7 December 1989 Income Tax Severed Letter ACC8831 F - Partition of Real Property by Tenants-in-Common

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.

Subject:  Partition of Real Property by tenants-in-common

Sections of the Act

Paragraph 54(c), subsections 39(1) and 9(1)

Type of Referral

Advance income tax ruling request made by 19(1) on behalf of a number of corporate taxpayers.

Facts

24(1)

Issue

When a partition of property occurs, the issue is whether taxpayers have a disposition of property within the meaning of paragraph 54(c) of the Income Tax Act.

Discussion

The Department's position, until recently (see comments below concerning property situated in Quebec), was set out in reply to question 54 of the 1981 Annual Tax Conference of the Canadian Tax Foundation.  This position is set out below:

     The question of whether a partition by tenants-in-common of their undivided interests in property constitutes a disposition under paragraph 54(c) is under review.  Our present position, however, is as follows:

a)     Where on property is involved:

i)     We will rule favourably in all cases where unimproved land only is involved. (See TR-13).

ii)     We will rule favourably in cases where parcels of land or subdivided lots are involved if they are contiguous and homogeneous and were acquired at the same time under one title. (See TR-76)

iii)     We will refuse to rule in all other cases.

b)     Where separate properties are involved:

i)     We will rule negatively where the properties are in any of the common law provinces.

ii)     Because of the operation of the Civil Code in the province of Quebec our position is in doubt; consequently, we will refuse to rule where the properties involved are in that province.

     In the above guidelines, properties that were acquired under separate titles, either at the same time or at different times, and properties not contiguous are separate properties.  "Unimproved land" means raw land that has not been improved by the construction of services like sewer, water mains, or sidewalks.  Subdividing by itself is not considered to be an improvement.

21(1)(b)

However, in relation to above position, a submission was made to you on July 28, 1989, (copy enclosed).

24(1)

24(1)

23

Additional Information

21(1)(b)

Recommendation

23 21(1)(a)

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch