Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Taxpayer sold principal residence and "hydro right of way property" to Couple A with agreement that "hydro right of way property" would be subdivided from principal residence and sold back to taxpayer for $1. This was not done. Bank was about to foreclose on property so Couple A sold it to some friends, Couple B. Couple B has agreed to honour original agreement and sell "hydro right of way property" back to taxpayer for $1.
Would the sale from Couple B to taxpayer result in a taxable capital gain?
Position TAKEN:
General comments provided.
Reasons:
Insufficient information provided to make a determination. From the information provided, there may also be several legal issues surrounding the transaction, which would first need to be resolved before tax treatment could be determined.
XXXXXXXXXX 2000-005832
T. Young, CA
February 6, 2001
Dear XXXXXXXXXX:
Re: Right of Way
This is in reply to your letter of November 24, 2000 to this directorate and to the XXXXXXXXXX Tax Services Office, requesting our opinion on a proposed sale involving a right of way.
In your letter, you stated that you and your wife sold a piece of property, which included your principal residence and "hydro right of way property" of approximately 2.75 acres of land, to another couple ("Couple A"). You indicate that, as part of the contract of sale, the right of way property was to be sold back to the vendor for one dollar once the right of way property was subdivided from the rest of the property. The subdivision and sale of the right of way property did not take place.
The original combined property was then sold to Couple B, friends of Couple A, who are renting the property back to Couple A. Couple B has agreed to sell the right of way property back to you and your wife for one dollar pursuant to the original agreement providing that the sale does not result in a taxable capital gain to Couple B. You were told that Couple B had previously wanted to give some property to their children, but did not do so because they were told that it would result in a taxable capital gain.
You have asked us to confirm that there will be no capital gain on the sale of the right of way property from Couple B to you and your wife.
Written confirmation of the tax implications inherent in particular transactions is given by this directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R4 (enclosed), dated January 29, 2001. Moreover, your situation appears to involve a number of legal issues with respect to the sale of the property, which must first be resolved before establishing the tax consequences. For instance, it is unclear from the information provided whether the above transactions involve the intended sale of property on which XXXXXXXXXX Hydro has a right of way, or a sale of a right of way on property owned by XXXXXXXXXX Hydro. The sale of a right of way involves a number of legal issues and would likely require the involvement of the grantor of the right. There may also be issues concerning ownership (legal and/or beneficial ownership) of the "hydro right of way property" as a result of the conditions in the purchase and sale agreement between you and Couple A.
In light of the complexity of the legal and tax issues involved in the above situation, you should consider contacting a tax and/or a legal advisor. However, we have enclosed the following interpretation bulletins, which may be of assistance to you:
- IT-419R - Meaning of Arm's Length
- IT-405 - Inadequate Considerations - Acquisitions and Dispositions
- IT-264R - Part Dispositions.
We regret that we cannot be of further assistance.
Yours truly,
M. Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2001
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2001
Email this Content