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.
Principal Issues: Would there be a disposition for capital gains purposes when equal tenants in common change their ownership to joint tenancy?
Position: Based on the facts provided, our view is that changing ownership from being equal tenants in common to joint tenancy would not, in and of itself, result in a disposition of the property for the purposes of the Act.
Reasons: Consistent with position in file #5-971957.
2004-007877
XXXXXXXXXX Allan Nelson, C.M.A
(613) 443-7253
September 8, 2004
Dear XXXXXXXXXX:
Re: Ownership
Technical Opinion Request
This is in reply to your May 25, 2004, electronic mail and our August 18 and 19, 2004, telephone conversations (Nelson/XXXXXXXXXX) where you requested a technical interpretation concerning whether a particular transaction would constitute a disposition for the purposes of the Income Tax Act (the "Act").
Salient Facts
A brother and sister presently own land and building as equal tenants in common.
They are contemplating changing the ownership so the brother and sister become joint tenants of the land and building. You indicate that before and after the change, the same two people own the property in the same proportion and that there are no other owners.
You refer to our file #5-971957, dated December 22, 1997, which stated, in part,
In our view, provided that immediately after the conversion, each co-tenant retains their proportionate undivided interest in the property, the mere change in the type of ownership from joint tenancy to tenants in common of real property would not constitute a disposition...
Your Question
You asked us to confirm that the change in ownership, noted above, from equal tenants in common to joint tenancy would not result in a disposition for capital gains purposes.
As explained in Information Circular 70-6R5 Advance Income Tax Rulings, 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. However, we are prepared to offer the following general comments, which may be of some assistance to you.
Subject to certain exceptions for transactions involving trusts, paragraph (e) of the definition of the term "disposition" in subsection 248(1) of the Act generally provides that there is no disposition when property is transferred without a consequential change in the beneficial ownership of the property. It is always a question of fact whether there has been a change in beneficial ownership. Paragraphs 2 to 5 of Interpretation Bulletin IT-437R discuss the concept of beneficial ownership.
The tax consequences in any scenario involving a change in property ownership from tenancy in common to joint tenancy would depend on whether it resulted in a disposition of an interest in the property. In our view, there would be such a disposition where, for example, three people own property as tenants in common and transfer the property to two of those people as joints tenants.
However, in the present case, based on the limited available information, our view is that changing ownership from being equal tenants in common to joint tenancy would not, in and of itself, result in a disposition of the property for the purposes of the Act. Without knowing all of the facts in a particular scenario, we are unable to comment further.
In accordance with paragraph 22 of Information Circular 70-6R5, the above comments are only an expression of opinion, and as such should not be construed as an advance income tax ruling, nor are they binding on the Canada Revenue Agency.
We hope the above will be of assistance to you.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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