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: Whether family residence disposed of pursuant to a court order can be treated as an investment property and capital loss claimed
Position: No. Question of fact whether property personal-use or income earning property
Reasons: Question of fact whether property acquired and used as personal use or income earning property. Facts suggest that property used as family residence and not to earn income.
2006-021694
XXXXXXXXXX Jack Szeszycki
(613) 957-8972
February 6, 2007
Dear XXXXXXXXXX:
Re: Disposition of a Family Residence
This is in reply to your letter dated December 1, 2006, and further to your telephone conversation with Ms. Gwen Moore of this Directorate, requesting our opinion as to whether the property transferred to your spouse, as required under a court order, can be characterized as an investment property for tax purposes.
In your letter you describe circumstances in which you are required by order of the court to, among other things, transfer title of the family residence to your spouse, as a result of which you realized a capital loss. It is your view that because of the 'involuntary' nature of the transfer the family residence property should be treated as an investment property and the capital loss deductible for tax purposes. The property was purchased in 1993, the same year as your marriage, and has been used as a family residence in all of the years since its acquisition.
The situation you describe is a factual one involving a completed transaction. It is not this Directorate's practice to comment on transactions involving specific taxpayers other than a proposed transaction in the form of an advanced income tax ruling. Normally, a taxpayer should submit all the relevant facts and documentation regarding a specific completed transaction to the appropriate Tax Service Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Section 54 of the Income Tax Act (the "Act") includes a definition of the term "personal-use property" and, under that definition, the term includes a property owned by a taxpayer that is used primarily for the personal use or enjoyment of the taxpayer or a person related to the taxpayer. It is a question of fact as to whether a property was acquired for the purposes of earning income or for some other purpose. Where a property is acquired by the taxpayer and used as a family residence continuously throughout the period of ownership, either by the taxpayer or someone related to the taxpayer, it would generally be considered a personal-use property as opposed to an investment property used for the purpose of earning income.
Subparagraph 40(2)(g)(iii) of the Act contains the special rule that deems any loss from the disposition of a personal-use property to be nil.
We trust that these comments will be of assistance to you.
Yours truly,
S. Parnanzone
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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