| 24(1) | 901290 |
| R.S. Biscaro | |
| (613) 957-2122 | |
| 19(1) | EACC9660 |
September 12, 1990
Dear Sirs:
This is in reply to your letter of June 13, 1990 in which you requested our views with respect to the application of subsection 164(6) of the Income Tax Act (the Act) to the following hypothetical situations: i) non-resident decedents and their estates where the taxpayer owned taxable Canadian property as capital property; and ii) a non-resident decedent who held capital property in joint tenancy with his spouse.
You have asked a number of questions concerning the first issue. We will answer them in the order in which they were presented.
1. We confirm that absent a restriction in the Act to its application to only Canadian resident decedents and their Canadian resident estates, subsection 164(6) applies to non-resident decedents and their non-resident estates.
2. Given that non-residents must include in their taxable income earned in Canada only taxable capital gains and allowable capital losses from dispositions of property that was taxable Canadian property (subparagraph 115(1)(a)(iii) and paragraph 115(1)(b) of the Act), we agree that the reference to property in paragraphs (a) and (c) of subsection 164(6) of the Act where non-residents are concerned will, as a consequence, be limited to taxable Canadian property.
3. We confirm that paragraph 104(23)(a) of the Act would permit the executors, in the absence of an established practice in Canada, to claim for Canadian income tax purposes any period not exceeding 12 months from the date of death as the taxation year of the estate.
4. With respect to Regulation 1000(2)(b), we confirm that the day the return of income for the first taxation year of the deceased taxpayer's estate is required to be filed under paragraph 150(1)(c) of the Act is the same for any estate whether or not it is a resident of Canada.
In respect of the second issue, you advised that the joint tenants were husband and wife and that the capital property held in joint tenancy was shares of a Canadian corporation which owned Canadian real estate. In this scenario you queried whether the Department was prepared to accept the application of subsection 164(6) on the disposition post-mortem of jointly held property by the surviving tenant of the property on the basis that the survivor is the decedent's legal representative.
In view of the fact that in a joint tenancy arrangement a decedent's interest in the property held passes directly to the surviving tenant and not the estate of the decedent, notwithstanding that the survivor may be the deceased taxpayer's legal representative, it cannot be said for purposes of paragraph 164(6)(a) that on a subsequent disposition by the surviving tenant the taxpayer's legal representative has disposed of capital property of the estate. Accordingly, the Department would not accept the application of subsection 164(6) on the disposition post-mortem of jointly held property by the surviving tenant.
As a result of our telephone conversation concerning the joint tenancy issue, you asked us to consider whether a change from a joint tenancy arrangement to one of tenancy in common would constitute a disposition of property. It is our view that such a change would not constitute a disposition of property for purposes of paragraphs 54(c), 69(1)(b) and 115(1)(a)(iii) of the Act.
We trust that our comments will be of assistance to you.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch