2 February 1994 External T.I. 9327515 F - 18(1)(a), 40(1)

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.

PRINCIPAL ISSUES:

Are building expenses incurred after the cessation of a business deductible from income or from proceeds of disposition.

POSITION TAKEN:

No.

REASONS FOR POSITION TAKEN:

Paragraph 18(1)(a) and subsection 40(1) of the Act.

LEGAL:

n/a

FINANCE OPINION:

n/a

JURISPRUDENCE:

n/a

RCT PUBLICATIONS:

n/a

HAA NUMBER:

HAA 4844-1

XXXXXXXXXX

Attention:  XXXXXXXXXX

Dear Sirs:

This is in reply to your letter of September 21, 1993 concerning the deductibility of various expenses pertaining to a building that had previously been used in a business. We apologize for the delay in replying to your letter.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2, dated September 28, 1990. Where the particular transactions are completed, the enquiry should be addressed to the relevant district taxation office. The following comments are, therefore, of a general nature only, and are not binding on the Department.

Paragraph 18(1)(a) of the Income Tax Act (the "Act") provides a general restraint on the deductions permitted in the computation of income of a taxpayer from a business or property by prohibiting the deduction of an outlay or an expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property. Therefore for the interests, taxes and insurance costs relating to a building to be deductible, they would have to have been incurred while the taxpayer was carrying on a business. If the business has ceased, the above-mentioned expenses will not be deductible.

Furthermore, there are no provisions in the Act to add these expenses to the adjusted cost base of the building in such a situation; in addition, they cannot generally be considered as outlays or expenses incurred for the purpose of making a disposition, and consequently be deductible from the proceeds of disposition.

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

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate