CRA indicates that the immediate expensing income limit under Reg. 1100(0.1)(c) is determined at the partnership rather than partner level
In general terms, the immediate expensing incentive in Reg. 1100(0.1) allows for the immediate expensing of up to $1.5 million (the “immediate expensing limit”) of the costs of various classes of depreciable property (being designated immediate expensing property, or “DIEP”) that has become available for use, acquired by an eligible persons or partnerships (EPOPs) (being resident individuals, CCPCs or partnerships with them as the only members). However, by virtue of Reg. 1100(0.1)(c), an EPOP that is an individual or partner may not claim immediate expensing CCA in excess of the EPOP’s income (computed before CCA) from the business or property in which the relevant DIEP is used for the taxation year.
Regarding the application of this Reg. 1100(0.1)(c) limitation, CRA confirmed that:
- For purposes of this limitation, the income of the EPOP earned from the business or property in which the relevant DIEP is used includes recapture of depreciation or terminal loss that relates to that same source of income.
- The immediate expensing CCA is deducted prior to regular CCA and consequently, although Reg. 1100(0.1)(c) effectively prevents an EPOP that is an individual or partnership from using the immediate expensing deduction to create or increase a loss, following their immediate expensing claim and subject to any other restrictions such as the rental and leasing property restriction rules in Regs. 1100(11) and (15), an individual or partner may use regular CCA on any remaining UCC balances to create or increase a loss.
- Given that CCA is claimed in computing income at the partnership level, the immediate expensing income limit under Reg. 1100(0.1)(c) is also determined at the partnership level, rather than taking into account additional expenses incurred at the partner level.
Neal Armstrong. Summary of 24 March 2023 External T.I. 2023-0960171E5 under Reg. 1100(0.1)(c).