November 30, 2010
XXXXXXXXXX Tax Services Office HEADQUARTERS Income Tax Rulings Attention : XXXXXXXXXX Directorate XXXXXXXXXX Tim Fitzgerald, CGA
2010-038718
XXXXXXXXXX - Beneficial Ownership of Property
Further to our telephone conversation [Fitzgerald/XXXXXXXXXX ] of November 26, 2010, we enclose for your action and resolution the correspondence we received from XXXXXXXXXX , concerning a house in XXXXXXXXXX , to which she and her recently deceased sister, XXXXXXXXXX hold legal title as tenants in common.
XXXXXXXXXX mentioned in her letter that in XXXXXXXXXX she co-signed a mortgage on the property because at the time, her sister did not qualify for a mortgage on her own. However, XXXXXXXXXX contends that the intention has always been that the property be beneficially owned by XXXXXXXXXX and that this was the actual arrangement up until the recent death of XXXXXXXXXX . XXXXXXXXXX further contends that she has never lived at the home, and has never contributed anything towards its purchase, maintenance, property taxes, insurance or any other expense related to the home.
XXXXXXXXXX has her own home in XXXXXXXXXX .
The XXXXXXXXXX property will be sold in the near future and the net proceeds from the sale will be paid to her niece and nephew (XXXXXXXXXX 's surviving adult children). XXXXXXXXXX would like the CRA to confirm that she will not be subject to capital gains tax when the XXXXXXXXXX property is sold.
As we discussed, we are not in a position to provide an advanced income tax ruling in XXXXXXXXXX 's situation. Whether the deceased, XXXXXXXXXX , was the beneficial owner of the property is a question of fact. Pursuant to subsection 70(5) of the Income Tax Act, there is generally a deemed disposition of property at fair market value immediately before the death of the taxpayer. The manner in which the deceased's disposition of the XXXXXXXXXX property is handled in XXXXXXXXXX 's terminal return is a major factor to consider in determining the tax consequences, if any, for XXXXXXXXXX when the property is sold.
As agreed, the XXXXXXXXXX TSO is in the best position to examine all the relevant facts, circumstances, and documentation surrounding the XXXXXXXXXX property and its use, and to review and consider XXXXXXXXXX 's final income tax return as it relates to her deemed disposition of the property upon her death. XXXXXXXXXX has been advised that her letter has been transferred to the XXXXXXXXXX TSO for resolution and that she should expect to be contacted by your office regarding her question.
Your co-operation is appreciated.
Sandy Parnanzone
Manager
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch