13 June 2000 Internal T.I. 2000-0027577 F - CORRECTION PARTAGE VS SOULTE -- summary under Subparagraph 12(1)(x)(iv)

A rental property partnership between two brothers (A and B) was wound-up pursuant to s. 98(3) so as to convert ownership to a 50-50 co-ownership, then the property was partitioned into two lots. B then determined that the lot he received did not reflect a 50% share and negotiated a compensation payment from A. The settlement included the assumption of a portion of the mortgage which had been assumed by B on the partition and the payment of a lump sum by A to B to compensate for the periodic payments that had been made by B on the assumed portion of the mortgage. The Directorate indicated that the terms of the settlement agreement between A and B indicated that such amount should indeed be treated as reimbursement of such mortgage expenses, rather than as a payment for the error in the partition, which would have been treated as proceeds of disposition.