920440
24(1) L. Holloway
(613) 957-2104
Attention: 19(1)
April 8, 1992
Dear Sirs:
Re: Technical Interpretation - Clause 149(1)(o.2)(ii)(A)
This is in reply to your letter dated February 10,1992 requesting a technical interpretation of clause 149(1)(o.2)(ii)(A) of the Income Tax Act (the "Act"). In particular you enquired whether a pension fund real estate corporation might lose its tax exempt status if it acquired an undivided one-half interest in a parcel of land, which was to be improved and leased to third parties, where the other co-owner did not qualify as tax-exempt under 149(1)(o.2)(ii)(A) of the Act.
Although you have asked for a technical interpretation, the situation presented appears to be an actual fact situation. Should this situation involve a proposed transaction, you may wish to submit all relevant facts and proposed transactions for a binding advance income tax ruling. However, should this situation involve actual taxpayers and completed transactions you may wish to submit all relevant facts and documentation (including company names and identification numbers) to the appropriate District Office for their comments.
We are however prepared to provide some general comments.
Our Comments
Ownership of an undivided interest in a property would give each co-
tenant rights in respect of the entire property area. Neither party would be able to point to a particular part which represents his share of all the area. Should a corporation that qualifies as tax exempt under paragraph 149(1)(o.2) acquire for the purpose of "maintaining, improving, leasing, or managing" an undivided interest in a parcel of land, with the other co-owner not being exempt under 149(1)(o.2), the corporation would lose its tax-exempt status. The pension fund real estate corporation in such a case, would not be carrying on the activites permitted by 149(1)(o.2)(ii)(A) in respect of property that it owns or that is owned by another pension fund real-estate corporation or a registered pension plan as required by the Act.
We trust these comments will be of assistance to you.
Yours truly,
E. Wheelerfor DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch