| 24(1) | 5-9836 |
| M.P. Sarazin | |
| (613) 957-2125 |
Attention: 19(1)
August 14, 1990
Dear Sirs:
This is in reply to your letter of March 22, 1990 in which you requested our interpretation regarding the application of subsection 110.6(5) of the Income Tax Act (the "Act") to the situation where a non-resident individual proposes to dispose of taxable Canadian property within the meaning assigned under subsection 248(1) of the Act and also proposes to become a Canadian resident in that same year. We apologize for the delay in responding to your request.
You feel that the Act is not clear as to whether or not a part-year resident would be entitled to use the deduction under subsection 110.6(3) of the Act in respect of a disposition occurring while the individual is a non-resident. If a part-year resident satisfies either of the conditions set forth in paragraphs 110.6(5)(a) or 110(6)(b) of the Act then for the purposes of subsections 110.6(2), 110.6(2.2) and 110.6(3) he shall be deemed to have been resident in Canada throughout the particular year. You wish to determine whether or not the individual is eligible to claim a deduction in computing his taxable income pursuant to subsection 110.6(3) of the Act if the property is disposed of prior to his commencing to reside in Canada, or only if the disposition takes place after he has become a Canadian resident.
It is our opinion that a deduction under subsection 110.6(3) of the Act will only be available where an individual disposes of taxable Canadian property during the period of time when he or she is resident in Canada. Our position is based upon subsection 110.6(13) of the Act which states "the amount determined under paragraph 110.6(3) in respect of an individual for a period throughout which he was not resident in Canada is nil". You may wish to refer to page 80 of the Technical Notes to a Bill Amending the Income Tax Act and Related Statutes issued by The Honourable Michael Wilson, Minister of Finance, November 1985 where it states:
"New subsection 110.6(13) of the Act provides that for the purposes of the capital gains exemption no amount is computed under paragraph (3)(b) for a period throughout which the individual was not resident in Canada. Therefore, any such gains or losses realized while an individual was not resident in Canada do not affect the computation of his entitlement to the capital gains exemption. This amendment is applicable to the 1985 and subsequent taxation years."
The foregoing comments represent our general views with respect to the subject matter of your letter. The foregoing opinions are not rulings and, in accordance with the guidelines set out in Information Circular 70-6R dated December 18, 1978, are not binding on the Department.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch