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:
1) Is a judicial sale subject to section 79 ?
Position:
1) NO, unless mortgagor plans for the sale and is the only bidder
Reasons:
2) Brill et all 96 DTC 6572
972115
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
December 8, 1997
Dear Sirs:
Re: Judicial sale and section 79 of the Income Tax Act (the "Act")
This is in reply to your letter of August 1, 1997, wherein you ask us whether a creditor who takes the hypothecary recourse against the debtor in forcing a judicial sale of the property and who makes a successful bid on the property becoming the owner of the property is subject to the provisions of section 79 of the Act.
Further to the Federal Court of Appeals decision in Richard C. Brill, Kenneth G. Farn et all at 96 DTC 6572, the court concluded that where the order in a judicial sale specifies a price, the proceeds of disposition is the specified price and section 79 of the Act is not applicable. The Department accepts that section 79 of the Act does not apply to either the mortgagor or the mortgagee where the judicial order specifies a sale price.
However, in our view, section 79 may apply where the judicial sale was a planned acquisition of the property by the mortgagor and the mortgagor is the only bidder at the judicial sale. Accordingly, in those situations, since beneficial ownership of the property is acquired or reacquired at that time by the person and the acquisition or reacquisition of the property was in consequence of another person's failure to pay to the person all or part of the specified amount of the debt, the provisions of section 79 may apply.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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