Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: 1. Whether consolidation of parcels of land into one consolidated parcel a disposition?
2. Whether, partition of consolidated parcel jointly owned into 5 parcels owned in severalty, a disposition?
Position: 1. No.
2. No.
Reasons: 1. No change in beneficial ownership.
2. Subsection 248(21).
XXXXXXXXXX
XXXXXXXXXX 973082
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1998
Dear Sirs:
Re: Advance Income Tax Ruling
XXXXXXXXXX (“Individual A”) XXXXXXXXXX
XXXXXXXXXX (“Individual B”) XXXXXXXXXX
XXXXXXXXXX (“Individual C”) XXXXXXXXXX
XXXXXXXXXX (“Individual D”) XXXXXXXXXX
XXXXXXXXXX (“Individual E”) XXXXXXXXXX
This is in reply to your letters of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above referenced taxpayers. We further acknowledge the letter dated XXXXXXXXXX, which provided additional information with respect to the facts and proposed transactions.
We understand that to the best of your knowledge and that of the taxpayers involved, none of the issues involved in the requested rulings is being considered by a Taxation Service Office or a Taxation Centre in connection with a tax return already filed, and none of the issues involved in the requested rulings is the subject of any notice of objection or is under appeal.
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
Facts:
1.
XXXXXXXXXX
Each of the five legal parcels has been owned since XXXXXXXXXX by the five individuals, as tenants in common, as follows:
Individual A XXXXXXXXXX % Individual B XXXXXXXXXX % Individual C XXXXXXXXXX % Individual D XXXXXXXXXX % Individual E XXXXXXXXXX %
Proposed Transactions
2. The five individuals will re-subdivide the XXXXXXXXXX acre property into five new parcels, and each new parcel will be 100% owned by one of these individuals.
3. A Consolidation Plan proposes to consolidate the five existing titles in the separate parcels into one title. This plan, once it is approved by the Municipality of XXXXXXXXXX, will be filed with the Land Title Office. Upon completion of the registration process, the new consolidated parcel comprising the five existing parcels less a small road dedication to the Municipality of XXXXXXXXXX, will be assigned a new lot number and plan number.
4. Following registration of the Plan of Consolidation of the property, a new Subdivision Plan will be filed, which will subdivide the consolidated parcel into five new parcels. Each of the five new parcels will be owned wholly and individually by one of the five previous joint owners. The Land Title Office will, upon completion of registration of the subdivision plan, assign each new title a new legal description. The fair market value of the respective five new parcels will be XXXXXXXXXX% of the total fair market value of the consolidated property.
5. After completion of the process, there will be five titles in the name of each individual owner, respecting the five new parcels. Individual A, Individual B and Individual C will each own individually a parcel having a fair market value of XXXXXXXXXX% of the fair market value of the consolidated property. Individual D and Individual E will each own individually a parcel having a fair market value of XXXXXXXXXX% of the fair market value of the consolidated property. There will be no cash payments among the five individuals named herein and no debt assumptions or other value equalization mechanisms other then the proposed transactions described herein.
Purpose of the Proposed Transactions
6. The taxpayers wish to own their interest in the property individually rather then as tenants in common.
Rulings Requested and Given
Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions, and purpose of the proposed transactions and provided further that the proposed transactions are carried out as described above, and that there are no other transactions which may be relevant to the rulings requested, we confirm the following:
A. The consolidation of the five original parcels as described in paragraph 3 above, in and by itself, will not be considered a “disposition” of the respective parcels, within the meaning of section 54 of the Income Tax Act (the “Act”).
B. The provisions of subsection 248(21) of the Act will apply to the partition of the consolidated property into five new parcels as described in paragraph 4 above.
C. Subsection 245(2) will not be applied as a result of the proposed transactions, in and of themselves, to re-determine the tax consequences confirmed in the above rulings.
The above rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 issued on December 30, 1996 and are binding on Revenue Canada provided that the proposed transactions are completed before XXXXXXXXXX.
Other Comments
Nothing in this ruling should be construed as implying that Revenue Canada has agreed to or reviewed the determination of the fair market value of the respective parcels of land or the consolidated property.
Yours truly,
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
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