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.
951975
XXXXXXXXXX D.A. Palamar
Attention: XXXXXXXXXX
August 21, 1995
Dear Sir:
Re: Paragraph (c) of the definition "proceeds of disposition" in section 54 of the Income Tax Act (the "Act")
This is in response to your letter of July 18, 1995 wherein you requested our views regarding the interpretation of the above-captioned provision. We understand the relevant facts to be as follows.
Facts
The Partition of Property Act (the "Partition Act") is a statute of the province of B.C. Section 2 of this Act reads:
"All joint tenants, tenants in common, coparceners, mortgagees or other creditors having liens on, and all parties interested in, to, or out of, any land may be compelled to make or suffer partition or sale of the land, or any part of it as provided in this Act, and the partition may be had whether the estate is legal or equitable or equitable only; except that in respect of special timber licences no partition shall be made of a single licence, and any odd licence not possible to assign by partition to any of the parties interested shall be ordered to be sold."
Sections 6 and 7 of the Partition Act read:
"In a proceeding for partition where, if the Act had not been passed, a judgment for partition might have been given, then if the party or parties interested, individually or collectively, to the extent of 1/2 or upward in the property to which the proceeding relates should request the court to direct a sale of the property and a distribution of the proceeds instead of a division of the property between or among the parties interested, the court shall, unless it sees good reason to the contrary, direct a sale of the property accordingly, and give all necessary or proper consequential directions.
In a proceeding for partition where, if this Act had not been passed, a judgment for partition might have been given, then if it appears to the court that by reason of the nature of the property to which the proceeding relates, or of the number of parties interested or presumptively interested in it, or of the absence or disability of some of those parties, or of any other circumstance, a sale of the property and a distribution of the proceeds would be more beneficial for the parties interested than a division of the property between or among them, the court may, if it thinks fit, on the request of any of the parties interested and notwithstanding the dissent or disability of any others of them, direct a sale of the property accordingly, and may give all necessary or proper consequential directions."
If real property is jointly owned by three taxpayers, two of them may petition the court, pursuant to section 2 of the Partition Act, to have the property sold and the proceeds distributed, despite the fact that the third person dissents to the petition. In these circumstances, if the court orders the property sold, the third person will have involuntarily disposed of their property by virtue of a provincial statute.
Your Question
If there is a court ordered sale of property under the Partition Act to which a taxpayer has dissented does Revenue Canada believe that the taxpayer's property has been "taken under statutory authority" as this phrase reads in the definition of "proceeds of disposition" in section 54 of the Act.
Our Views
In our view the proceeds of disposition received by the dissenting third party would be considered to be "compensation for property taken under statutory authority" within the meaning of paragraph 54(c) of the Act.
These comments are given in accordance with the practice referred to in paragraph 21 of IC 70-6R2 and are not binding on Revenue Canada.
Yours Truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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