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 transfer of title of wholly owned property to joint ownership constitutes a disposition when there is no change in beneficial ownership.
Position: No disposition.
Reasons: Paragraph (e) of the definition of the term "disposition" in subsection 54(1) of the Act makes it clear that a disposition will not occur as a result of any transfer of property by virtue of which there is a change in legal ownership without any change in beneficial ownership. It is not clear if in such a situation, probate fees upon the death of one of the joint owners would be eliminated.
XXXXXXXXXX 992688
Wm. P. Guglich
Attention: XXXXXXXXXX
November 18, 1999
Dear Sirs:
Re: Joint Ownership and Beneficial Ownership
This is in reply to your letter of October 1, 1999, requesting our views regarding the definition of "disposition" in section 54 of the Income Tax Act (the "Act"), as it pertains to the following hypotethical situations:
A widow registers her son as joint owner of her home in order to avoid probate fees upon her death. Specifically you described the following two scenarios:
A statutory declaration is registered along with the transfer of title to joint tenancy indicating that her son only has a registered and not a beneficial title in the home.
Only the transfer of title to joint tenancy is registered (and not a statutory declaration regarding beneficial ownership).
Your Views
In the first scenario, it is your understanding that there would be no change in the beneficial ownership and pursuant to the definition of disposition in section 54 of the Act, the transfer of title to joint ownership would not be considered a disposition for tax purposes.
In the second scenario, based on your review of the comments regarding beneficial ownership in Interpretation Bulletin It-437R, you believe that there would be a transfer of beneficial ownership because the mother would legally require the son's permission to mortgage the property to sell the property etc. Therefore, you believe that such a transaction would trigger a disposition for tax purposes at the time the son became joint owner of the home.
Paragraph (e) of the definition of the term "disposition" in subsection 54 of the Act makes it clear that, for purposes of subdivision c of Division B of Part I of the Act, a disposition will not occur as a result of any transfer of property by virtue of which there is a change in legal ownership of the property without any change in the beneficial ownership thereof. In each particular case, it is a question of fact whether there has been a change in the beneficial ownership. This determination must be made on the basis of the relevant law relating to property ownership. A statutory declaration or written agreement or the lack of such would not, in and by itself, be conclusive evidence as to whether beneficial ownership has changed. Paragraphs 2 to 5 of Interpretation Bulletin IT-437R discuss the concepts of "beneficial ownership" and "legal ownership". However, as stated in paragraph 4, these comments are subject to any determination under the law regarding beneficial ownership.
In our view, if in fact beneficial ownership has not changed, no disposition for tax purposes will have occurred. However, we would caution you, that in such a situation, a true joint tenancy arrangement does not exist and, in our view, the objective of reducing probate fees is not achieved.
We trust our comments will be of assistance.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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