23 February 1990 Ministerial Correspondence 59444 F - Meaning of "Replacement Property"

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.

February 23, 1990

Dear Sirs:

Re:  "Replacement Property" Section 44 of the Income Tax Act

This is in reply to your letter of January 17, 1990 concerning the meaning of the above term in the following fact situation:

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Based on above facts you have asked us to confirm that:

The land and buildings which are located in the United States will qualify as "replacement property" for the purposes of Section 44 of the Income Tax Act.

Our Comments

From the information in our telephone conversation of February 5, 1990, it would appear that you are describing a proposed transaction, involving a specific taxpayer which according to the Department's Information Circular 70-6R would more appropriately be the subject of an Advance Income Tax Ruling.  We are however prepared to offer the following general comments.

The question of whether a particular property qualifies as a replacement property is one that must be determined on the basis of all the pertinent facts of the particular situation.

As you are aware the term "replacement property" is defined in subsection 44(5) of the Income Tax Act.  In order for a property to come under this definition the conditions in paragraphs 44(5)(a), (b) and (c) of the Act must be met, if applicable.

24(1)

We suggest you refer to Interpretation Bulletin IT-259R2 regarding the time at which proceeds of disposition become receivable in the case of an expropriation and other matters which you may be concerned about.  We particularly refer you to paragraph 10 of this Interpretation Bulletin which explains the Department's position when more than one property is acquired to replace another, which you indicated in our telephone conversation may be the situation in your client's case.

In answer to your main concern it is our view that a geographical location would not necessarily be a relevant factor in establishing the use for a replacement property, provided all of the conditions in subsection 44(5) are met and the necessary election is properly filed as required.

We trust the above comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislation and Intergovernmental Affairs Branch