industrial condominium units, which may also be rental properties, the replacement rules would not apply.
Attached for your information is interpretation bulletin IT-259R3, Exchanges of Property that deals with the replacement rules and IT-491, Former Business Property that deals with the meaning of the terms "rental property" and "former business property".
We hope our comments are helpful.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Attachments
??
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2002
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2002