11 October 1996 Income Tax Severed Letter 9631125 - Capital gain election — non-resident individual

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 an individual who was not resident on February 22, 1994 can claim the capital gains deduction in respect of a capital gain triggered by the capital gains election.

POSITION:

No. REASONS:

Subsection 110.6(13) of the Act provides that a non-resident of Canada cannot claim the capital gains deduction while non-resident on any capital gains arising from the disposition of a property while non-resident.

5-963112 XXXXXXXXXX C. Chouinard

October 11, 1996

Dear Sir\Madam:

Re: Capital Gains Election - Non-Resident

We are writing in reply to your letter of September 16, 1996, wherein you inquired whether an individual who was not resident in Canada on February 22, 1994 could file the capital gains election and claim the capital gains deduction under subsection 110.6(3) of the Income Tax Act (the "Act").

Our Comments

In order to claim the capital gains deduction in a particular taxation year, a taxpayer must have been resident in Canada throughout that year. In the year an individual becomes resident or ceases to be resident, subsection 110.6(5) of the Income Tax Act (the "Act") deems the individual to have been resident in Canada throughout the particular year, providing he or she was also resident throughout either the immediately following or immediately preceding year. However, according to subsection 110.6(13) of the Act, a non-resident of Canada cannot claim the capital gains deduction while non-resident on any capital gains arising from the disposition of a property while non- resident. Accordingly, the period of non-residency will not normally affect the eligibility for the capital gains deduction arising from a disposition after a taxpayer is resident or deemed resident in Canada.

According to paragraph 110.6(19)(a) of the Act, where the capital gains election is filed, the property which is the object of the election is deemed to have been disposed of on February 22, 1994. Since subsection 110.6(13) of the Act applies for the purposes of section 110.6 of the Act, it also applies for purposes of subsection 110.6(19) of the Act. Therefore, only a taxpayer who was resident in Canada on February 22, 1994 and who otherwise met subsection 110.6(5) of the Act could file the capital gains election and claim the capital gains deduction under subsection 110.6(3) of the Act.

We have reviewed the statements in the Capital Gains Election Package and the Capital Gains Guide as they relate to non-residents claiming the capital gains exemption and agree that they may be construed incorrectly. We will inform our Guides Division of this matter.

We trust that these comments will be of assistance.

Yours truly,

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