Personal-Use Property

Cases

Klotz v. The Queen, 2004 DTC 2236, 2004 TCC 147, aff'd 2005 DTC 5279, 2005 FCA 158

Prints which the taxpayer purchased without seeing or taking personal possession of and then immediately donated to a Florida university were found in obiter to constitute personal-use property. The interpretation advanced by the taxpayer - that every property that was not used or held for an income-producing purpose was a personal-use property - was to be preferred. In any event, even if, as contended by the Crown, a property must actually be used or enjoyed by the taxpayer to qualify as a personal-use property, the prints here so qualified because "one way of using an object is to give it away, whether the motive be altruistic, charitable or physical."

See Also

Plamondon v. The Queen, 2011 DTC 1137 [at 746], 2011 TCC 47 (Informal Procedure)

each donated dried insect was separate property

Hogan J found that dried insects donated by the taxpayer to Laval University were individually appraised and did not "form an unbreakable set," and thus were not a set (as per s. 46(3)), so that under s. 46(1), each insect had an adjusted cost base of $1,000. Before so concluding, he disagreed with the expansive interpretation of personal-use property in Klotz, stating (at para. 15):

In English, the ITA uses the word "primarily". The Oxford English Dictionary, third edition, defines "primarily" as follows: "to a great or the greatest degree; for the most part, mainly". Thus, the property must unequivocally be for the use and enjoyment of the taxpayer. If Parliament had wanted there to be only two types of property, it could have defined PUP as all property that is not income property… However, that was not what Parliament did.

Here, the taxpayer "prepared them only for donation. There was no real use" (para. 19) (after citing Glaxo Wellcome as to "use").

Words and Phrases
use primarily

Donato v. The Queen, 2009 DTC 1384 [at 2111], 2009 TCC 590

Cartoons that the taxpayer donated to Brock University were not personal-use property given that the drawings had been created by him in the course of his work as a free-lance cartoonist. However, if the drawings instead had been donated by his wife, they would have qualified as personal personal-use property.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) reasonable not to foresee rectification order 92

Administrative Policy

7 October 2016 APFF Financial Strategies and Financial Instruments Roundtable Q. 2, 2016-0651711C6 F - RRIF, Transfer of designated benefit

land underlying duplex used 40% personally is not personal-use property

If a duplex was a single property, the election of February 22, 1994 respecting the elimination of the $100,000 capital gains exemption would be engaged by a disposition of the unit occupied by the owner, thereby forcing the making of a decision as to whether to designate the residence as a principal residence, to the detriment of such a designation for the individual’s chalet. Where an individual owning a triplex occupies 40% of it, can the related land give rise to an allowable capital loss? How does the February 22, 1994 election apply in such a case? CRA responded:

[A] building and the land on which the building is located are a single property under the private law applicable in Québec.

[Reg.] 1102(2)…applies only for the purposes of calculating capital cost allowance, and recapture or terminal loss.

Consequently, where a taxpayer realizes a capital loss on the disposition of a property comprising a building and the land upon which it is situated, subparagraph 40(2)(g)(iii) effectively denies the loss only if the property is a PUP under section 54. …

Regarding the February 22, 1994 election, the CRA still considers as valid the form, Election to Report a Capital Gain on Property Owned at the End February 22, 1994, filed by a taxpayer in accordance with the instructions and information available at that time.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 1102 - Regulation 1102(2) Reg. 1102(2) deems building to be separate from land and does not bifurcate the land 161
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(iii) capital loss recognition on land underlying duplex used 40% personally 71
Tax Topics - Income Tax Act - Section 146.3 - Subsection 146.3(6.11) computation of eligible amount following year of death 285

7 November 2014 External T.I. 2014-0536261E5 F - Bien à usage personnel

property rented to brother at FMV rent could be PUP

An individual lease a foreign real estate property to the individual's brother, to live there with his family, for a fair market value rent. Is the property a personal-use property? CRA responded:

The fact that a property is used to produce an income does not prevent it from qualifying as property for personal use; it all depends on the primary use of the property. The term "primarily" is not defined in the Act. …Plamondon…defined… "primarily" as "to a great or the greatest degree; for the most part, mainly" and "principal" as "the most important, the first among many."

…If the examination of the facts of the case reveals that the property is used primarily for the personal use and enjoyment of the taxpayer's brother, the property could qualify as personal-use property.

2013 Ruling 2012-0443081R3 - Distribution of pre-72 Capital Surplus on Hand

Are non-interest bearing loans, for example to a non-resident corporation or to a non-resident child of a parent, "personal-use property" ("PUP") – so that for example they would not be "specified foreign property" in s. 233.3(1)? After citing Plamondon v. The Queen, 2011 TCC 47, and in finding that such debt generally would not be PUP, CRA stated:

[T]o qualify as PUP under paragraph (a) the property must be owned and actually used primarily for the personal use or enjoyment of the taxpayer or a related person. … A debt would normally only qualify as PUP under paragraph (b), which requires the debt result from the disposition of a property which itself was PUP.

12 February 2013 Internal T.I. 2012-0437211I7 F - NRT rules and subsection 164(6)

personal residence of deceased potentially would not be personal-use property to estate

The estate of an individual was deemed to be resident in Canada. At the time of his death, the deceased held his Canadian principal residence. A capital loss also was realized on the disposition by the estate of the residence. The executor had elected under s. 164(6)(c) to carry back this and other capital losses to the terminal return of the deceased.

The Directorate referred to E2008-0280751E5 and E2002-0148955, where CRA had stated that a capital loss from the disposition of a personal residence of the deceased was eligible under s. 164(6) if it was not personal use property to any beneficiary or a related person.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 164 - Subsection 164(6) s. 94 deemed resident trust could carry back under s. 164(6) re capital loss on non-TCP shares 306
Tax Topics - Income Tax Act - Section 94 - Subsection 94(3) - Paragraph 94(3)(a) estate of resident deceased with one resident beneficiary was subject to s. 94(3) 301

3 June 2011 STEPs Roundtable Q. 10, 2011-0401871C6 F - Personal use property of an estate

a cottage owned by an estate which has not been used by any of the beneficiaries or related individuals would not be personal-use property, so that a capital loss realized by the estate on its sale would be deductible against capital gains of the estate.