22 August 1995 External T.I. 9515745 - SUCCESSIVE INTERESTS IN REAL PROPERTY - 43.1

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.

RULINGS DIRECTORATE

CORRESPONDENCE SUMMARY

Principal Issues:

(1)Whether the disposition of a remainder interest in depreciable (real) property is considered as a disposition of the underlying property where the person disposing of the interest retains the life interest?

(2)Whether the deemed disposition of a life interest pursuant to section 43.1 is considered a disposition for purposes of section 13?

Position TAKEN:

(1)Yes. Considered a partial disposition of the underlying depreciable property. The remainder interest is considered a separate property in the hands of the acquiror.

(2)No. Section 43.1 is restricted to subdivision c of Part I.

Reasons FOR POSITION TAKEN:

(1)Previous Ruling positions supported by a legal opinion.

(2)Legislation. No counterpart to section 43.1 in subdivision b of Part I as there is with subsection 13(4)/44(1) and 13(7)/45(1).

			951574
XXXXXXXXXX             	G. Donell

Attention: XXXXXXXXXX

August 22, 1995

Dear Sirs:

Re: Life & Remainder interests - depreciable property

This is in reply to your letter of June 6, 1995 in which you have asked us to confirm, in writing, the view expressed by us in a letter to you dated April 28, 1994 concerning the disposition of a remainder interest in real property and the retention of the "life estate" in the property as described in section 43.1 of the Income Tax Act (the "Act").

In that letter we advised that the disposition of the remainder interest constituted the partial disposition of any underlying depreciable property that could, depending on the facts, result in the realization of a capital gain and recaptured depreciation with respect to that depreciable property. The remainder interest would be considered to constitute a separate property to the holder. Also, we would confirm that section 43.1 of the Act deems there to be a disposition, for capital gains purposes only, of the retained "life estate".

This letter is intended to reaffirm the views expressed in our letter of April 28, 1994.

Yours truly,

Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch