24 June 1998 External T.I. 9805315 - LIFE ESTATE, REMAINDER, CDN RESOURCE 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: section 43.1, Canadian resource property

Position: 43.1 does not apply to disposition of life interest in Canadian resource property

Reasons: scheme of Act, wording of 43.1

XXXXXXXXXX 980531
Denise Dalphy

Attention: XXXXXXXXXX

June 24, 1998

Dear Sirs:

Re: Interests in Mineral Rights

This is in reply to your letter dated February 25, 1998 concerning the disposition of an interest in mineral rights.

Whether a particular property is a real property, whether a property is a Canadian resource property, the value of a particular property, and when a disposition occurs, are all questions of fact. It is generally appropriate that these determinations be made by the relevant Tax Services Office, which would have access to all relevant details on their review of a completed transaction. However, if all significant facts are available with respect to a transaction that is seriously contemplated, you may wish to request an advance income tax ruling. Nonetheless, we are prepared to offer the following comments at this time.

While subsection 43.1(1) of the Income Tax Act (the “ Act”) begins with the words “Notwithstanding any other provision of the Act”, it does not provide that its deemed disposition rule with respect to the life estate retained applies for all purposes of the Act. In our view, the section 43.1 deeming provisions do not extend to the computation of proceeds of disposition of a “Canadian resource property”. In such a case, the general provisions of the Act and common law, such as, subsection 70(5.2), paragraph 69(1)(b), and the principle of constructive receipt, etc. would apply.

Finally, with respect to the valuation of a life estate or remainder, please refer to IT-226R, Gift to a charity of a residual interest in real property or an equitable interest in a trust.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R3, the above comments do not constitute an income tax ruling and accordingly are not binding on the Department. Our practice is to make this specific disclaimer in all instances in which we provide an opinion.

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