CRA expands its official published positions on the replacement property rules

Folio S3-F3-C1 on the replacement property rules has largely repeated the points in (now-cancelled) IT-259R4, but has also added a few points:

  • Class 14.1 properties (e.g., farm quotas) will not be eligible as former business properties because they are not real property.
  • The s. 44 rollover can be used to reduce a capital gain that otherwise would arise after giving effect to a partial rollover under s. 85(1).
  • A building rented by a partner to a partnership for use in its business would normally be considered to be a former business property of the partner.
  • Where a partnership is wound up under s. 98(3), CRA accepts that the undivided interests received in the former partnership’s property can qualify as former business properties, so that the former partners can now exchange their undivided interests for divided interests on a rollover basis under ss. 44 and 13(4).
  • CRA has added brief comments on the extension in s. 13(4.2) of the former business property concept to limited-period franchises, concessions or licences that have been disposed of or terminated.

Various of the positions carried forward from IT-259R4 are potentially quite helpful, including an expansive interpretation of the concept of similar business.

Neal Armstrong. Summaries of Folio S3-F3-C1 dated 8 April 2019 under s. 13(4.1), s. 13(4.3), s. 44(1), s. 44(1)(e), s. 44(5)(a), s. 44(6), s. 248(1) – former business property, s. 87(2)(l.3) and s. 88(1)(e.2).