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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Subject: PARTITION OF PROPERTY Section(s): 248(21), 248(20)]
913482
H. Woolley
(613) 957-2139
XXX
Attention: XXX
January 27, 1992
Dear Sirs:
Re: Subsection 248(21) of the Income Tax Act (the "Act")
This is in reply to your letter dated December 18, 1991 wherein you requested our views on the application of subsection 248(21) of the Act. Specifically, you inquire whether joint owners of one piece of land may subdivide such land into several parcels and retain joint ownership in one or more parcels while transferring parcels of equal value to each joint owner without triggering a disposition for income tax purposes.
It is our view that the word "property" in the preamble to subsection 248(21) of the Act and the phrase "parcel of land" in paragraph 248(21)(c) of the Act, as they apply to the issue at hand, both refer to the piece of land held by the joint owners prior to the subdivision. Accordingly, once the piece of land has been subdivided into several parcels, for the purposes of subsection 248(21) of the Act, all these parcels will be regarded as one property.
Where the subdivided parcels are then partitioned between the joint owners in a manner such that each and every joint owner receives a parcel of equal value and any remaining parcels continue to be held in joint ownership by all the joint owners, each of the joint owners will have a new interest the fair market value of which immediately after the partition, expressed as a percentage of the fair market value of all the new interests in the property immediately after the partition, is equal to the fair market value of that person's undivided interest immediately before the partition, expressed as a percentage of the fair market value of all the undivided interests in the property immediately before the partition. Thus, subsection 248(21) of the Act will apply such that:
- (i) subsection 248(20) of the Act is not applicable, and
- (ii) the new interest of each joint owner will be deemed to be a continuation of that person's undivided interest in the original one piece of land.
It should be noted that where, subsequent to the partition, several of the subdivided parcels continue to be held in joint ownership by all the joint owners, if the joint owners subsequently exchange, with each other, their undivided interests such that each owner received a divided interest, for example, an entire interest in one or more properties, it is our view that a disposition will occur at this time.
We trust our comments are of assistance.
Yours truly,
E. Wheeler
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1992
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© Sa Majesté la Reine du Chef du Canada, 1992
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