11 December 1992 Income Tax Severed Letter 9229962 - Departure Tax on Foreign 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.

922996
XXXXXXXXXX Jim Wilson
(613)957-2123

Attention: XXXXXXXXXX

December 11, 1992

Dear Sirs:

Re: Canada-U.K. Income Tax Convention (the "Convention")

We are writing in reply to your letter dated September 29, 1992, in which you requested our comments on the application of paragraph 9 of Article 13 of the Convention under the following hypothetical set of facts:

Facts

• 1. The taxpayer is a U.K. citizen but has been a resident of Canada for 20 years. The taxpayer is not and has never been a Canadian citizen.
• 2. The taxpayer decides to move back to the U.K. to retire. The taxpayer owns some real property in the U.K. on which significant capital gains have accrued.
• 3. The taxpayer has no intention of selling the U.K. property for several years and makes the election under paragraph 48(1)(c) of the Income Tax Act (the "Act") to avoid the deemed disposition on departure from Canada. The real property is deemed to be taxable Canadian property as a result of the election.
• 4. Seven years after moving back to the U.K. the taxpayer sells the real property.

Our Comments

Based on the understanding that the taxpayer, immediately after his departure from Canada, will be a resident of the U.K. for purposes of the Convention as defined in Article 4 therein, paragraph 9 of Article 13 of the Convention will not apply. Pursuant to paragraph 8 of Article 13 of the Convention, any taxable capital gain resulting from the disposition of that property is only taxable in the U.K., thus an offsetting deduction under paragraph 110(1)(f) of the Act would be allowed in computing taxable income earned in Canada.

The foregoing opinion is not an advance income tax ruling and is not binding on the Department.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch