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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
The application of subsection 14(1.01) of the Act in two hypothetical situations, which concern the expression "the cost of the property to the taxpayer can be determined."
Position:
General comments provided; where insufficient information is provided the Directorate is not inclined to provide an opinion on a recently enacted provision. We will, however, provide an advance income tax ruling if requested, providing all necessary information is disclosed. If the transactions are complete, the matter should be referred the relevant Tax Services Office, to whom we would provide assistance in reviewing the matter where requested.
Reasons: IC 70-6R4
XXXXXXXXXX 2001-009490
Randy Hewlett, B.Comm.
October 9, 2001
Dear XXXXXXXXXX:
Re: Technical Interpretation Request - Subsection 14(1.01) of the Income Tax Act (the Act)
We are writing in response to your letter dated July 25, 2001, wherein you requested our opinion regarding subsection 14(1.01) of the Act, enacted June 14, 2001 when Bill C-22 received Royal Assent. We also acknowledge a recent telephone conversation on the matter (Hewlett/XXXXXXXXXX September 21, 2001). The focal point of your request concerned the expression "the cost of the property to the taxpayer can be determined" as used in subsection 14(1.01) of the Act. Specifically you ask whether the election in subsection 14(1.01) of the Act can be utilized where a taxpayer sells an eligible capital property (ECP) in two hypothetical situations you put forward. In the first situation the costs in developing the property is known and has been capitalized as an eligible capital expenditure. In the second situation, no amount has been capitalized and you indicate that there are development costs that may have been deducted as current expenditures.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R4, Advanced Income Tax Rulings, dated January 29, 2001. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Subsection 14 (1.01) of the Act allows a taxpayer to elect to remove a portion of the proceeds of disposition of an ECP from cumulative eligible capital (CEC) and recognize a capital gain on the portion of the proceeds in excess of the cost. The cost is deemed to be the proceeds of disposition for the purposes of subsection 14(5) of the Act and accordingly deducted from CEC. The election does not apply where, among other things, the taxpayer cannot determine the cost of the property.
As discussed with you in the telephone conversation referred to above, we are unable to provide a technical opinion on the application of subsection 14(1.01) of the Act with limited information in an actual fact situation. We will, however, consider a request for an advance income tax ruling on a proposed transaction, if all the necessary information is provided. As explained in paragraph 22 of IC 70-6R4, if the transactions are completed, the matter should be referred to your client's Tax Services Office.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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