CRA recognizes glitch in the draft rules for Class 14.1 (formerly, eligible capital) properties

Effective January 1, 2017, eligible capital properties will become Class 14.1 depreciable property. There is a glitch in the draft legislation, which CRA has referred to Finance.

Where, prior to 2017, an addition to a taxpayer’s CEC was reduced under variable A.1 based on the gain realized by a non-arm’s length transferor of the eligible capital property, there is no upward adjustment under the draft legislation for this amount where there is an arm’s length sale after January 1, 2017 of what now is a Class 14.1 property – so that effectively there is double recognition of a capital gain.

Neal Armstrong. Summary of 2016-0641851E5 under s. 13(37).