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.
922127
24(1) Glen Thornley
(613) 957-2101
Attention: 19(1)
August 24, 1992
Dear Sirs:
Re: Recaptured Capital Cost Allowance
This is in reply to your letter of July 7, 1992 concerning whether recaptured capital cost allowances are considered active business income or income from property (inactive).
In your particular fact situation the taxpayer was a CCPC that reported its income as active business income up until the time it sold its business. The land and buildings that were previously used in the active business were retained but were subsequently rented to an unrelated corporation. Your client proposes to sell the land and building for an amount that will result in recapture of capital cost allowances. You ask if the recapture of capital cost allowances in these circumstances will be considered active business income or income from property and thus inactive business income.
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
Our Comments
The Department's administrative position on the reporting of recapture of capital cost allowance that arises after cessation of the particular business that gave rise to the recapture of capital cost allowances is set out in paragraph 6 of Interpretation Bulletin IT-73R4. There it states that income related to a business that arises after cessation of that business cannot qualify as income from a business except where it arises from, among other things, the recapture of capital cost allowance. In this situation the income that does qualify as income from a business because it arises from the recapture of capital cost allowance will be considered to be income from the same category of business as that to which the source originally related. This administrative position does not, however, extend to situations where the depreciable property is subsequently treated as a rental property and capital cost allowance claimed against such rental income. It would then be a rental property giving rise to property (inactive) income. Our administrative position as described above would generally apply if the property was only rented or leased for a short time during which it was listed for sale and no capital cost allowance was claimed against the incidental rental or lease income.
The foregoing is an expression of opinion only and is not an advance income tax ruling. Accordingly, it is not binding on the Department.
We trust our comments will be of assistance to you. Yours truly,
E. Wheeler
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
Document Disclosed Pursuant to The Access To Information Act Document Divulgué en vertu de la loi sur l'accès à l'information
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© Her Majesty the Queen in Right of Canada, 1992
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© Sa Majesté la Reine du Chef du Canada, 1992
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