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.
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901133 |
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J.D. Brooks |
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613-957-2097 |
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EACC 9459 |
Dear Sirs:
Re: Subsection 1103(2d) of the Income Tax Regulations Subsection 85(1) of the Income Tax Act
We are writing you in reply to your letter of June 13, 1990 in which you raised a concern which stems from our letter (900027) of June 8, 1990 on Regulation 1103(2d). You noted that an election filed under Regulation 1103(2d) with respect to the 1988 transfer from Corporation A to Corporation X would be deemed to have effect prior to the time at which an election under subsection 85(1) of the Act would have been filed. Since the election under the Regulation would cause the transferred assets to be in class 39 at the time of the transfer to Corporation X and no longer in class 39 at the time of the transfer to Corporation X and no longer in class 29, you raised the concern that the subsection 85(1) election would no longer be valid. You queried whether the Department would view the revision to the subsection 85(1) election, identifying the property as property of class 39 and not of class 29, as being of a clerical nature and therefore be afforded the treatment described in paragraph 19 of our Information Circular 76-19R.
Our Comments
Where an election under subsection 85(1) of the Act is filed, it relates to specific property rather than to a prescribed class of assets. Thus, the transfer of the assets from class 29 to 39, pursuant to Regulation 1103(2d), would not itself invalidate the election.
However, it is likely that the transfer of assets will necessitate a revision to the amounts agreed upon for purposes of subsection 85(1). This could be the case where the undepreciated capital cost ("UCC") of class 39 is higher than the UCC of class 29 and the UCC of the class was used to determine the agreed amounts. To alter the agreed amounts, it would be necessary to conform to the requirements of subsection 85(7.1).
Yours truly,for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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