5 December 1989 External T.I. 59025 F - United States Vacation Property

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.

December 5, 1989

Dear Sirs:

Re:  United States Vacation Property

We are writing in response to your letter of October 24, 1989 regarding the transfer of the title of a condominium located in Florida to a company incorporated in Canada, due to estate tax concerns in the United States.

Where residential property is held by a corporation for the occupancy of a shareholder, the general rule is that a taxable benefit will result when the fair market rental of the property is greater than the outlays incurred by the shareholder.  A benefit will not normally be assessed to the shareholder, however, where all of the following conditions are met:

1.     Its only objective is the holding of property for the personal use or enjoyment of the shareholder.

2.     Its shares are held by an individual or an individual and persons (other than a corporation) related to the individual.

3.      Its only transactions relate to the objective described in 1 above.

4.      It would charge the shareholder with all operating expenses of the property with the result that there will be no profit or loss with respect to the property shown on any of its returns.

5.      It must acquire the property solely with funds provided by the shareholder.

We wish to point out that it is our policy to assess benefits where the property is transferred, on a tax-free basis, utilizing certain provisions of the Income Tax Act such as subsection 85(1).

24(1)

You have also asked that we confirm if an explanatory letter is an acceptable replacement for the filing of an annual return.  The Income Tax Act requires that each corporation, except a registered charity, must file an annual return in a prescribed form, containing certain information.  Accordingly, a tax return must be filed.

Paragraph 4 of Information Circular 85-3R (copy enclosed) indicates that if no financial transactions have occurred, you would be required to provide, at least, a balance sheet.

The opinions expressed in this letter are not rulings and are not considered binding on the Department as outlined in paragraph 24 of Information Circular 70-6R.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch