24 September 2004 GST/HST Ruling 52848 - Eligibility to apply for a GST/HST employee rebate

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'agence.

Dear XXXXX:

Thank you for your letter and attachments, sent to our XXXXX office XXXXX concerning the application of the Goods and Services Tax ("GST")/Harmonized Sales Tax ("HST") to the sale of a lease interest held on a lot XXXXX.

Statement of Facts

The facts that follow are based on your letter, and additional information and documentation subsequently provided by XXXXX.

1. XXXXX Her Majesty in Right of Canada, as represented by the Minister of Indian Affairs and Northern Development leased land to XXXXX (the "Sublessor") for a term of XXXXX years. The Land in question is described as XXXXX (the "Lands").

2. The Sublessor is a bare trustee holding the Land for the beneficial ownership of XXXXX and is developing a portion of the Land into a residential subdivision.

3. XXXXX subleased from the Sublessor a single building lot located within the subdivision. The building lot is legally described XXXXX (the "Lot").

4. XXXXX made a single, lump-sum payment of $XXXXX for the full term of the sublease.

5. XXXXX is a real estate development company specializing in the construction of residential complexes.

6. The normal business practice of XXXXX is to acquire land, then presell a residential complex to be constructed upon it. This practice ensures that XXXXX maintains its financial stability by guaranteeing that the cost of constructing a complex is promptly recovered.

7. In keeping with its normal business practices, XXXXX acquired the leasehold interest in the Lot for the purpose of constructing a residential complex in its commercial activities.

8. XXXXX the Sublease stipulates that XXXXX covenants with the Sublessor that it will use the Lot for residential purposes.

9. Citing competing commitments and unable to presell a residential complex on the Lot, XXXXX decided not to build the complex and to dispose of its leasehold interest in the Lot.

10. XXXXX entered into an agreement to assign its leasehold interest in the Lot to XXXXX for consideration equal to $XXXXX. At that time, the XXXXX made an initial deposit of $XXXXX and paid the balance on the adjustment date, XXXXX.

11. In completing the transaction contemplated under the agreement with the XXXXX fully divested itself of all its rights and obligations in respect of the Lot. In particular, XXXXX retains no reversionary interest in the Lot.

12. Prior to the present assignment, XXXXX had never acquired and sold an interest in a parcel of vacant land without first constructing a residential complex on the parcel.

13. The XXXXX will build their personal residence on the Lot without the participation of XXXXX. XXXXX are not Status Indians.

Ruling Requested

The assignment of the leasehold interest in the Lot to the XXXXX is an exempt supply for GST/HST purposes.

Ruling Given

The assignment of the leasehold interest in the Lot to the XXXXX is an exempt supply for GST/HST purposes.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transaction(s) for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-8816.

Yours truly,

Paul Hawtin
Real Property Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2004/09/16 — RITS 53159 — Prepaid Funeral Arrangement