20 December 2010 External T.I. 2010-0384531E5 - Sale of Taxable Canadian Property by Non-Residents

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.

Principal Issues: 1. Whether the interpretation stated in document 932632 is still current.
2. Whether s. 164(6) applies where shares of a private corporation do not derive most of their value from real Canadian property.

Position: 1. Yes.
2. No.

Reasons: 1. This has been the CRA's long-standing position.
2. This has been the CRA's long-standing position.

XXXXXXXXXX
						2010-038453
						Lindsay Frank

Attention: XXXXXXXXXX

December 20, 2010

Dear XXXXXXXXXX :

Re: Sale of Taxable Canadian Property by Non-Residents

This is in reply to your email of October 25, 2010, in which you sought a technical interpretation of the interplay between taxable Canadian property ("TCP") and the operation of subsection 164(6) of the Income Tax Act (the "Act") as it applies to two separate issues.

With respect to the first issue, you were seeking confirmation whether the technical interpretation provided in document 932632, which states that subsection 164(6) of the Act applies to a non-resident estate, is still current. Under subsection 164(6), the legal representative of a deceased's estate may apply the estate's capital losses on the deceased's final return, provided that such losses were realised in the estate's first taxation year. As long as these losses arose from the disposition of TCP, the technical interpretation applies equally to non-resident estates.

The second issue concerns the application of subsection 164(6) to shares of a private corporation, where the shares no longer derive their value from real Canadian property. If the shares are no longer TCP, subsection 164(6) would no longer apply to non-resident estates.

Bill C-9, which received royal assent on July 12, 2010, introduced an amendment to the definition of TCP contained in paragraph 248(1)(d). Effective March 5, 2010, shares of a private corporation other than a mutual fund corporation are defined as TCP if, at any time in the sixty months prior to their disposition, more than fifty per cent of their fair market value was derived from real or immoveable property situated in Canada, Canadian resource property, or timber resource property, and options or interests in respect of the foregoing. Accordingly, the timing of the acquisition or the disposition of the shares is germane as to whether the definition of TCP is relevant.

Please note that if the shares are not TCP to the estate, and therefore ineligible for a loss carry-back, they were, probably, also not TCP in the deceased's final return and therefore not subject to Canadian tax.

Should you have any questions or require additional information, please do not hesitate to contact Lindsay Frank at the number provided above.

Phil Jolie
Director
International & Trusts Division
Income Tax Rulings Directorate