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.
Principal Issues: whether transfer of land by a developer to a municipality in order that the former may obtain a development permit must be recognized at that time as a barter transaction
Position: not usually
Reasons: caselaw
2003-004357
XXXXXXXXXX Denise Dalphy, LL.B.
(613) 941-1722
April 29, 2004
Dear XXXXXXXXXX:
Re: Transfer of Real Property to a Municipality
We are writing in reply to your letter dated October 10, 2003 wherein you requested our views on the income tax consequences of the transfer of property by a developer to a municipality in order for the developer to receive a development permit from the municipality.
In particular, you have asked us to confirm that your understanding of the general administrative position of the Canada Revenue Agency (the "CRA") is as follows:
1. "Transfer of land to a municipality pursuant to a development agreement is not generally seen as a barter transaction. As a result, the principles in Interpretation Bulletin IT-490 would not generally be applicable.
2. When the developer transfers land inventory to a municipality pursuant to the development agreement, the developer would not normally realize any income or deemed income as a result of that transaction. Similarly, the developer would not normally incur a deductible expenditure. Instead, any costs incurred by the developer in respect of the transferred land would be re-allocated to the land (and possibly buildings) retained by the developer and would receive tax recognition as the developer sells those remaining parcels of real estate."
Written confirmation of the consequences inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5. Where the particular transactions are partially completed or completed, the enquiry should be addressed to the relevant Tax Services Office. Notwithstanding the foregoing, we are providing the following comments.
On the basis of the decisions of the courts in R. v. Metropolitan Properties Co Ltd., 85 DTC 5128 (FCTD) and Edmonton Plaza Hotel (1980) Ltd. v. The Queen, 87 DTC 5371 (FCTD), where a taxpayer consistently follows the allocation method that you have described above, we would not generally challenge the related income tax consequences. However, in order to provide you with any certainty on this issue, we would need to review all of the facts relating to specific proposed transactions in the context of an application for an advance income tax ruling.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the CRA. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.
Yours truly,
Steve Tevlin
Manager
Corporate Financing Section
Financial Industries Division
Income Tax Rulings Directorate
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, 2004
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, 2004
Email this Content