16 November 2001 External T.I. 2001-0101055 - gas station fuel tank leakage cleanup costs

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: Are the costs incurred to clean up leakage from underground fuel tank ( gas station) deductible in the current period?

Position: Depends on the Facts.

Reasons: While the nature of any cost depends upon the facts in a given situation, generally, costs incurred to remove pollutants or to modify a condition that was caused or is directly attributed to the business, and that will not contribute value to the land beyond what it would be worth in an undisturbed state, would generally, be considered to be current expenses.

Costs incurred for the purpose of improving the location in preparation for development or sale or to alter the land beyond its natural state would generally be considered capital in nature if the land itself is a capital property.

								2001-010105
XXXXXXXXXX 							Mohamud Jivraj
(613) 957-9796
November 16th 2001

Dear Sir,

Re: Environmental Clean-up Costs

This is a response to your fax of September 12, 2001.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Service Office. However, we are prepared to provide the following general comments.

While the nature of any cost depends upon the facts in a given situation, costs incurred to remove pollutants or to modify a condition that was caused or is directly attributed to the business, and that will not contribute value to the land beyond what it would be worth in an undisturbed state, would generally be considered to be current expenses.

Costs incurred for the purpose of improving the location in preparation for development or sale or to alter the land beyond its natural state would generally be considered capital in nature if the land itself is a capital property.

The above comments should not be construed as advance income tax rulings, nor are they binding on the Agency with respect to a particular fact situation.

If you have any questions concerning this matter, please contact the writer.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch