17 October 1997 External T.I. 9611075 - WHETHER A PARTITION.

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 subsections 248(21) and 248(20) apply in a specific fact situation? More specifically whether there is a "partition" of "a property"?

Position:

No.

Reasons:

	Partition is defined as the dividing of lands, held 	jointly, into distinct portions so that they may be held 	in severalty.  In the situation described only one co-	owner will hold 100% ownership of a distinct portion 	while the remaining portions will continue to be held in 	joint ownership. 

961107

XXXXXXXXXX Wm. P. Guglich

Attention: XXXXXXXXXX

October 17, 1997

Dear Sirs:

Re: Subsection 248(20) and (21) of the Income Tax Act (the "Act")

This is in reply to your letters of March 13 and December 16, 1996 concerning the application of subsections 248(20) and (21) of the Act. You also submitted a representation, prepared by XXXXXXXXXX, dated December 9, 1996, respecting this matter.

You described a situation where three taxpayers (A, B and C) each own an undivided one third interest in two land holdings (Greenacre and Blackacre) purchased in July of 1968 and October of 1968, respectively. There are four buildings on the land. One of the buildings and the underlying land all of which is on Greenacre, will be severed. The taxpayers propose to rearrange their ownership interests so that taxpayer A will own 100% of the severed building and related land and 8.333% of the three other buildings and related land. Taxpayers B and C will each own 45.8333% of the other three buildings and related land.

It is your view that Greenacre would be considered "a property" until Blackacre was purchased. When Blackacre was purchased and it abutted Greenacre, Blackacre and Greenacre became one property, "Redacre", by virtue of section 50 of the Ontario Planning Act. When the conditions in the Ontario Planning Act have been met and the ownership interests have been rearranged as described above, the severed part of Greenacre transferred to taxpayer A will, in your view, then be considered to be partitioned and be a separate property.

It appears that the interpretation you seek relates to a proposed transaction to be undertaken by a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R3 dated December 30, 1996 issued by Revenue Canada, Taxation. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for a particular taxpayer with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular IC 70-6R3. Nevertheless, we can offer the following general comments.

OUR VIEWS

In order that subsection 248(21) or 248(20) of the Act may apply there must be "a partition" of "a property" among those persons that owned the property jointly.

Black's Law Dictionary defines "partition" as: "the dividing of lands held by joint tenants, coparceners, or tenants in common, into distinct portions, so that they may hold them in severalty. And, in a less technical sense, any division of real or personal property between co-owners, resulting in individual ownership of the interests of each...."

In the scenario described in your letter, the severance and the rearrangement of ownership interests results in taxpayer A owning 100% of a distinct portion but the remaining portion(s) continue to be held in joint ownership and land which is held in joint ownership cannot be regarded as being held in severalty. Therefore, as part of the land will continue to be held in joint ownership (as opposed to being held in severalty) there would be no partition and subsections 248(21) and 248(20) of the Act would not apply.

As there is no partition in the scenario described in your letter, we did not consider it necessary at this time to determine the precise land mass (i.e., Greenacre, Blackacre or Redacre) that would be considered "a property", for purposes of subsections 248(21) and 248(20) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

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