14 September 1995 External T.I. 9522665 - CO-OWNERSHIP OF REAL 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:

-Whether co-ownership of real property by a pension corporation constitutes a partnership.

-Whether a tax exempt pension corporation can own real property through a partnership interest.

Position TAKEN:

-Question of fact and subject to the relevant provincial law. However, co-ownership of one or more properties not associated with a business does not of itself create a partnership.

-No, a pension corporation cannot own real property through a partnership it must own a direct interest in the real property.

Reasons FOR POSITION TAKEN:

-Meaning of "partnership"
-Subparagraph 149(1)(o.2)(ii)

						952266
XXXXXXXXXX						B. Kerr

Attention: XXXXXXXXXX

September 14, 1995

Dear Madam:

Re: Co-ownership of Real Property

This is in reply to your letter of August 21, 1995, wherein you requested our views on whether co-ownership of real property by a pension corporation that is exempt from tax under paragraph 149(1)(o.2) of the Income Tax Act (the "Act") would constitute a partnership for the purposes of the definition of "foreign property" in paragraph 206(1)(i) of the Act. In this regard, the ownership documents clearly state that it is a co-ownership and not a partnership.

Our Comments

The fact that the parties to a particular arrangement expressly disclaim a partnership does not, by itself, preclude the arrangement from being a partnership. If a particular arrangement is a partnership, an interest therein would constitute a "foreign property" by virtue of paragraph 206(1)(i) of the Act. If it is clear from all the facts that such an arrangement is not a partnership, then the provisions of paragraph 206(1)(i) would not apply.

The Department's general views as to what constitutes a "partnership" are set out in Interpretation Bulletin IT-90, entitled "What is a partnership", dated February 9, 1973. As stated in paragraph 2 therein, a partnership is the relation that subsists between persons carrying on business in common with a view to profit. However, co-ownership of one or more properties not associated with a business does not of itself create a partnership. For guidance on whether a particular arrangement at a particular time constitutes a partnership, reference should be made to the relevant provincial law on the subject, and such law will be viewed as persuasive by the Department.

We would also like to confirm that subparagraph 149(1)(o.2)(ii) of the Act, inter alia, does contemplate co-ownership of real property that is capital property and that a pension corporation cannot hold real property through a partnership interest, it must own a direct interest in the real property.

As stated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, the opinions expressed in this letter are not rulings and are consequently not binding on the Department.

We trust that these comments will be of assistance.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch