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.
1989 CORPORATE MANAGEMENT TAX CONFERENCE
QUESTION 17
(A) FOR THE PURPOSES OF DETERMINING THE TYPE OF PROPERTY IN A BUTTREFLY REORGANIZATION DOES REAL ESTATE USED IN AN ACTIVE BUSINESS QUALIFY AS A ``BUSINESS PROPERTY" OR DOES ITS ULTIMATE USE BY THE TRANSFEREE DICTATE THE TYPE OF PROPERTY IT CONSTITUTES?
(B) IF THE REAL ESTATE IS USED PARTIALLY IN AN ACTIVE BUSINESS BUT PRINCIPALLY IN A SPECIFIED INVESTMENT BUSINESS, WOULD THE REAL ESTATE CONSTITUTE TWO TYPES OF PROPERTY? IF THE ANSWER IS AFFIRMATIVE, ON WHAT BASIS SHOULD THE DISTRIBUTION BE MADE?
DEPARTMENT'S POSITION
(A) IT IS GENERALLY THE USE OF THE REAL ESTATE BY THE PARTICULAR CORPORATION BEFORE THE BUTTERFLY REORGANIZATION THAT WOULD BE TAKEN INTO ACCOUNT IN DETERMINING THE TYPE OF PROPERTY THE REAL ESTATE CONSTITUTES. A CHANGE IN USE, IF ANY, PRIOR TO THE BUTTERFLY REORGANIZATION WOULD ALSO BE TAKEN INTO CONSIDERATION IN MAKING SUCH A DETERMINATION.
(B) DEPENDING ON THE FACTS OF A PARTICULAR SITUATION, IT IS THE DEPARTMENT'S VIEW THA REAL ESTATE USED PARTIALLY IN AN ACTIVE BUSINESS AND PARTIALLY IN A SPECIFIED INVESTMENT BUSINESS WOULD GENRALLY CONSTITUTE TWO TYPES OF PROPERTY, NAMELY, BUSINESS PROPERTY AND INVESTMENT PROPERTY. ANY REASONABLE ALLOCATION OF THE FAIR MARKET VALUE OF THE PROPERTY BASED ON USE WOULD BE ACCEPTABLE TO THE DEPARTMENT FOR THE PURPOSES OF DETERMINING WHAT PORTION OF THE FAIR MARKET VALUE SHOULD BE ALLOCATED TO EACH TYPE OF PROPERTY.
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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