A REIT holds units of a Canadian limited partnership which, in turn, holds inter alia all the shares of a U.S. subsidiary, which does not hold any non-portfolio property. In order for such shares to qualify as “real or immovable property” (for purposes of the REIT tests in s. 122.1) the subsidiary must itself satisfy the four numerical REIT tests in paras. (a) to (d) of the REIT definition.
Would the subsidiary satisfy the para. (a) non-portfolio property test? CRA responded:
The condition set out in paragraph (a) of the definition of REIT requires that at each time in the taxation year the total fair market value at that time of all non-portfolio properties that are qualified REIT properties held by the trust is at least 90% of the total fair market value at that time of all non-portfolio properties held by the trust.
In our view, the fact that a particular entity does not hold any non-portfolio property does not preclude the entity from satisfying the condition set out in paragraph (a) of the REIT definition.