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: Can subsection 73(1) of the Act apply to transfers of capital property under a written separation agreement between former common-law partners who do not have support or property rights under provincial statutes (Quebec in this case).
Position: Yes subsection 73(1) can apply to transfers of capital property between former common-law partners who do not have any support or property rights under their provincial statutes.
Reasons: Rights arising out of a common-law relationship may still exist outside of the codified provincial statutes (ie. such as in written separation agreements).
2003-003192
XXXXXXXXXX Karen Power, CA
(613) 957-8953
January 6, 2004
Dear XXXXXXXXXX:
Re: Settlement of Rights Arising Out of a Common-Law Partnership
We are writing in reply to your letter of July 25, 2003, wherein you requested our views on whether subsection 73(1) of the Income Tax Act (the "Act") could apply in respect of the transfer of capital property in the following situation.
1. Two individuals lived together as "common-law partners" as that term is defined in subsection 248(1) of the Act.
2. These individuals have separated and have not been cohabitating with each other for a period of at least 90 days because of a breakdown of their conjugal relationship.
3. The former common-law partners want to settle their rights arising from their relationship by transferring a capital property from one to the other.
4. The settlement of the rights from their common-law partnership breakdown will be determined directly by the former common-law partners according to a written separation agreement.
5. The former common-law partners are residents in Quebec. You indicate that no legislation in Quebec provides for the rights and obligations of such common-law partners.
Written confirmation of the tax implications applicable to particular transactions is given by this Directorate only if the transactions are proposed and are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5. However, we are prepared to offer the following general comments.
In order for subsection 73(1) of the Act to apply, inter alia, capital property must have been transferred in circumstances to which subsection 73(1.01) of the Act applies. Paragraph 73(1.01)(b) of the Act refers to property transferred by an individual to "a former spouse or common-law partner of the individual in settlement of rights arising out of their marriage or common-law partnership". In our view, the phrase "in settlement of rights arising out of their...common-law partnership" as contained in paragraph 73(1.01)(b) of the Act can be interpreted to include the rights created by the existence of a written separation agreement entered into following the breakdown of the common-law partnership, even though the provincial statutes may not provide for support or property rights between common-law partners.
We trust our comments will be of assistance to you.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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