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.
DOCUMENT TYPE: Opinion
Principal Issues: What are tax consequences of a taxpayer gifting a particular property to his adult stepson (not a farm property).
Position: A capital gain would arise upon the transfer of the property if the proceeds of disposition exceed the adjusted cost base and outlays and expenses for the purpose of making the disposition.
Reasons: Paragraph 69(1)(b) of the Act deems the taxpayer to have received proceeds of disposition equal to the fair market value.
2003-004162
XXXXXXXXXX Karen Power, CA
(613) 957-8953
December 10, 2003
Dear XXXXXXXXXX:
Re: Gifting of Property to a Child
We are writing in reply to your letter of September 23, 2003, wherein you requested our comments on the tax consequences of gifting a particular property (the "Property") to your adult stepson.
The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. However, we are prepared to offer the following general comments, which may be of assistance.
Based on the limited information provided in your letter, it does not appear that the Property has ever been used in the business of farming by you or any of your family members. Income from a rental arrangement is not considered income from farming.
Except as expressly provided in the Income Tax Act (the "Act"), where property is disposed of by a taxpayer to a person with whom the taxpayer does not deal at arm's length for no proceeds or for proceeds less than its fair market value, or to any person by way of gift intervivos, paragraph 69(1)(b) of the Act deems the taxpayer to have received proceeds of disposition equal to the fair market value. Consequently, a capital gain would arise upon the transfer of the Property to your stepson if the deemed proceeds of disposition exceed the adjusted cost base of the Property and outlays and expenses for the purpose of making the disposition. In addition, pursuant to paragraph 69(1)(c) of the Act, where a taxpayer acquires a property by way of gift, the taxpayer is deemed to acquire the property at its fair market value.
If the Property has ever been used in the business of farming by you, your spouse or any of your children (including a stepchild), you may want to consult with a legal and/or tax professional to assist you in determining whether subsection 73(3) of the Act, which provides rollover treatment for certain inter-generational transfers of farm property, will apply. In addition, they could assist you in determining whether the Property meets the requirements of "qualified farm property". Subsection 110.6(2) of the Act permits a capital gains deduction of up to $500,000 for an individual resident in Canada throughout the year who disposed of "qualified farm property" in the year.
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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