Land and non-depreciable building are one property

Although in common tax parlance one refers to land and building as distinct properties, at common law the improvements to land such as buildings form part of the land.  This often is not relevant as Reg. 1102(2) effectively deems depreciable property to be separate property from the land.

One place where this point is relevant is under Art. XIII, para. 9 of the Canada- U.S. Treaty, which potentially exempts part of the gain on the sale of real estate that has been held by a resident of the other country since before September 26, 1980.  In the example of recreational land in a common-law province on which a personal-use cottage building is erected after that date, the land and improvements will be considered to be one property, so that the portion of a subsequent gain of the U.S.-resident owner which can be partially exempted can include gain attributable to the building.  Also, only one s. 116 certificate would be required.

Neal Armstrong.  Summary of 4 December 2013 Memo 2013-0489051I7 under Treaties – Art. 13.