22 October 2008 External T.I. 2008-0268651E5 - Taxability of Amounts Received For Future Repairs

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: How should amounts received by a co-operative housing corporation from its member/shareholders for the purpose of making future major repairs and replacements to the particular residential property be treated for tax purposes?

Position: General comments only - However, amounts are not likely taxable.

Reasons: Paragraph 3 of IT-304R2.

XXXXXXXXXX 						Michael Cooke
							2008-026865
October 22, 2008					

Dear XXXXXXXXXX :

Re: Co-operative Housing Corporations - Amounts Received for Repairs

We are writing in response to your correspondence dated February 13, 2008, wherein you requested our views on the taxability under the Income Tax Act (the "Act") of amounts received by a co-operative housing corporation from its member/shareholders. The amounts were received by the co-operative housing corporation for the purpose of making future major repairs and replacements to the particular residential property.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following comments.

Comments:

While always a question of fact, it appears likely that the co-operative housing corporation would be considered to be a non-profit organization ("NPO") under paragraph 149(1)(l) of the Act. However, if the particular co-operative housing corporation is not an NPO, it is our view that the comments in paragraph 3 of IT-304R2, "Condominiums" would be applicable. Specifically, paragraph 3 of IT-304R2 in discussing condominium corporations that are not NPOs states that, "Any excess of members' condominium fees and contribution over the corporation's expenditures for the year is not considered to be income of the corporation."

We trust our comments will be of assistance.

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch