IT
SPECIAL RELEASE
Rental of Real Property by Individual
IT-434R July 7, 1989
The purpose of this Special Release is to reflect changes in the
Income Tax Act pursuant to S.C. 1986, c.6 and 1986, c.55 and
amendments to the Income Tax Regulations as well as to up-date
references to other Interpretation Bulletins.
1. Secondary references should be changed as follows:
(a) delete section 9 and subsections 74(5) and 120(2) of the
Income Tax Act, and
(b) add subsections 9(1), 74(7) and (8), 74.1(1) and (2), and
paragraph 74.5(3)(a) of the Income Tax Act and subsections
1100(11) and (15) of the Income Tax Regulations.
2. Paragraph 7 is revised to read as follows:
"7. The operator of a rooming or lodging house, hotel or motel
would normally be considered to be carrying on a business
where, in addition to the basic services that relate to the
operation and maintenance of the property as described in 5,
extra services such as the supply of cleaning and maid
services, linens, washroom supplies, dining facilities, etc.,
are provided for the convenience and comfort of guests. The
operator of a trailer court or campground where services such
as laundromat, cafeteria, swimming pool, washrooms, showers,
playground, etc., are provided would also be considered to be
carrying on a business. See, however, the comments in 18 below
regarding the restrictions on the deduction of capital cost
allowance pursuant to subsection 1100(11) or (15) of the
Regulations."
3. (a) The first sentence of paragraph 10 is revised to read as
follows:
"For transfers of property before May 23, 1985, subsections
74(1) and 75(1) provide that any income or loss from property
transferred either to the transferor's spouse or to a minor is
deemed to be income or loss of the transferor."
(b) The third sentence of paragraph 10 is revised to read as
follows:
"Where the separation is pursuant to a written separation
agreement, the separation must be of at least twelve months'
duration commencing from the date on which the written
separation agreement was entered into, but where the spouse
ceases to live apart from the taxpayer within those twelve
months subsection 74(1) applies from the commencement of the
twelve month period."
(c) The last sentence of paragraph 10 is revised to read:
"(For more detailed discussion on subsections 74(1) and 75(1)
see IT-258R2, 'Transfer of Property to a Spouse' and IT-260R,
'Transfer of Property to a Minor' and the Special Release
for each dated December 30, 1987.)"
4. The heading "Husband and Wife Partnership" is deleted and
paragraph 11 is replaced with the following:
"11. Subsection 74.1(1) generally provides that any income or
loss arising from property loaned or transferred after May 22,
1985 to or for the benefit of either the transferor's spouse
or a person who has since become that spouse is deemed to be
the income or loss of the transferor. Subsection 74.1(1) does
not apply where paragraph 74.5(3)(a) applies, i.e., where the
transferor and the spouse are living separate and apart by
reason of a breakdown of their marriage. Similarly, subsection
74.1(2) provides that any income or loss from property loaned
or transferred after May 22, 1985 to or for the benefit of a
person who is under 18 years of age and who
(a) does not deal with the transferor at arm's length, or
(b) is the niece or nephew of the transferor
(in this paragraph referred to as a 'related minor') is deemed
to be the income or loss of the transferor. Subsections
74.1(1) and (2) apply only where the transferred property
produces income from property. Neither of these subsections
apply where the loaned or transferred property produces
business income. Thus where a rental operation that
constitutes a business is transferred to a spouse or a related
minor, neither subsection 74.1(1) nor (2) will apply. For a
more detailed discussion of the attribution rules for property
that has been loaned or transferred after May 22, 1985, see
IT-510 'Transfers and Loans of Property made after May 22,
1985 to a Related Minor' and IT-511 'Interspousal Transfers
and Loans of Property made after May 22, 1985'."
5. In paragraph 15, change the reference to "IT-171" to a reference
to "IT-171R".
6. In paragraph 16, change the reference to "IT-393" to a reference
to "IT-393R".
7. Paragraph 18 is revised to read as follows:
"18. Whether the renting of real property by an individual is
a business or not, the depreciable property may be
considered to be a 'rental property' or a 'leasing property'
for the purposes of the capital cost allowance
restrictions contained in subsection 1100(11) or 1100(15) of
the Regulations. (For a detailed discussion on subsections
1100(11) and 1100(15) of the Regulations, see the latest
versions of IT-195, 'Rental Property - Capital Cost Allowance
Restrictions' and IT-443, 'Leasing Properties - Capital Cost
Allowance Restrictions'.)"
8. In paragraph 19, the reference to "IT-172R" should be to "IT-172R
and the Special Release thereto dated June 13, 1986".
9. In paragraph 20, a reference to paragraphs 22 to 24 of IT-521
" Motor Vehicle Expenses Claimed by Self-Employed Individuals" should
be added.
Last updated on 1989-07-07.
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