6 January 1999 Internal T.I. 9833837 - DEFINITION OF SPOUSE

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: Where the 12 month period referred to in subparagraph 252(4)(a)(i) of Income Tax Act (the “Act”) straddles the end of 1992, will the individuals involved in the common-law relationship be treated as spouses immediately after the end of the 12 month period, assuming the other requirements of subsection 252(4) of the Act are met?

Position: Yes

Reasons: Position approved by Policy Review Committee (see 0-971306)

		January 6, 1999

	Vancouver Tax Services Office 	HEADQUARTERS
	Nelson Toy	M. Eisner
	Client Services Division	(613) 957-2138
		983383

Common Law Partners - Transfer of Property

Pursuant to our recent telephone discussion (Eisner/Toy), we are replying to you in respect of a file (file 951891) sent to us by your office. The file concerns a letter sent to your office by XXXXXXXXXX.

In the situation set out in that letter, two individuals (“Individual A” and “Individual B”) were common law partners from some time in 1979 to February 14, 1993. Pursuant to a separation agreement that was signed by Individual A and Individual B on March 9, 1993, the ownership of their matrimonial home was to be changed from being jointly owned to being owned solely by Individual B and Individual B would make a payment of $10,000 to Individual A.

The concern is whether subsection 73(1) of the Income Tax Act (the “Act”) applies on the transfer of Individual A’s interest in the matrimonial home to Individual B. In general terms, that provision provides for a tax-deferred rollover when property is transferred by a taxpayer to a spouse or a former spouse in settlement of rights arising out of marriage.

Our Comments

In order to determine the tax consequences of an actual situation, it is necessary to review all the relevant facts and documentation. While such a review has not been carried out, we are providing you with the following general comments.

As indicated in paragraph 1 of IT-325R2 “Property Transfers After Separation, Divorce and Annulment”, paragraphs 73(1)(a) and (b) of the Act allow capital property to be transferred on a tax-deferred basis to the spouse of a taxpayer or former spouse of a taxpayer in settlement of rights arising out of their marriage. After 1992, the term “spouse” has an extended meaning for all purposes of the Act including subsection 73(1) of the Act. Under paragraph 252(4)(a) of the Act, two individuals of the opposite sex after 1992 will be considered to be spouses of each other when they are cohabiting in a conjugal relationship and either (a) they have so cohabited throughout the preceding 12 months, or (b) they are the natural parents of the same child. Paragraph 252(4)(a) of the Act also provides that for the purpose of that paragraph, a common law marriage is considered to have been dissolved at the beginning of a separation that lasts at least 90 days. In addition, pursuant to paragraph 252(4)(b) of the Act that applies after 1992, references to “marriage” in the Act are to be read as if a conjugal relationship described in paragraph 252(4)(a) of the Act were to be regarded as a marriage.

It is the Department’s view that where the 12 month period referred to in subparagraph 252(4)(a)(i) of the Act straddles the end of 1992, the individuals involved in the common-law relationship will be treated as spouses immediately after the end of the 12-month period, provided that the other requirements of subsection 252(4) of the Act are met.

Where a transfer of property occurs between two common law partners or former common law partners who are considered to be spouses or former spouses pursuant to the above comments in respect of subsection 252(4) of the Act, the tax-deferred rollover provisions of subsection 73(1) of the Act will be applicable assuming the other requirements of that provision are satisfied and that the transferor does not elect in his return of income for the year in which the property was transferred not to have the provisions of subsection 73(1) of the Act apply.

If you require further assistance, we would be pleased to provide our views.

For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.

Jim Wilson
Section Chief
Business, Property & Employment Section II
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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