12 October 1995 External T.I. 9512485 - PARTITION OF ACCOUNTS RECEIVABLES & OTHER FUNGIBLES.

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:

APPLICATION OF 248(20) & 248(21) WHERE THE SUBJECT PROPERTY IS ACCOUNTS RECEIVABLES INVENTORY AND OTHER LIKE PROPERTY COMPRISED OF NUMEROUS INDIVIDUAL PROPERTIES?

Position TAKEN:

1. SUBSECTION 248(21) APPLIES ONLY TO PROPERTY LISTED IN PARAGRAPH (c).

2. EACH ACCOUNT RECEIVABLE AND EACH PIECE OF EQUIPMENT WILL BE CONSIDERED A PROPERTY. PARAGRAPH 248(20)(e) PROVIDES THAT PARAGRAPHS 248(20(a) TO (d) DO NOT APPLY TO FUNGIBLE TANGIBLE PROPERTY DESCRIBED IN INVENTORY.

Reasons FOR POSITION TAKEN:

1.THE PREAMBLE IN SUBSECTION 248(21) MUST BE INTERPRETED IN LIGHT OF THE PRESUMPTION MADE IN PARAGRAPH (c).

2.THE PREAMBLE IN SUBSECTION 248(20) REFERS TO "a property" WHICH IN OUR VIEW MEANS A SINGULAR PROPERTY AND NOT MULTIPLE PROPERTIES. THE ONLY EXCEPTION IS PROVIDED IN THE INTERPRETIVE PROVISION DESCRIBED IN PARAGRAPH 248(21)(c).

	   	951248
XXXXXXXXXX	Wm. P. Guglich

Attention: XXXXXXXXXX

October 12, 1995

Dear Sirs:

Re: Partition of Property

This is in reply to your letter of April 21, 1995 concerning the application of subsections 248(20) and 248(21) where the subject property is accounts receivable, inventory and the like where the particular type of property may be comprised of numerous individual properties. We apologize for the delay in responding.

Our Comments

Subsection 248(20) of the Act clarifies the tax consequences of a partition of a property previously owned by two or more persons.

Subsection 248(21) of the Act provides an exception to the general rule in subsection 248(20). The Department is of the view that subsection 248(21) of the Act usually applies only to property listed in paragraph (c), i.e., to buildings and parcels of land. The preamble to subsection 248(21) of the Act must be interpreted in light of the presumption made in paragraph (c) of the same subsection.

The preamble in subsection 248(20) of the Act refers to a property. In our view, the term a property means a singular property and does not mean multiple properties. The only exception is the interpretive provision described in paragraph 248(21)(c) of the Act for purposes of subsection 248(21). If the term a property was to be interpreted to mean multiple properties there would be no need for the interpretive provision in paragraph 248(21)(c) of the Act.

As regards account receivables and equipment, each account and each piece of equipment would in our view ordinarily be considered a property. In the case of fungible capital property (eg., grain, oil, etc.,) and fungible intangible property described in inventory the matter of what would constitute a property would be determined on the basis of the facts in each particular case. Paragraph 248(20)(e) of the Act provides that paragraphs 248(20)(a) to (d) do not apply in respect of fungible tangible property which is described in inventory.

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch