11 February 1994 Interpretation 11660-1/0703

Various tenants in common entered into a joint venture agreement to build and operate a commercial building on land they held through a nominee company. A manager appointed by the Management Committee has been collecting and accounting for all of the GST on the rents and other income from the building. A participant’s interest in the joint venture will be sold for cash to another participant. CRA stated:

[W]here the operator makes the supply of a participant's interest in the joint venture on behalf of that participant to another participant in the joint venture, and the supply is under the joint venture agreement, the operator would be deemed to be making the supply pursuant to paragraph 273(1)(a) and the supply would be deemed not to be a supply pursuant to paragraph 273(1)(c). … [T]he supply of a participant's joint venture interest in this situation would not be under the joint venture agreement. Therefore, the deeming provisions would not apply to the supply of the joint venture interest and the sale would be taxable.

Various tenants in common entered into a joint venture agreement to build and operate a commercial building on land they held through a nominee company. A manager appointed by the Management Committee has been collecting and accounting for all of the GST on the rents and other income from the building. A participant’s interest in the joint venture will be sold for cash to another participant. CRA stated:

[W]hen a participant in this joint venture sells his/her undivided interest in the joint venture property, and the rights and obligations attached to this interest, the recipient would be considered to have acquired all or substantially all of the assets required to carry on a business.

The vendor and the recipient would, therefore, be able to make an election, pursuant to section 167, to have no tax payable on the supply, unless the recipient is not registered.