24 December 1997 External T.I. 9726975 - CO-OPERATIVE HOUSING CORP

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 the shares in a cooperative housing organization can qualify as a principal residence?

Position:

Section 54 of the Act defines "principal residence" of a taxpayer for a taxation year, to include a property that is "... a share of the capital stock of a cooperative housing corporation acquired for the purpose of acquiring the right to inhabit a housing unit owned by the corporation and that is owned, whether jointly with another person or otherwise, in the year by the taxpayer, ..."

Reasons:

There would be no meaning to the term "cooperative housing corporation" in the definition of principal residence in section 54 of the Act if shares of corporations incorporated under legislation other than "cooperative legislation" were accepted as a principal residence.

972697
XXXXXXXXXX A.M. Brake

December 24, 1997

Dear Sir\Madam:

Re: Principal Residence, Share of Co-operative Housing Corp.

This is in reply to your letter of August 21, 1997 regarding the income tax treatment of a gain on the sale of shares of a cooperative housing corporation. You state that the entity operates as a non-profit organization and merely acts as agent when a share owner sells her\his housing unit that is represented by a share, to a willing buyer. In the past, shares were sold for the same price that the vendor had initially paid for them. In this regard, you also asked whether the non-profit status of the organization would be at risk if the owner sold a share for more than he or she paid for it.

Section 54 of the Income Tax Act (the "ACT") defines "principal residence" of a taxpayer for a taxation year. The definition includes a property that is "... a share of the capital stock of a cooperative housing corporation acquired for the purpose of acquiring the right to inhabit a housing unit owned by the corporation and that is owned, whether jointly with another person or otherwise, in the year by the taxpayer, ...". If your housing organization is in fact incorporated under the part of the Cooperative Association Act of British Columbia that deals exclusively with housing cooperatives (the Cooperative Act), the share of the corporation may qualify under the definition of a "principal residence." If that is the case, then any capital gain on the sale of the shares would qualify for the principal residence exemption to the extent provided by paragraph 40(2)(b) of the Act. If the housing association is not in fact incorporated under legislation dealing with housing cooperatives, the gain on the sale of shares of such a corporation would be treated in the same manner as ordinary taxable capital gains under the Act.

Since the housing association referred to in your letter acts only as agent for the vendor of the share, it is our view that the sale of a share by a member would not, in itself, affect the tax exempt status of the entity.

We trust our comments will be of assistance to you.

Yours truly,

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