5 November 1998 External T.I. E9822585 - JOINT OWNERSHIP

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 property into joint ownership causes a disposition of the property.

Position: If beneficial ownership has changed then the transfer results in a disposition.

Reasons: In a true joint tenancy arrangement, beneficial ownership has been transferred and the title to the property vests in the transferee immediately, as such a disposition has taken place.

		5-982258
XXXXXXXXXX 	Karen Power, CA
(613) 957-8953
Attention:  XXXXXXXXXX 

November 5, 1998

Dear Sirs:

Re: Transfer of Property into Joint Ownership

We are writing in reply to your letter of June 18, 1998, wherein you requested our views on whether the transfer of a property into joint ownership is a disposition of the property.

You have described situations in which clients hold non-registered mutual funds solely in their own name. You would like to recommend that your clients change the registration of these funds to joint ownership with rights of survivorship (JTWROS) with their spouses. The purpose of this transaction is strictly to avoid probate fees on the client’s death. You have also advised your clients, that the original owner must continue to report all of the income and capital gains/losses resulting from these funds throughout the clients’ lifetime.

Our Comments

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.

It is the Department’s view that the transfer of property solely owned by a taxpayer into a true joint ownership arrangement between the taxpayer and his spouse or child, one in which beneficial ownership has changed, would result in a disposition as title to the property vests in the spouse or child immediately.

In a situation where a taxpayer transfers a property into joint ownership with his spouse, subsection 73(1) of the Act would deem the proceeds of disposition to be equal to 50% of the adjusted cost base of the property. The spouse will be deemed to have acquired the property at that time for an amount equal to 50% of the adjusted cost base. A taxpayer may elect in his tax return for the taxation year in which the property is transferred not to have the provisions of subsection 73(1) apply. In such a situation, the taxpayer will be deemed to have transferred 50% of the property at its fair market value and the spouse will be deemed to have acquired the property at that same fair market value.

Throughout the lifetime of the taxpayer, regardless of legal ownership, subsections 74.1(1) and 74.2(1) will attribute any income, gain or loss from the property to the taxpayer.

The 50% interest in the property retained by the taxpayer in all of the above situations would be subject to the provisions of subsection 70(5) of the Act upon the death of the taxpayer (assuming the property has not otherwise been disposed of before that time).

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