| 24(1) | 5-902763 |
| Bill Guglich | |
| (613) 957-2102 |
19(1)
November 16, 1990
Dear Sirs:
This is in reply to your letter of October 2, 1990, and further to our telephone conversation of November 15, 1990, 19(1) Guglich, concerning the revised definition in subsection 248(1) of the Income Tax Act of the term "former business property" as contained in the July 1990, "Draft Amendments to the Income Tax Act and Related Statutes" (the July 1990, Draft Amendments).
You request our views as to whether property, which prior to the sale had been rented to both arms-length tenants and related non-arms length parties, could be considered former business property to the extent of the percentage occupancy by the related parties carrying on a business.
In our view the use of the words "primarily" and "principally" in the July 1990, Draft Amendments requires that the property as a whole must qualify rather than a portion or percentage of the property. Thus in your example, in order to qualify, the property as a whole must be used by the taxpayer or the person related to the taxpayer primarily for the purpose of gaining or producing income from a business. A portion of the property could not qualify as a former business property. The Department's position regarding the meaning of the words "primarily" and "principally" are contained in Interpretation Bulletin IT-491. As indicated in paragraph 4 of IT-491 although the actual or physical portion of the property used in the two income-earning processes is one of the prime factors to consider it may not in and by itself be conclusive in every case.
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch