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Land and Associated Real Property

From: Canada Revenue Agency

GST/HST memorandum 19.5
October 2001

Overview

For GST/HST purposes, all supplies of land situated in Canada are taxable, unless explicitly exempted. For a detailed list of issues related to supplies of land that are discussed in this Memorandum, see the Table of Contents.

Disclaimer

The information in this memorandum does not replace the law found in the Excise Tax Act and its Regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate Regulation, or contact a Canada Revenue Agency (CRA) GST/HST Rulings Centre for more information. These centres are listed in GST/HST Memorandum 1.2, Canada Revenue Agency GST/HST Rulings Centres. If you wish to make a technical enquiry on the GST/HST by telephone, please call the toll-free number 1-800-959-8287.

If you are located in the Province of Quebec, please contact Revenu Québec by calling the toll-free number 1-800-567-4692 for additional information.

Note
This section of Chapter 19 incorporates the information from and supersedes the following policy statements: P-059, Business vs. Adventure or Concern in the Nature of Trade Relating to Sales of Real Property; P-088 Sale of Single Sites in a Residential Trailer Park; P-109, Transfer of Farmland by a Farmer, Holding Sole Title, to One or More Related Persons and Themselves as Joint Tenants; P- 121, Sale of Land Related to a Residential Complex, P-183 Input Tax Credits on Farmland Acquired in Joint Tenancy.

Table of Contents

Supplies of land by way of sale

Taxable unless specifically exempted
[Sch V, Part I]

1. For GST/HST purposes, all sales of land situated in Canada are taxable, unless explicitly exempted. In general, exempt sales of land are sales of:

2. Most of the exemptions that apply to sales of land are listed in Part I of Schedule V to the Excise Tax Act (the Act). The treatment of such sales is discussed below. Additional exemptions found in Part VI of Schedule V (in particular sections 10, 25, and 28) may apply to sales of land made by a public service body. Also, exemptions found in Part V.1 of Schedule V (in particular sections 1 and 5) may apply to sales of land made by charities. For a discussion of the meaning of "sale" as it is used in the context of real property, see GST/HST Memorandum 19.1, Real Property and GST/HST.

Sale by an individual or personal trust

[Sch V, Part I, s 9]

3. In general, sales of real property by an individual or a personal trust are exempt, subject to certain exceptions. These exceptions, discussed in paragraphs 5 to 19, generally restrict the exemption to supplies of personal-use land.

4. For purposes of the GST/HST, a personal trust is:

  1. a testamentary trust (as defined in subsection 248(1) of the Income Tax Act), or
  2. an inter vivos trust that is a personal trust (as defined in subsection 248(1) of the Income Tax Act) all the beneficiaries (other than contingent beneficiaries) of which are individuals and all the contingent beneficiaries of which, if any, are individuals, charities or public institutions.

Further information on personal trusts will be provided in GST/HST Memorandum 3.1.3, Trustees and Receivers.

Supply of capital real property held for use primarily in a business with a reasonable expectation of profit

Capital property
[Sch V, Part I, para 9(2)(a)]

5. A sale of real property made by an individual or personal trust is excluded from the exemption under section 9 if immediately before the time ownership or possession of the property is transferred, the property is capital property used primarily (more than 50%) in a business carried on by the individual or the personal trust with a reasonable expectation of profit.

6. Guidelines to use when determining if a particular property is used primarily in a business are contained in Appendix A to this Memorandum. Guidelines for determining if a business has a reasonable expectation of profit are contained in Appendix B.

7. Effective October 4, 2000, a supply by way of sale of real property made by an individual or personal trust is excluded from exemption if the real property was last used as capital property primarily in making taxable supplies by way of lease, licence or similar arrangement of that property and the individual or personal trust is a registrant. This exclusion from exemption under section 9 applies even if the property had been so supplied without a reasonable expectation of profit. The sale is also excluded from the exemption if the individual or trust is a registrant and the real property was last used as capital property primarily in a combined use of carrying on a business with a reasonable expectation of profit and of making taxable supplies by way of lease, licence or similar arrangement of that property. In these circumstances, the seller, as a registrant, would have been entitled to claim ITCs in respect of the property or improvements to it. Therefore, it is not appropriate that the subsequent sale of the property be exempt.

Supply of real property in the course of a business

[Sch V, Part I, subpara 9(2)(b)(i)]

8. A sale of real property by an individual or personal trust is also excluded from the exemption under section 9 if the sale is made in the course of a business of the individual or the personal trust. In this regard, it is important to determine if a sale is made in the course of a business or if it is an adventure or concern in the nature of trade, or neither. Generally, a sale of real property made in the course of a business is subject to GST/HST. A sale made as an adventure or concern in the nature of trade is exempt from GST/HST (subject to paragraph 9, below) if it is made by an individual or a personal trust and if none of the other exclusions to the exemption in section 9 apply. Guidelines for determining if a supply is made in the course of a business, or if it is an adventure or concern in the nature of trade, or neither, are contained in Appendix C to this Memorandum.

Supply of real property as an adventure or concern in the nature of trade

Election: exempt supply treated as a taxable supply
[Sch V, Part I, subpara 9(2)(b)(ii)]

9. A sale of real property by an individual or personal trust is also excluded from the exemption under section 9 if the individual or personal trust makes an election to treat the otherwise exempt sale of real property as a taxable one. The individual or personal trust may make this election if the sale is made as an adventure or concern in the nature of trade of the individual or the trust. Neither the vendor nor the purchaser needs to be a GST/HST registrant to make this election.

10. The individual or personal trust that sells the property must complete the prescribed form, form GST 22, Election to Treat the Tax Exempt Supply of Real Property By Way of Sale by an Individual or Trust as a Taxable Supply and file the form with the Canada Customs and Revenue Agency (CCRA) before the sale to which it relates is made.

Subdivided, severed or expropriated property

Subdivided or severed property
[Sch V, Part I, para 9(2)(c)]

11. While a sale of personal-use real property by an individual or personal trust is generally exempt under section 9 of Part I of Schedule V, the sale is excluded from the exemption under this section if the individual, the personal trust or the settlor Footnote 1 of the trust sells part of a parcel of land and the parcel of land has been subdivided or severed into parts by the individual, trust or settlor.

Two parts
[Sch V, Part I, subpara 9(2)(c)(i)]

12. However, if the parcel of land is subdivided into only two parts and if that parcel has not been subdivided or severed from another, the sale of either of the two parts is exempt under section 9 of Part I of Schedule V.

Related individual or former spouse
[Sch V, Part I, subpara 9(2)(c)(ii)]

13. Moreover, if the recipient in the sale of a part of the subdivided or severed land is a related individual, former spouse or former common-law partner of the individual or the settlor, and the related individual, former spouse or former common-law partner is acquiring the part of the parcel of land for his or her personal use and enjoyment, the sale of that part is exempt under section 9, even if the land has been subdivided or severed into more than two parts.

Expropriated property
[Sch V, Part I, para 9(2)(c)]

14. When determining whether land has been subdivided or severed, if the individual, the trust or the settlor supplies a part of a parcel of land to a person who has the right to acquire the land by expropriation, such as a municipality or utility commission, that part and the remainder of the parcel are not considered to have been subdivided or severed from each other by the individual, trust or settlor.

Example 1

Mr. Gardener owns four hectares of land. The four hectares were purchased as a single parcel of land with a single legal description. While Mr. Gardener uses a quarter hectare to produce vegetables for his market gardening business, the remainder of the property is used for his personal use and enjoyment. According to the CCRA's guidelines for determining if capital real property is used primarily in a business, (see Appendix A to this memorandum), Mr. Gardener does not use the property primarily as capital property in a business carried on by himself. If Mr. Gardener were to sell the entire parcel of land, the sale would be exempt under section 9 of Part I of Schedule V.

However, Mr. Gardener subdivides the four hectares into eight half-hectare lots. He sells a lot to each of his three children, and the remaining five lots to a developer. In this situation, under the provisions of paragraph 9(2)(c) of Part I of Schedule V, each lot sold to his children remains an exempt supply if his children acquire the lots for their personal use and enjoyment. The five lots sold to the developer are taxable supplies.

Example 2

Ms. Fields purchased three separately titled properties that she holds primarily for personal use and enjoyment. The properties are contiguous to one another and share common boundaries as shown in Diagram 1.

Diagram 1

Properties that are contiguous to one another and share common boundaries

Ms. Fields decides to sell the three properties, but would first like to reconfigure these three pieces of land into three rectangular lots of the same shape and size with each having a separate legal description. She expects this will make them easier to sell. She ultimately ends up with the three properties regrouped as in Diagram 2:

Diagram 2

The three properties regrouped

Would the supply of one of the lots shown in Diagram 2 be an exempt supply of land by an individual or does paragraph 9(2)(c) of Part I of Schedule V apply in this situation?

Generally, in order to give rise to the reconfigured lots as shown in Diagram 2, Ms. Fields would have had to combine the three lots shown in Diagram 1 into a single lot, lot D, with a single legal title (Diagram 1A ) Footnote 2.

Diagram 1A

Combining the three lots shown in Diagram 1 into a single lot

Lot D is considered to be one parcel of land. D is then subdivided or severed into three parts described as lots E, F and G. Thus, paragraph 9(2)(c) of Part I of Schedule V applies, and the sale of lots E, F and G would be taxable unless the lot is sold to a former spouse or former common-law partner of Ms. Fields or an individual related to her and the lot is for that individual's personal use and enjoyment.

Example 3

Mr. Acres at one time owned a three-hectare parcel of land. In 1992, Mr. Acres subdivided the parcel into one two-hectare lot and one one-hectare lot. He sold the one-hectare lot at that time. Since subparagraph 9(2)(c)(i) of Part I of Schedule V provides that a supply of a part of a parcel of land by an individual is exempt if the parcel is subdivided or severed into only two parts and if the originating parcel had not been subdivided or severed from another parcel, the sale of the one-hectare lot was exempt.

Now, in 2001, Mr. Acres subdivides the remaining two-hectare lot into two lots of one hectare each and sells the lots to people who are not related to him. He undertakes no other activity to market the properties. The land has been used primarily for Mr. Acres' personal use and enjoyment.

Since these one-hectare lots were produced by the further severance of the two-hectare lot which had itself been severed from the original three-hectare parcel, the supply of these one-hectare lots to people who are not related to Mr. Acres is not exempt. The provision offers no restriction as to when the prior subdividing or severing was to have taken place. Thus, even though there is a gap in time in this example between the first subdivision and the second, the provisions of subparagraph 9(2)(c)(i) apply to make the current sale of the remaining lots taxable.

In this example, the original three-hectare parcel of land had been subdivided in 1992 into a two-hectare parcel and a one-hectare lot. The sale of the one-hectare lot at that time had been exempt. Note that if this one-hectare lot had not been sold at that time, and had not been sold until the same time as, or even later than, the new parcels created from the further severance of the two-hectare lot, the sale of this original one-hectare lot would still be exempt. The conditions of its origin have not changed: it was created when a parcel of land was severed into only two parts, and the originating three-hectare parcel had not been severed from another parcel.

Example 4

Ms. Lake owns a half-hectare parcel of land. The half hectare is in cottage country and has been used for Ms. Lake's personal use and enjoyment. On one side of the property is the lakeshore, on the other is the roadway. Ms. Lake wants to subdivide the property into two quarter-hectare lots. The municipality allows the subdivision but expropriates a 10-metre wide strip of her property that runs along the roadway to widen the road.

In this case, even though the subdivision results in three pieces of land, the two somewhat-less-than a quarter-hectare lots and the 10-metre wide strip of property beside the current roadway, paragraph 9(2)(c) of Part I of Schedule V deems the expropriated part not to have been subdivided or severed. Thus, the supply of either of the lots by Ms. Lake will be an exempt supply unless another exclusion to the exemption applies.

Supplies deemed under sections 206 or 207

Supplies deemed under sections 206 or 207 not exempt
[para 9(2)(d)]

15. A sale of real property by an individual or a personal trust is excluded from the exemption under section 9 of Part I of Schedule V if the sale is deemed to have been made under sections 206 or 207. Under the provisions of section 206, if a personal trust ceases to use or reduces its use of capital real property in commercial activities and begins to use or increases its use of the property in non-commercial activities, there is a deemed sale of the property or portion of the property. Except where the sale is an exempt supply, the personal trust is deemed to have collected tax on the deemed sale. Section 207 applies in a similar manner to an individual who ceases to use or reduces the use of capital real property in commercial activities or begins to use the property primarily for personal use and enjoyment. Again, the individual is deemed to have collected tax on the deemed supply, unless the supply is an exempt supply (see paragraph 22). For further information on the change-in-use rules, see GST/HST Memorandum 19.4.2, Commercial Real Property-Deemed Supplies.

Real property sold back to vendor

Taxable sale-back
[para 9(2)(f)]

16. Effective October 5, 2000, if an individual or personal trust has bought taxable real property and subsequently sells it back to the vendor, the parties to the resale transaction may jointly elect, in limited circumstances, to have tax apply to the sale back to the vendor.

17. Specifically, this election to treat a particular sale of real property by an individual or personal trust as a taxable sale can be made if:

18. Prior to October 5, 2000, the person returning the real property could not recover the tax that was paid on the purchase of the real property in circumstances where the sale-back was an exempt supply. This election places a person who returns real property in a position similar to one who returns new goods to the vendor and receives a credit or refund for the GST/HST that was originally paid on the sale of the goods.

19. The parties to the resale transaction must make the election jointly using form GST 22, Real Property – Election to Make Certain Sales Taxable. The registrant buying back the real property is responsible for filing the election with the tax return in which the registrant is required to report the tax payable on the supply.

Sale of farmland

20. In general, if a farmer sells or transfers ownership of farmland to an individual related to the farmer (or a former spouse or former common-law partner of the farmer) who, in turn, uses the land for the individual's own personal use and enjoyment, the sale or transfer is exempt. An exemption may also apply where a farmer changes the use of farmland and begins to use the land for his or her own personal use and enjoyment.

[Sch V, Part I, s 10]

21.Specifically, the sale of farmland by an individual is exempt from the GST/HST if it is sold to another individual who is related to, or who is a former spouse or former common-law partner of the individual and:

Example 1

A farmer, who was previously engaged in a profitable farming business, has not grown crops on a particular parcel of property for the past two years. He has cultivated the land to control the weeds. He sells the land to his son who will use the land solely for his personal use and enjoyment. This sale is exempt under the provisions of section 10 of Part I of Schedule V.

Example 2

A schoolteacher owns a farm where she undertakes limited farming activities without a reasonable expectation of profit. She decides to sell the farm to her brother. Since the teacher did not use the land at any time in a commercial activity that is the business of farming, the sale of the farmland is not exempt under the provisions of section 10 of Part I of Schedule V. It should be noted, however, that the sale would be exempt under section 9 of Part I of Schedule V.

Deemed sales
[Sch V, Part I, s 11]

22. The deemed sale of farmland that occurs when an individual ceases using farmland in a commercial activity that is the business of farming and starts using the farmland for his or her personal use and enjoyment is an exempt supply under section 11 of Part I of Schedule V. This provision exempts certain supplies that might otherwise be taxable under subsection 190(2) or 207(1). In the absence of section 11, when the land ceases to be used in farming and starts to be used for personal use and enjoyment of the farmer, subsection 190(2) or 207(1) could apply to tax this change in use.

23. Specifically, under subsection 190(2), if at any time an individual appropriates real property for his or her personal use and enjoyment (or for that of a related individual, former spouse, or former common-law partner), and if immediately before the appropriation, the property was held for supply or was used or held for use as capital property in the individual's business or other commercial activity and was not a residential complex, there is a deemed sale of the appropriated property. The individual is required to self-assess and account for GST/HST calculated on the fair market value of the property at the time of its appropriation.

24. Under subsection 207(1), where an individual who is a registrant ceases to use real property in commercial activities and begins to use the property exclusively for other purposes or primarily for the individual's personal use and enjoyment (or that of a related individual, a former spouse or former common-law partner), there is a deemed sale. The individual must self-assess and account for GST/HST calculated pursuant to the formula set out in subsection 207(1).

25. However, as noted in paragraph 22, section 11 of Part I of Schedule V exempts, in certain circumstances, supplies that might otherwise be taxable under subsections 190(2) or 207(1). Section 11 applies if the following conditions are met:

Example

Farmland lies adjacent to a lake. The farmer decides to build a cottage near the lakeshore. This necessitates building a road to the lakeshore to give easier access to the property on which the cottage is to be built. The entire parcel of land is appropriated for the personal use and enjoyment of the farmer and his family. Under the provisions of subsection 190(2), the farmer is deemed to have made a supply to himself of the land that is now being used for his own and his family's personal use and enjoyment. No tax liability is incurred, however, as this deemed supply is exempt under section 11 of Part I of Schedule V as long as the land was used in a commercial activity that is the business of farming, and not in any other business, immediately prior to the appropriation.

Exempt supply by corporation, partnership or trust
[Sch V, Part I, s 12]

26. The sale of farmland is also exempt if a person that is a corporation, partnership or trust supplies the farmland by way of sale to a particular individual, an individual related to the particular individual, a former spouse or former common-law partner of the particular individual and if:

(i) all or substantially all of the property of the person is used in a commercial activity that is the business of farming;

(ii) the particular individual is a member of the partnership, a beneficiary of the trust or a shareholder of, or related to, the corporation; and

(iii) the particular individual, the spouse or common-law partner of the particular individual or a child (within the meaning of subsection 70(10) of the Income Tax Act) of the particular individual is actively engaged in the business of the person;

and

Related persons
[ss 126(2)]

27. An individual is related to a particular individual if they are related to each other for purposes of subsections 251(2) to (6) of the Income Tax Act. Under that Act, individuals can be related by blood, marriage or adoption. For further information, see interpretation bulletin IT-419, Meaning of Arm's Length.

"Child"
[Income Tax Act ss 70(10)]

28. Section 12 of Part I of Schedule V refers to subsection 70(10) of the Income Tax Act for the meaning of "child". Under that subsection, a "child" of a taxpayer includes:

  1. a child of the taxpayer's child,
  2. a child of the taxpayer's child's child, and
  3. a person who, at any time before the person attained the age of 19 years, was wholly dependent on the taxpayer for support and of whom the taxpayer had, at that time, in law or in fact, the custody and control.

Meaning of "farmland"

29. For purposes of the farmland exemptions under Schedule V (i.e., sections 10, 11 and 12 of Part I), "farmland" should generally be interpreted as being the land that is regularly used by a person for the purpose of gaining or producing income from a farming business carried on by the person. A portion of land (other than land forming part of a residential complex), that is not used directly in a farming business but that is part of an entire parcel of land some of which is used directly in a farming business may be considered to be farmland. For example, a bush area surrounded by land used in a farming business is considered to be a part of the entire parcel of farmland. In addition, any fixtures on the farmland that a person also regularly uses in the business of farming would normally form part of the farmland to which the exemption, if applicable, would apply.

30. As noted above, for the farmland exemptions to apply, the farmland in question must have been used in a commercial activity that is the business of farming prior to the supply and not in any other commercial activity immediately prior to the supply or deemed supply. Accordingly, these provisions do not exempt the sale of hobby farms or the sale of land that was not used by the supplier in the business of farming but was farmed by another person who leased the land.

31. When determining if the land was used in the business of farming, the CCRA considers such factors as the type of farming activity carried on by the supplier, the nature of the income or loss reported for income tax purposes by the supplier and the use for which the land is zoned for the purposes of municipal property tax assessment. Similarly, a change in the use of land transferred from a supplier to a recipient would be expected to result in appropriate changes for income tax reporting and, where applicable, the municipal property tax assessment of the land in question. For example, after the transfer of ownership, for the recipient to be considered to have acquired the land for his or her personal use and enjoyment, the recipient would no longer be reporting business income or losses relating to the farmland for income tax purposes. In addition, where a particular individual converts the farmland from business use to personal use, a deemed disposition of the land would occur for income tax purposes under section 45 of the Income Tax Act. Further, where applicable, the municipal property tax assessment of the farmland in question should have changed from farm property to the appropriate description of the actual use of the property for such assessment purposes.

32. The fact that the land is no longer being actively farmed does not mean that in all cases the land is being used for the personal use and enjoyment of the recipient. The CCRA would consider evidence that supports a personal use and enjoyment of the land, or that supports other non-personal uses of the land, such as a business or trading use. Where the recipient resides on the land, factors that may indicate the use of the land are whether any new buildings or other facilities have been constructed on the property and, if so, what type and for what purpose.

33. If the recipient did not reside on the premises and the land remained vacant, information should be provided as to the length of time that the land was held and the manner in which the land was used and enjoyed. Although there is no length of time set out in the Act with respect to qualifying for an exemption under section 9, 10 or 11 of Part I of Schedule V, length of time in holding the land may be a factor that indicates whether the land was in fact acquired for the personal use and enjoyment of the recipient or was acquired by the recipient for the purpose of resale.

34. If the recipient acquired the land for the purpose of resale, neither section 10 nor section 11 would apply since the land was not acquired for the required purpose.

Taxable sale of farmland

Taxable sales

35. If an exemption does not apply, the sale of farmland by a farmer is generally taxable.

Election: sale of assets of a business
[ss 167(1)]

36. However, where a person sells farmland as part of the supply of an ongoing farming business, the supplier and recipient may jointly elect to have no GST/HST payable on the sale. To qualify for the election, the supplier must sell a business or part of the business, not just the individual assets Footnote 3, and the recipient must acquire ownership, possession or use of all or substantially all (90% or more) of the property required to carry on the business.

37. To make the election, the recipient and the supplier must complete form GST44, Election Concerning the Acquisition of a Business or Part of a Business. The recipient, if a registrant, must file the form with the CCRA no later than the due date of the recipient's GST/HST return for the first reporting period in which tax would, if not for the election, have become payable in respect of the supply of any property or service made under the agreement for the supply of the business or part.

38. If the supplier and the recipient make this joint election, the recipient is considered to have acquired the farmland for use exclusively (90% or more) in commercial activities. If the recipient does not use the farmland exclusively in commercial activities, the recipient will have to self-assess the GST/HST owing on all or part of the property in accordance with the change-in-use rules using the regular GST/HST return (GST34).

Supply of business assets of deceased
[ss 167(2)]

39. Similarly, the estate of a deceased individual can jointly elect with the beneficiary of the estate who is inheriting the farmland to not have tax apply to the supply of the property. This election is available under particular circumstances if the property being supplied is part of the supply of the business assets of the deceased and the property is acquired for use in the commercial activities of the recipient individual. As in paragraph 38, assessment of GST/HST due to change in use may be required.

40. For further information on tax-free sales of real property and the elections under subsection 167(1) and subsection 167(2), see GST/HST Memorandum 19.4.1, Commercial Real Property – Sales and Rentals.

Sale of land previously leased for a residential complex

Exempt sale
[Sch V, Part I, s 5.2]

41. Section 5.2 of Part I of Schedule V to the Act exempts the sale of land (as well as an interest in the land) that forms part of a residential complex where the land is sold without the building. This exemption is provided under the following conditions:

Example

Several years ago, the Martin family built their family's cottage on land they leased from a property development company for use as a summer residence. The company now sells the half hectare on which the cottage stands to the Martins. This sale of the half hectare is an exempt supply under the terms of section 5.2 of Part I of Schedule V.

Sale of land that is a residential trailer park

Trailer park
[ss 123(1)]

42. A "trailer park" of a person means a piece of land that is owned by or leased to the person and that is exclusively composed of:

(a) one or more sites each of which is, or is intended to be, supplied by the person by way of lease, licence or similar arrangement to the owner, lessee or person in occupation or possession of a mobile home, a travel trailer, motor home or similar vehicle or trailer, situated or to be situated on the site, and

(b) other land that is reasonably necessary for

(i) the use and enjoyment of the sites by individuals residing in or occupying mobile homes, travel trailers, motor homes or similar vehicles or trailers, situated or to be situated on those sites, or

(ii) the purpose of engaging in the business of supplying the sites by way of lease, licence or similar arrangement.

Residential trailer park

43. A residential trailer park is also defined in subsection 123(1). The definition says, in effect, that a residential trailer park is a trailer park or two or more contiguous trailer parks encompassing at least two sites, where:

(a) 90% or more of the sites in the trailer park or trailer parks are supplied under a lease, licence or similar arrangement, or are intended to be supplied under a lease, licence or similar arrangement under which continuous possession or use of a site is provided for a period of at least

and

(b) if the sites were to be occupied by mobile homes, the sites would be suitable for use by occupants of a mobile home (whether or not the park in fact has mobile homes) as a place of residence of individuals throughout the year. The test is whether or not the sites are serviced and accessible for use by mobile homes, thereby making the sites suitable for occupancy by individuals as places of residence throughout the year.

Fixtures and appurtenances

44. Any building, fixture or other appurtenance to the residential trailer park that is reasonably necessary for the use and enjoyment of the sites by individuals residing in the park, or for the business of supplying such sites (for example, a rental office), is considered to be part of the residential trailer park.

Exempt sale
[Sch. V, Part I, s 5.3]

45. The sale of land or an interest in land that has been used as a residential trailer park is an exempt supply if the following conditions are met:

46. The exemption is not available if the supplier has claimed an ITC in respect of the last acquisition of the park or an additional area, or in respect of an improvement to the park or additional area after the last acquisition of the park or additional area.

47. This treatment of a sale of a used residential trailer park parallels the treatment of a sale of a used apartment building, i.e., as an exempt sale of previously occupied multiple-unit residential housing.

Additional area separate supply
[ss 136(4)]

48. Where a person sells a residential trailer park whose area has been extended to encompass additional land, the supply of the original area and the supply of the additional area are treated as separate supplies in certain circumstances. If no site in the additional area has been supplied by way of lease, licence or similar arrangement and if the supply of the original area of the park would have satisfied the requirements for exemption under section 5.3 of Part I of Schedule V if the additional area had not been added to the original area, then this sale will be treated as two separate supplies: the supply of the original area, which is an exempt supply and the supply of the additional area, which is a taxable supply.

49. If a site in the additional area had been supplied by way of lease, licence or similar arrangement as described by paragraph 7(b) of Part I of Schedule V, the person making this supply would have been deemed to have made and received a taxable sale of the additional area and to have collected and paid GST/HST on such a deemed sale under the self-supply rules. This treatment parallels the treatment of the lease of the first unit in an addition to a multiple-unit residential complex. If tax had applied at some time to the additional area of the park, the supply of the original residential trailer park and the new area would not be treated as two supplies. It would be treated as one supply that is exempt under section 5.3 of Part I of Schedule V, provided ITCs have not been claimed (see paragraph 46).

50. The provisions of the Act under which a person could be deemed to have both made and received a taxable sale of the land in a residential trailer park are:

Supply of a single site taxable
[Policy statement P-088]

51. Since a residential trailer park must be composed of at least two sites, the sale of a single, separately titled site in a residential trailer park is not a supply of a residential trailer park, nor is it the supply of an interest in such a park. Consequently, the sale of a single site in a residential trailer park is not exempt under section 5.3 of Part I of Schedule V.

52. Where a sale of a site in a residential trailer park is made together with the sale of an interest in the common elements of the residential trailer park, the supply of the interest in the common elements is considered to be incidental to the supply of the site and thus, under the provisions of section 138, to form part of the same supply. Consequently, the supply of the interest in the common elements will have the same tax status as the supply of the site in the residential trailer park.

53. The sale of an undivided interest in the entire residential trailer park that gives the recipient an undivided percentage ownership interest in the park with the exclusive right to use a single site in the park is considered to be a sale of an interest in a residential trailer park within the meaning of section 5.3 of Part I of Schedule V. Accordingly, such a sale would be exempt provided the other conditions of section 5.3 are also met.

ITCs available
[s 193]

54. In cases where the sale of a single site in the residential trailer park is taxable, the supplier of the site may be entitled to claim ITCs under section 193 Footnote 8 equal to the lesser of the basic tax content of the single site at the time the sale is made and the tax payable on the sale of the particular site provided that the supplier is a registrant. If the supplier is not a registrant, the supplier may be entitled to claim a rebate under section 257 Footnote 9 equal to the lesser of the basic tax content at the time the sale is made and the tax payable on the sale of the particular site. The supplier, if a registrant, would also be entitled to claim ITCs for costs relating specifically to the sale of the site that are not included in the basic tax content referred to above.

Example 1

A corporation that owns a residential trailer park sells sites in the park to persons who are currently leasing the sites in the park for their travel trailers. Each site is sold as a separately titled, single site along with an interest in the common elements, as opposed to providing the recipients with an undivided percentage interest in the park as tenants in common. In this situation, the supply of each of the sites along with an interest in the common elements does not constitute the supply of a residential trailer park or an interest therein. It is a sale of land and subject to GST/HST.

Example 2

A corporation that owns a residential trailer park sells an undivided interest in the park with the exclusive right to use a single site in the park to those purchasing such an interest. This supply constitutes the supply of an interest in a residential trailer park. Provided that the park would qualify as a residential trailer park within the meaning of subsection 123(1) and that section 5.3 would apply to exempt the sale of the entire residential trailer park if such a supply were made, the sale of the undivided interest is exempt under section 5.3 of Part I of Schedule V.

Example 3

An individual who owns a residential trailer park sells single, separately titled sites in the park along with an interest in the common areas. As noted in the first example, the supply is not exempt under section 5.3 of Part I of Schedule V. Moreover, even though the sale is made by an individual, it is not exempt under section 9 of Part I of Schedule V since immediately before the sale the property was capital property used primarily in a business of the individual that, it is presumed, the individual carried on with a reasonable expectation of profit.

Example 4

A corporation that owns a residential trailer park sells to an individual a single, separately titled site in a residential trailer park together with the mobile home on the site that the individual occupies as a place of residence. Although the mobile home is a residential complex, the site subjacent to it does not form part of the residential complex even though the mobile home has been permanently affixed to the site in the same manner as a house. Paragraph (d) of the definition of residential complex in subsection 123(1) excludes subjacent land from being classed as part of a residential complex if it is a site in a residential trailer park. The sale of this previously occupied mobile home is exempt either under section 4 of Part I of Schedule V if the corporation is the builder of the mobile home or under section 2 of Part I of Schedule V if the corporation is not the builder. The sale of the site in the residential trailer park, i.e., the land portion of the real property sold, is deemed under the provisions of subsection 136(2) to be a separate supply from the sale of the mobile home. The sale is a taxable supply of land since neither sections 5.2 nor 5.3 of Part I of Schedule V applies to make it an exempt supply.

Tax had already applied to this land when the corporation was deemed to have self-supplied it under subsection 190(4) at the time of the first lease of the first site in the residential trailer park. At the time of the taxable supply of the site to the individual, the corporation, if it is a registrant, may claim ITCs under the provisions of section 193 equal to the lesser of the basic tax content at the time of the sale of the site and the tax payable on the sale of the site or, if it is not a registrant, the corporation may be eligible for a rebate under the provisions of section 257.

Example 5

A corporation that owns a residential trailer park sells to an individual a single, separately titled site in a residential trailer park. The individual already owns the mobile home that is permanently affixed to the site in the same manner as a house. This sale of the site to the individual is not the supply of a residential complex, nor is it a supply of a residential trailer park. It is a taxable supply of land.

As noted in example 4, tax had already applied to this land when the corporation was deemed to have self-supplied it under subsection 190(4) at the time of the first lease of the first site in the residential trailer park. At the time of the taxable supply of the site to the individual, the corporation, if it is a registrant, may claim ITCs under the provisions of section 193 equal to the lesser of the basic tax content at the time of the sale of the site and the tax payable on the sale of the site or, if it is not a registrant, the corporation may be eligible for a rebate under the provisions of section 257.

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