QUESTION 26
SALE OF PROPERTY - TREATMENT OF DEPOSIT
Where a taxpayer enters into a transaction to sell capital property and receives a deposit, how is that deposit treated for tax purposes if the transaction fails to close?
DEPARTMENT'S POSITION
Where the vendor of the property is not in the business of dealing in the type of property to be sold, the forfeited deposit would ordinarily be a capital gain in the vendor's hands.
Further discussion on this topic can be found in IT-461 dated October 6, 1980, which concerns Forfeited Deposits.
Prepared byR.B. DaySection 23Canadian Tax FoundationNovember 29, 1989