2002 Ruling 2002-0143443 - No change in beneficial 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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Whether a transfer of the legal title, without any change in beneficial ownership, constitutes a disposition.

Position: No

Reasons: By virtue of paragraph (e) of the definition of "disposition" in subsection 248(1) of the Income Tax Act, a disposition does not include a transfer of property in which there is a change in the legal ownership without any change in the beneficial ownership.

XXXXXXXXXX                                                  				2002-014344

Attention: XXXXXXXXXX

XXXXXXXXXX, 2002

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling

We are replying to your request for an advance income tax ruling dated XXXXXXXXXX, in which you requested an advance income tax ruling in respect of the income tax consequences arising from the proposed transactions described below. We also acknowledge your correspondence of XXXXXXXXXX. We understand that, to the best of your knowledge, and that of the taxpayers on whose behalf this ruling is requested, none of the issues contained in this advance income tax ruling are:

i) contained in earlier returns of the taxpayers or a related person;

ii) being considered by a tax service office and/or a tax centre in connection with a tax return previously filed by the taxpayers or a related person;

iii) under objection by the taxpayers or related person;

iv) before the courts; or

v) the subject of a ruling previously issued by the Directorate to the taxpayers or a related person.

Facts

1. XXXXXXXXXX ("Mother") owned a parcel of land (the "Property") located at XXXXXXXXXX Mother died on XXXXXXXXXX. Under the terms of her will, a life interest in the Property was left to XXXXXXXXXX ("Father") and upon his death, the residue was to be divided equally between XXXXXXXXXX ("Child1"), XXXXXXXXXX ("Child2"), XXXXXXXXXX ("Child3"), and XXXXXXXXXX ("Child4"). Child2 and Child3 were appointed executors of Mother's will.

2. Father died on XXXXXXXXXX. At that time, Child1 was working and residing in XXXXXXXXXX.

3. Child1 expressed an interest in acquiring sole ownership of the Property. As a result, the Property was appraised and Child1 paid $XXXXXXXXXX to the Mother's estate. The executors distributed the net proceeds received from Child1 equally among the four beneficiaries entitled to a share of the Property.

4. Concerned that the acquisition of real property in Canada might jeopardize his residency status, Child1 asked Child2 to hold legal title to the Property on his behalf. On the advice of legal counsel, a mortgage was registered on the Property to secure Child1's beneficial interest in the Property. Notwithstanding any comments in the mortgage agreement to the contrary, Child1 holds all rights of beneficial ownership with respect to the Property and has the unfettered ability to deal with the Property as he sees fit. Child2's sole function in respect of the Property is to hold the legal title as he had no significant powers or responsibilities for the Property and could take no action without instructions from Child1. Child1 inhabits the Property when he is in Canada.

Proposed Transactions

5. Child2 will transfer the legal title of the Property to Child1.

Purpose of the Proposed Transactions

6. Child1 would like to hold the legal title to the Property in his own name and Child2 would like assurance that he will not be required to include any amount in income as a result of the proposed transaction.

Ruling Given

Provided that the preceding statements are accurate and constitute complete disclosure of all relevant facts, proposed transactions and purpose thereof and the proposed transactions are carried out as herein described, our advance income tax ruling is as follows:

A. The transfer of the Property from Child2 to Child1 will not result in a disposition of the Property within the meaning of subsection 248(1) of the Act.

B. No income, capital gain or loss will be realized by Child2 as a result of the transfer of the legal title of the Property to Child1 as described in paragraph 5 above.

The above ruling is given subject to the general limitations and qualifications set out in Information Circular 70-6R5, Advance Income Tax Rulings, and is binding on the Canada Customs and Revenue Agency provided the proposed transactions are completed within six months of the date of this letter. Nothing in this ruling should be construed as implying that the CCRA has agreed to or reviewed the determination of the fair market value of the Property or the residency status of XXXXXXXXXX at any time. The circumstances under which an individual is considered to be a resident of Canada for purposes of the Act are set out in Interpretation Bulletin IT-221R3, Determination of an Individual's Residence Status.

Yours truly,

XXXXXXXXXX
Manager
Trust Section
International and Trusts Division
Income Tax Rulings Directorate