10 April 2002 External T.I. 2002-0131295 - Whether disposition by 60 month resident

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 CCRA.

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

Principal Issues: Whether upon becoming non-resident, there is a deemed disposition of real property held by an individual (other than a trust) who has been resident in Canada for less than 60 months

Position:     		No deemed disposition 

Reasons: Application of 128.1(4)(b)(iv)

XXXXXXXXXX 							2002-013129
T. Cook
April 10, 2002

Re: Deemed Disposition of Property Upon Becoming Non-Resident

Dear XXXXXXXXXX:

We are writing in reply to your letter of March 20, 2002, in which you requested our view regarding the application of paragraph 128.1(4)(b) of the Income Tax Act (the "Act") to certain property owned by you. Your letter states that you arrived in Canada in XXXXXXXXXX, and you are planning to leave Canada by the end of XXXXXXXXXX. We understand that you have owned a property in the United Kingdom ("UK Property") since prior to your arrival in Canada and will continue to do so until after you leave. Your view is that upon your departure the UK Property will not be subject to a deemed disposition under subsection 128.1(4) of the Act.

Our Comments

Your letter describes the factual situation involving a specific taxpayer. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on the tax consequences applicable to a specific taxpayer in respect of particular circumstances other than in the form of an advance income tax ruling. However, we are prepared to offer the following general comments, which may be of assistance.

Paragraph 128.1(4)(b) of the Act provides that when a taxpayer ceases to be resident in Canada, each property owned by the taxpayer is deemed to be disposed of, subject to certain exceptions. The exception potentially applicable in this instance is found in subparagraph 128.1(4)(b)(iv). It provides, in part, that there is no deemed disposition of property held by an individual (other than a trust) where:

? the individual was not resident in Canada for more than 60 out of the last 120 months; and

? the property was owned by the individual when he or she last became resident in Canada.

Therefore, when an individual (other than a trust) ceases to be resident in Canada after a period of residency of less than five years (and he or she has had no other period of residency in Canada), any property owned by that individual since before he or she became resident is not subject to the deemed disposition in paragraph 128.1(4)(b). We note that the application of paragraph 128.1(4)(b) turns largely on the individual's residence and residency is a question that can only be determined in light of all the relevant facts and circumstances of each case (see Interpretation Bulletin IT-221R3, Determination of an Individual's Residence Status).

We trust that our comments will be of assistance to you. However, as stated in paragraph 22 of Information Circular 70-6R4, the opinion expressed in this letter is not a ruling and consequently is not binding on the Canada Customs and Revenue Agency.

Yours truly,

Jim Wilson
Section Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 3 -