27 January 1992 Internal T.I. 9119057 F - Acquisition of Property - Change in Beneficial Ownership

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.

January 27, 1992

Attention:  Bill Rutgers

911905

19(1)

We are writing in reply to your memorandum of July 5, 1991 and telephone conversations (Ho/Rutgers) wherein you requested our opinion on whether or not a corporation can legally own a property, as a bare trustee, in trust for another person and whether the Department will look through the bare trustee for tax purposes. We apologize for the delay in replying to your memorandum. As an example, you have provided us with the following facts.

Facts

24(1)

24(1)

Our Opinion

21(1)(b),  24(1)

Since we do not have the facts for the other projects, the following are general comments only.

Our position on bare trustees is outlined in IT-216. There is also a published ruling, ATR-1, dated November 29, 1985 and a discussion paper in the 1989 Corporate Management Tax Conference report on this subject matter. If it can be determined that   24(1)   is acting as an agent, then the Department will look through   24(1) for income tax purposes. However, we feel that the following issues does need careful consideration:

-     where beneficial ownership resides, and

-     whether transactions are subject to general anti-avoidance rules.

Beneficial Ownership

Whether a taxpayer has acquired a beneficial ownership is a question of fact.

Clause 54(c)(v) of the Income Tax Act (the "Act") states that:

""Disposition" of any property,....for greater certainty, does not include....any transfer of property by virtue of which there is a change in the legal ownership of the property without any change in the beneficial ownership thereof,..."

Paragraph 2 of IT-437 states that the Department will look to such factors as the right to possession, the right to collect rents, the right to call for the mortgaging of the property, the right to transfer title by sale or by will, the obligation to repair, the obligation to pay property taxes and other relevant rights and obligations. Although these factors are for the purposes of paragraph 54(g) of the Act, they are also relevant in the case here. If it can be determined that the beneficial ownership has not been transferred, then, as stated in paragraph 4 of IT-170R, the transaction that can be described as a sale is disregarded. Therefore, the purchaser is not considered to have acquired beneficial ownership.

General Anti-Avoidance Rules

If it can be determined that the transactions have no purpose other than to obtain tax benefits, they can be avoidance transactions.

We trust the above comments are of assistance, but we would also be pleased to elaborate on any specific aspects that you may require.

Yours truly,

for DirectorManufacturing Industries, Partnershipsand Trusts DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch