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.
Dear Sirs:
RE: Transfer of property pursuant to subsection 85(1)of the Income Tax Act
This is in reply to your letter of July 31, 1980 requesting our opinion as to whether a leasehold interest in land is real property.
You have outlined a situation where a taxpayer would transfer a 99-year leasehold interest in land to a Canadian corporation in exchange for capital stock pursuant to the provisions of subsection 85(1) of the Income Tax Act (the Act). Your particular concern is that if the leasehold is considered to be inventory and is also considered to be real property that a rollover under subsection 85(1) of the Act could not be carried out.
Technically, it would appear that the leasehold interest in the land may not be real property and, therefore, could be disposed of pursuant to the provisions of subsection 85(1) of the Act. However, if, in fact, the leasehold interest is inventory, it may be that the policy intent of subsection 85(1) would not be respected upon such a disposition. In such a situation the Department would look closely at the facts to determine if the transaction could lead to unacceptable tax results.
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© Her Majesty the Queen in Right of Canada, 1980
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© Sa Majesté la Reine du Chef du Canada, 1980
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