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.
| 19(1) |
File No. 5-8506 |
| |
M. Eisner |
| |
(613) 957-2138 |
November 14, 1989
Dear Sirs:
This is in reply to your letter of August 4, 1989 concerning the meaning of "replacement property" in subsection 44(5) of the Income Tax Act.
As you have described a proposed transaction in your letter in respect of an actual fact situation, we are unable to comment thereon pursuant to paragraph 23 of Information Circular 70-6R. However, we are able to provide you with general comments.
It is our understanding that you are concerned with the type of situation where a taxpayer ceases to carry on part of a manufacturing operation but continues to deal in the same product and, as a consequence, disposes of a building and the related land used in the old operation and acquires a building and related land for use in the new operation.
In relation to this situation, paragraph 16 of IT-259R2 indicates that where a former property was used for the purpose of gaining and producing income from a business, the department will normally consider the replacement property to be acquired for the "same or similar use" it it is a property that is used for the purpose of gaining or producing income in the same or similar business. In addition, paragraph 19 of IT-259R2 indicates that a taxpayer who changes from one business category to another but continues to deal in the same product will normally be considered to be in a "similar business".
As a result of the foregoing comments in IT-259R2, it is our general view that the capital property acquired in the above situation will not be prevented from being described in paragraphs 44(5)(a) and (b) by virtue of the taxpayer having ceased to carry on part of the manufacturing operation.
These comments represent our opinion of the law as it applies generally. As indicated in paragraph 24 of Information Circular 70-6R dated December 18, 1978, this opinion is not a ruling and, accordingly, it is not binding on Revenue Canada, Taxation.
We trust that these comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch
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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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