21 November 1994 Internal T.I. 9417017 - REASONABLE EXPECTATION OF PROFIT

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

	                          November 21, 1994
	London District Office	Business and General
	Jim Atkinson	             Division
	Business Audit	          A.M. Brake
(613) 957-2133

		                            941701

Dispositions of Property on which "No Expectation of Profit" Determination has been made.

This is in reply to your memorandum of June 23, 1994 concerning a loss on the disposition of a capital property (building) where rental losses have been disallowed on the basis of "no reasonable expectation of profit". It is your view that since the property is not a "personal use property" ("PUP"), the subparagraph 40(2)(g)(iii) stop loss rule would not deny the loss.

Generally, all property, other than inventory, constitutes capital property. Certain types of capital property fall within the definition of a PUP and certain PUPs are further defined to be "listed personal property" ("LPP"). Where the proceeds of disposition on any capital property is less than the adjusted cost base of that property a capital loss is realized from the disposition and unless the stop loss rules contained in paragraph 40(2)(g) specifically deny or restrict the capital loss, it would not otherwise be denied. Given that the property in question is not a PUP and that there is no other provision contained in paragraph 40(2((g) that would have application, we agree with your position that the loss should not be denied.

Whether a particular property is a PUP is a determination of fact to be made based on the facts of a particular situation and in this regard we have forwarded a copy of your submission to the attention of Ian Rathwell, Audit Directorate, who will be responding further on this subject and related matters.

R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch

c.c.Ian Rathwell, Audit Directorate