Jennings – Tax Court of Canada finds that rezoning expenses were fully deductible

Six years after the taxpayers acquired a triplex, they discovered that it was not zoned for that use, and applied to get it rezoned. In finding that the substantial related expenses were deductible, Woods J noted that although there was in a sense a long-term benefit from the rezoning, it did not produce any change in how the property was used.

This is a more favourable result than Shabro, where the replacement of a floor, which was damaged because it rested on a former landfill site, by a floor supported by steel piles, was a capital expenditure even though (similarly to Jennings) the taxpayer thereby only got what it thought it had in the first place (a suitable building) - although it may have helped that the expenditures did not effect any change to, or acquisition of, tangible property (see BP Australia, Strick v. Regent, Oxford).

Neal Armstrong. Summary of Jennings v. The Queen, 2015 TCC 96 under s. 18(1)(b) – capital expenditure v. expense – improvements v. running expense.