20 December 1996 External T.I. 9630725 - OWNERSHIP OF A HOUSE

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:

Ownership of a house built by a daughter and her husband on a parcel of land owned by the mother.

Position:

Question of fact. Pertinent information was provided.

Reasons:

The ownership of the house at this time is a settled matter.

		963072
XXXXXXXXXX		Jacques E. Grisé
(613) 957-2059
December 20, 1996

Dear XXXXXXXXXX:

Re: Ownership of a House

This is in reply to your letters of September 11 and October 30, 1996 requesting an advance ruling on the ownership of a house erected by your daughter and son-in-law on land you own on XXXXXXXXXX.

The central question (i.e., the ownership of the house) is a question of fact on which we will not provide an advance ruling. However, we will provide you with information concerning the ownership of property which we hope will be helpful in establishing the ownership of the house. For purposes of this letter, land is a property and the house on the land is a separate property from the land.

In common law jurisdictions such as British Columbia, two forms of property ownership are recognized - legal and beneficial. Legal ownership normally exists when title is transferred to, recorded in, registered in or otherwise carried in the name of a person. A person's legal ownership of a property may be subject to another person's beneficial ownership. The term "beneficial ownership" describes the type of ownership of a person who is entitled to the use and benefit of the property whether or not that person has concurrent legal ownership. Please refer to the attached Interpretation Bulletin IT-437R, Ownership of Property (Principal Residence), for a more detailed discussion on the ownership of property.

You will note from paragraph 13 of IT-437R that a person may in some cases be considered to own a housing unit situated on land not owned by the person in circumstances where, by reason of the law or according to the terms of the lease, the person has a leasehold interest in the land. It is not necessary for a lease to be in writing for a lease to exist. Furthermore, a lease may exist without the payment of rent or compensation by the tenants to the landlord. For further information on leasehold interests we are attaching Interpretation Bulletin IT464R, CCA - Leasehold Interest. Although this bulletin deals with depreciable property some of the information relating to leasehold interest will also apply to non-depreciable property.

We confirm your understanding that giving a property, such as a parcel of land, to your daughter will result in a capital gain providing that the value of the property at the time of the gift exceeds the total of the adjusted cost base of the property at that time and the expenses relating to the disposition.

Please call Jacques Grisé at (613)957-2059 should you wish to discuss any of the above.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
Enclosures