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.
Principal Issues: In order to avoid CCA recapture on the sale of its depreciable business assets consisting of heavy equipment, the taxpayer-corporation wishes to elect under Reg. 1103(1) to transfer them into class 1 prior to acquiring a commercial rental building that would also fall into class 1. If the heavy equipment and the building are not used in the same business, can the Reg. 1103(1) election be effective to avoid the CCA recapture on the heavy equipment by the purchase of the building?
Position: No
Reasons: Reg. 1101(1) prescribes a separate class for properties that otherwise would fall into the same class but are used in separate businesses. Reg. 1103(1) election applies to assets used in the same business.
XXXXXXXXXX S. Parnanzone
2006-017111
March 6, 2006
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling Request
XXXXXXXXXX
This letter confirms our recent telephone conversations and in particular the telephone conversation of March 2, 2006, (XXXXXXXXXX/Parnanzone) at which time you advised us that you were electing to withdraw the advance income tax ruling request of February 6, 2006, submitted on behalf of the above-named taxpayer, concerning an election under subsection 1103(1) of the Income Tax Regulations.
As discussed by telephone, in a situation where two properties are described in the same class of Schedule II of the Income Tax Regulations and where one of the properties is acquired for the purpose of earning income from a particular business and the other property is acquired for the purpose of earning income from a separate business or from the property, subsection 1101(1) of the Income Tax Regulations prescribes a separate class for each property that was acquired for the purposes of earning income from each business. In this regard, we also referred you to Interpretation Bulletin IT-206R, Separate Businesses.
We are therefore closing our file on your ruling request. Your deposit will be refunded under separate cover.
Yours truly,
Bob Skulski
Manager
Business Incentives & Capital Transactions Section
Business and Partnerships Division
Income Tax Rulings Directorate
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