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: General comments regarding interpretation bulletins and the rulings process
Position:
Reasons:
2003-000095
XXXXXXXXXX Karen Power, CA
(613) 957-8953
March 6, 2003
Dear XXXXXXXXXX:
Re: Principal Residence Exemption
This is in reply to your facsimiles of January 30, and February 3, 10, 13 and 20, 2003, requesting our comments on why a particular advance income tax ruling (published as document # F2001-009633) was issued.
As you note, the principal residence exemption is discussed in Interpretation Bulletin IT-120R5 "Principal Residence". Paragraph 3 of the interpretation bulletin states that a housing unit can qualify as a "principal residence" and it provides several examples of what constitutes a housing unit. As discussed during our recent telephone conversation, the list of items that are considered housing units is not an all-exclusive list. Furthermore, as indicated to you in our letter of January 24, 2003 (document # E2002-016489), the above ruling did not relate to a "co-operative housing corporation", but rather provided that a particular unit (composed of shares and a lease) fell within the definition of "principal residence" contained in section 54 of the Income Tax Act (the "Act"). The ruling was provided after a full appreciation of all facts and legal documentation, including the unit holders' rights and obligations in relation to the property they acquired. In a situation involving proposed transactions, such a determination can only be made in the context of an advance income tax ruling where all relevant information has been provided.
You express concerns that interpretation bulletins should be amended to reflect all new positions. However, interpretation bulletins are not intended to cover every possible circumstance. Rather, they are written to cover the normal circumstances that many taxpayers find themselves in. Only where the Canada Customs and Revenue Agency is aware of the wide spread use of a particular structure will it consider an amendment to an interpretation bulletin. There was no such indication when document # F2001-009633 was issued. We would also note, that in addition to our interpretation bulletins, the publication of severed rulings such as the one referred to above, is also intended to provide a useful service to taxpayers and increase the transparency of the income tax system while respecting the confidentiality of taxpayer information.
Where there is uncertainty regarding the tax implications of a particular proposed transaction, taxpayers should request an advance income tax ruling to confirm the income tax consequences of their particular transaction. In providing an advance tax ruling, our directorate will ensure that a particular transaction conforms to both the legal and policy requirements of a specific provision of the Act. This is precisely what transpired in file #F2001-009633.
Yours truly,
Marc Vanasse, CA
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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