Department's Position #29
Subsection 18(2) of the Income Tax Act (the "Act") limits the deduction of interest and property taxes in respect of the acquisition and holding of land except to the extent that "...gross revenue, if any, from the land for the particular year exceeds the aggregate of all amounts deducted in computing his income from the land for the year...".
1. The word "land" is both singular and plural: does Revenue Canada's definition of land include all such land so as to permit net revenues from all land in aggregate to be used to offset interest and taxes in aggregate?
2. Are the proceeds of sale of; (i) a portion of the original contiguous tract, and (ii) a separate tract of "land" included in "gross revenue, if any, from the land"?
Response
The Department has responded to these questions previously during the 1989 Corporate Management Tax Conference, question 13 at page 8:25 in the report.
1. The revenues that relate to a particular parcel of land may only be included in computing the net income from that parcel of land and not included or applied in the net income of any other parcel of land that the taxpayer may own. To the extent that there is insufficient income from that particular parcel of land that would offset the applicable expenses, the remainder must (subject to the provisions of paragraph 18(2)(f) of the Act) be added to the cost of that parcel of land.
2. The phrase "gross revenue, if any, from the land" found in paragraph 18(2) of the Act does not in our view include revenue from sales of individual parcels severed from a large tract of land. In other words, as stated above the proceeds from the sale of one parcel of land will not be considered to be revenue related to ownership of any other parcel of land.
Canadian Tax FoundationNovember 1991Franklyn S. Gillman9125895Section 31