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.
940256
XXXXXXXXXX D. Zion
Attention: XXXXXXXXXX
March 17, 1994
Dear Sirs:
Re: Election Re Principal Residence
This is in reply to your correspondence of February 2, 1994, requesting our opinion concerning the application of subsection 45(3) of the Income Tax Act (the "Act") to an outlined situation.
The particular circumstances outlined in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R2, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate district taxation office for their views. However, we are prepared to offer the following general comments which may be of some assistance to you. In the comments that follow unless otherwise stated, all statute references are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993.
Subsection 45(3) of the Act enables a taxpayer who acquires residential real estate for rental or business purposes and at a later time occupies it as a principal residence to elect out of the deemed disposition rule in paragraph 45(1)(a) of the Act. As a result of a subsection 45(3) election, recognition of any capital gain or loss accruing on the property during its income-producing years will be deferred until the property is actually sold. The election would normally be made on or before April 30 following the year in which the property is sold. Pursuant to subsection 45(4) of the Act however, an election under subsection 45(3) will not be available where the taxpayer, his spouse, or a trust of which his spouse is a beneficiary has benefited from the deduction of capital cost allowance in respect of the property for a taxation year after 1984. In this regard, we would direct you to the comments contained in paragraph 31 of IT-120R Principal Residence.
We trust that our comments will be of assistance to you.
P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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