Two co-owners of a triplex (the “Taxpayers”) agree that the first Taxpayer can live in one of the units free of rent and that the other Taxpayer, whose daughter resides in a second unit, would be exclusively allocated for inclusion in that Taxpayer’s return all the revenues generated by that unit. Would this agreement be respected for tax purposes?
The Directorate responded:
[T]o the extent that the Agreement is valid under the Civil Code of Québec, the Canada Revenue Agency should examine the specific provisions of the Agreement to determine the tax consequences applicable to Taxpayers arising from the application of the Agreement. As part of that analysis, we have assumed that none of the Taxpayers would receive any benefit because of the Agreement.