28 July 1995 External T.I. 9512685 - SEIZURE OF 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.

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.

Principal Issues:

In determining the cost of seized property for purposes of subsection 79.1(6) of the Act which debts are included? The legislation reads "where a particular property is seized at any time in a taxation year by a creditor in respect of one or more debts". Where the foreclosure is with respect to a specific debt owing to the creditor but there are other debts owing to the same creditor on the seized property are these other debts to be included in the cost of the seized property to that creditor?

Position TAKEN:

Reasons FOR POSITION TAKEN:

Reasonable to take that position. In the alternative debts other than those on which foreclosure was initiated will disappear on seizure of property for proceeds equal to nil. Therefore if debt is capital property there will be a capital loss, no real difference in result.

		     		951268
XXXXXXXXXX	                         S.J.Tevlin

Attention: XXXXXXXXXX

July 28, 1995

Dear Sirs:

Re: Section 79.1 of the Income Tax Act

This is with respect to your letter of May 3, 1995 requesting our views on the application of section 79.1 of the Income Tax Act (the "Act") to the hypothetical fact situation described in your letter.

The situation described appears to concern a factual situation involving a specific taxpayer,accordingly your questions should be directed to your District Taxation Office which has the responsibility of determining the tax consequences of completed transactions and their implications to the specific taxpayers. However, if this is a proposed transaction, this matter would be more appropriately the subject of an Advance Income Tax Ruling. We are, however, prepared to provide the following general comment which may be of some assistance.

Although subsection 79.1(6) of the Act refers to a property seized by a creditor "in respect of one or more debts", it is our opinion that it would not be unreasonable to include all debts owing to that creditor, with respect to the property seized by that particular creditor, in the determination of the cost to that creditor of the seized property for purposes of subsection 79.1(6) of the Act. The term "debt" has the meaning as defined in subsection 79(1) of the Act.

The foregoing comment is given in accordance with the practice referred to in paragraph 21 of IC-70-6R2 dated September 28, 1990 and is not binding on Revenue Canada, Taxation.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate

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