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.
Dear Sir/Madam:
Re: 19(1)
This is in reply to your request for an advance income tax ruling on behalf of the taxpayers named in your letter dated July 4, 1991. As you are aware, we are unable to provide you with a ruling with respect to proposed legislation. In addition, since the situation you have described involves actual taxpayers and proposed transactions, that would more appropriately be dealt with by way of an advance income tax ruling, we are unable to comment specifically on the issues set out in your letter. However we offer the following general comments regarding the application of proposed subsection 248(21) of the Income Tax Act (the "Act") as contained in Bill C-18 which was tabled in the House of Commons on May 30, 1991.
Our Comments
The Explanatory Notes to Bill C-18 provide for special interpretative rules with respect to proposed subsection 248(21) of the Act. In particular these notes explain that:
"paragraph (21)(c) provides that for the purposes of this rule separate lots that result from the subdivision of a parcel of land are to be regarded as "a property" rather than separate properties. If it were not for this rule, a distribution or allocation of lots following a subdivision of a parcel of land might not technically be possible under the main rule."
- A disposition of undivided interests for income tax purposes will not occur "...when a property is subdivided and distributed (in whole or in part) between its owners in the course of a partition in such a way that each owner preserves a share of the fair market value of the property - a share that bears the same proportion to the fair market value of all the shares in the property, as the fair market value of that owner's undivided interest in the property bears to the fair market value of all the undivided interests in the property immediately before the partition."
- "When this exception applies, the rules in subsection (20) are not applicable and the new interest that each owner has pursuant to the partition is deemed to be a continuation of that owner's undivided interest such that the tax values and characteristics (cost, undepreciated capital cost, status as inventory or capital property, etc.) of the previous interest flow to the new interest."
In addition we are in agreement with the Department of Justice's position that the words "in the property" preceding the words "a new interest the fair market value of which immediately after the partition ..." in proposed subsection 248(21) considers the new aggregate interest in the whole of the property.
Your deposit will be returned to you under separate cover.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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