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: Whether a change in legal title on the property that is owned by a parent, but for which the taxpayer has legal title, would result in a capital gain when the taxpayer's name is removed from legal title.
Position: In and of itself, a change in legal title would not cause a disposition to occur, and a capital gain would not be triggered.
Reasons: The definition of a disposition in ss.248(1), excludes any transfer of the property, where there is no change in beneficial ownership.
XXXXXXXXXX
2010-038322
J. Nichols
October 28, 2010
Dear XXXXXXXXXX :
Re: Beneficial Ownership - Change of title on property
I am writing in reply to your letter dated September 30, 2010, requesting our assistance in determining whether a change in legal title on the property that is owned by your mother, but for which you have legal title, would result in a capital gain when your name is removed from legal title. In 1996, your mother had the opportunity to purchase the matrimonial home under a separation agreement. In order for your mother to complete the sale, you agreed to be a guarantor on title. Your mother has since paid off the mortgage and would like to put her estate in order by removing your name from legal title of the property.
Our Comments
Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed, and are the subject matter of an advance income tax ruling, submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Ruling, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office ("TSO"), a list of which is available on the "Contact Us" page of the CRA website. We are, however, prepared to provide the following general comments.
Subsection 248(1) of the Income Tax Act (the "Act"), provides a definition of "disposition" for income tax purposes. The definition describes various types of dispositions, however, specifically excludes therefrom "any transfer of the property as a consequence of which there is no change in the beneficial ownership of the property". As such, if the facts show that a taxpayer is not the beneficial owner, then a change of title, in and of itself, would not cause a disposition to occur, and a capital gain would not be triggered.
Interpretation Bulletin IT-437R, Ownership of Property (Principle Residence), sets out the guidelines for how to determine when there is beneficial ownership or legal ownership. As noted in paragraph 4, "In determining whether a person has beneficial ownership, one should consider such factors as the right to possession, the right to collect rents, the right to call for the mortgaging of the property, the right to transfer title by sale or by will, the obligation to repair, the obligation to pay property taxes and other relevant rights and obligations. Not all of these incidents of ownership need occur concurrently before it is concluded that the person has beneficial ownership of the property, which is a question of fact in each particular case." This publication is available on our website at http://www.cra-arc.gc.ca/E/pub/tp/it437r/README.html.
As discussed above, the determination of whether a person has beneficial ownership of a property is a question of fact that can only be determined after a review of all the relevant documents and the circumstances applicable to a particular situation. As the subject matter of your inquiry involves questions of facts, you may wish to contact the local TSO for assistance.
We trust that these comments will be of assistance.
Yours truly,
Randy Hewlett
Manager
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch
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