30 November 1996 Ruling 9723453 - EXCHANGE OF PROPERTY

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:

Does the exchange of land qualify as a replacement property?

Position:

Yes, provided the T/P makes an election under subsection 44(1).

Reasons:

The Company's Land is a former business property and Z's Land qualifies as a replacement property.

XXXXXXXXXX							972345
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

This is in reply to your letter dated XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-noted taxpayer.

To the best of your knowledge, and that of the taxpayers involved, none of the issues contained herein is being considered by a tax services office or a taxation centre in connection with any tax return already filed and none of the issues is under objection or appeal.

Definitions

In this letter, the following terms have the meanings specified:

(a)unless otherwise indicated, all references to statute are to the Income Tax Act (the "Act");

(b)"adjusted cost base" has the meaning assigned by section 54 of the Act;

(c)"former business property" has the meaning assigned by subsection 248(1) of the Act;

(d)"public corporation" and "taxable Canadian corporation" have the meanings assigned by subsection 89(1) of the Act;

(e)"the Company" is XXXXXXXXXX;

(f)"XCO" is XXXXXXXXXX;

(g)"Z" is XXXXXXXXXX;

Facts

The Company is a taxable Canadian corporation controlled by XCO through its wholly-owned subsidiaries. XCO is a public corporation. The Company was incorporated under the laws of the Province of XXXXXXXXXX.

XXXXXXXXXX

XXXXXXXXXX

A portion of the assets owned by the Company includes

XXXXXXXXXX

This land of the Company will hereinafter be referred to as the "Company's Land".

The Company's Land totals XXXXXXXXXX square miles in area

XXXXXXXXXX

XXXXXXXXXX

Z owns assets which include land consisting of

XXXXXXXXXX

This land of Z will hereinafter be referred to as "Z's Land". Z's Land is comprised of XXXXXXXXXX square miles which is currently being used to

XXXXXXXXXX

Z has designated Z's Land for the purpose of exchanging Z's Land for the Company's Land.

On XXXXXXXXXX, the Company and Z entered into an Agreement in Principle (the "Agreement") to exchange the Company's Land and Z's Land on the basis that each is approximately equal in area XXXXXXXXXX and approximately equal in value.

XXXXXXXXXX

Proposed Transactions

The Company's Land will be exchanged for Z's Land and Z's Land will become XXXXXXXXXX lands of the Company.

XXXXXXXXXX

In the estimate of the Company, the fair market value of the Company's Land is and will be equal to the fair market value of Z's Land at the time of the exchange.

Purpose of the Proposed Transactions

The proposed transactions are being undertaken or arranged primarily to facilitate Z

XXXXXXXXXX

The purpose of the proposed transactions is also to compensate the Company for relinquishing the Company's Land.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions and provided that the underlying agreements are consistent with the above, our rulings are as follows:

A.The Company's Land will constitute "former business property" as defined in subsection 248(1) of the Act.

B.Z's Land will constitute "replacement property" as this term is used in subsection 44(5) of the Act.

C.Provided that the Company makes an election pursuant to subsection 44(1) of the Act, the gain to the Company from the disposition of the Company's Land will be determined under the provisions of paragraph 44(1)(e) of the Act and the cost to the Company of the acquired Z's Land will be determined under the provisions of paragraph 44(1)(f) of the Act.

D.Expenses incurred by the Company with respect to obtaining the advance income tax rulings described in this letter will be deductible in accordance with paragraph 20(1)(cc) of the Act.

E.As a result of the proposed transactions, in and by themselves, subsection 245(2) of the Act will not be applied to redetermine the tax consequences confirmed in the rulings given.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996, and are binding provided that the proposed transactions are completed by XXXXXXXXXX.

The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.

Comments

Nothing in this ruling should be construed as implying that Revenue Canada has agreed to or reviewed:

(a) the determination of the fair market value or adjusted cost base of any particular asset referred to herein;

		or

(b) any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch