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: Whether re-purchase of a Class 3 property is added to Class 3 or Class 1 of Schedule II of the Regulations.
Position: In this situation, Class 3.
Reasons: All condominium units in the same building are considered to be the same "rental property".
XXXXXXXXXX 2001-010680
A. Seidel, CMA
(613) 957-2058
December 21, 2001
Dear XXXXXXXXXX:
Re: Capital Cost Allowance for Condominiums
This is in reply to your letter, dated October 19, 2001, requesting our views as to the appropriate classification of a condominium for capital cost allowance ("CCA") purposes within Schedule II of the Income Tax Regulations (the "Regulations").
The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate district tax services office for their views. However, we are prepared to offer the following general comments which may be of assistance.
Each condominium unit that a taxpayer owns, that is contained within and is part of an aggregate structure that is a building, is necessarily referenced to the particular building in which it is contained. Subsection 1101(1ac) of the Regulations refers to one or more properties that is a "rental property" and a "rental property" is defined, in subsection 1100(14) of the Regulations, as a building. Accordingly, it is reasonable to conclude that, for purposes of subsection 1101(1ac) of the Regulations, when a taxpayer owns several condominium units in the same building, they would all be included in the appropriate CCA class as one building. Furthermore, if a taxpayer owns several condominium units in the same building, and the aggregate of the cost of the units owned in that building is greater than $50,000, then a separate class must be set up for that aggregate in respect of that building for CCA purposes pursuant to paragraph 1101(1ac)(a) of the Regulations.
Although paragraph 6 of Interpretation Bulletin IT-304R2 ("IT-304R2") states that condominium units acquired after 1987 are generally included in Class 1 of Schedule II of the Regulations, it also states that "if a unit was acquired before 1988, it may have qualified for inclusion in Class 3 ...". Paragraph 7 of IT-304R2 re-iterates that two or more condominium units in the same building are included in the same class for CCA purposes.
Generally, where a condominium building was purchased before 1988, and was included in Class 3 of Schedule II of the Regulations, any subsequent disposition or re-acquisition of condominium units in that building would be considered to be dispositions and acquisitions of that Class 3 property. However, paragraph (k) of Class 3 of Schedule II of the Regulations has a dollar limit for additions made to a Class 3 property after 1987. Paragraph (k) of Class 3 provides that any subsequent additions to Class 3 are permitted "to the extent that the aggregate cost of all such additions ... to the building does not exceed the lesser of" $500,000 and 25% of the aggregate of the amounts that would be the capital cost of the building and any additions thereto included in Class 3, Class 6 or Class 20 of Schedule II of the Regulations.
The publications referred to in this letter may be obtained from your local tax services office or from our Internet web site (www.ccra-adrc.gc.ca).
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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