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: Tax consequences on death of holding an interest in joint tenancy or an interest as tenants in common.
Position: Deemed disposition under subsection 70(5).
Reasons: The provision of subsection 70(5) will deemed the interest in the property to be disposed of at fair market value under both tenancy arrangements.
5-981844
XXXXXXXXXX Karen Power, CA
(613) 957-8953
November 5, 1998
Dear XXXXXXXXXX:
Re: Joint Tenancy & Tenants in Common
We are writing in reply to your letter of June 8, 1998, concerning the taxation of property owned by yourself and your brother and sister.
Specifically you have asked us to comments on whether the type of tenancy arrangement (joint tenants vs. tenants in common) will impact the tax consequences on the death of one or more of the tenants.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Department.
Joint tenancy is defined in Black’s Law Dictionary as the type of ownership of, real or personal property by two or more persons. Joint tenants have one and the same interest commencing at one and the same time, and held by one and the same undivided possession. The primary incident of joint tenancy is the right of survivorship. When one joint tenant dies, his interest is transferred to the other joint tenants and does not belong to the deceased taxpayer’s estate.
Tenants in common on the other hand, is defined in Black’s Law Dictionary as a form of ownership whereby each tenant holds an undivided interest in the property. Unlike a joint tenancy, the interest of a tenant in common does not terminate upon his or her death (i.e. there is no right of survivorship). As you have indicated the interest of a tenant in common passes to his or her estate upon death.
The provisions of subsection 70(5) of the Act, will operate to deem the deceased to have disposed of his interest in the property (whether it is a joint tenant interest or a tenants in common interest) immediately before his death for proceeds equal to its fair market value. For the same reasons, and in accordance with paragraph 70(5)(b) of the Act, the individual acquiring the property, deemed to have been disposed of, acquires that property at its fair market value. In a tenants in common arrangement, the deceased taxpayer’s estate would be deemed to have acquired the interest in the property at its fair market value. In a joint tenancy arrangement, each of the joint tenants, would be deemed to have acquired their portion of the interest in the property at its fair market value. The capital gain may not be deferred until the property is sold under either tenancy arrangement.
We have not provided any comments with respect to property transfer taxes as this does not involve the interpretation of specific provisions of income tax law. We would suggest you contact the British Columbia Provincial Government for more information on the British Columbia Land Transfer Tax Act.
We trust our comments will be of assistance to you.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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