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.
RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY
Principal Issues:
Where depreciable property has been disposed of in physical parts or undivided interests, whether the "lesser of" formula in component "F" of the undepreciated capital cost of a prescribed class, as defined in subsection 13(21), is determined by aggregating all proceeds of disposition and all pro-rata capital cost in respect of a particular property or by considering each partial disposition as the disposition of a separate property.
NOTE: Issue relates to partial disposition method employed in IT-418.
Position TAKEN:
No position taken. Arguments for both views. Publications advised of potential confusion arising from IT-418 example.
Reasons FOR POSITION TAKEN:
Legislation unclear.
951572
XXXXXXXXXX G. Donell
Attention: XXXXXXXXXX
September 26, 1995
Dear Sir:
Re: Undepreciated capital cost - Partial dispositions
This is in reply to your letter of June 16, 1995 in which you have asked us for our views with respect to the method employed, in Interpretation Bulletin IT-418, titled "CCA - Partial Dispositions of property", dated June 26, 1978. In particular you have outlined a hypothetical situation where a depreciable property has been disposed of in two equal parts in two separate taxation years. In the first such year the pro-rated capital cost of the part disposed of exceeds the related proceeds of disposition whereas in the second year the reverse occurs. In such a situation you contend that the method used in IT-418 to determine the effect upon the related undepreciated capital cost, as defined in subsection 13(21) of the Income Tax Act, produces an anomalous result that fails to reflect the actual economic result.
The situation you have outlined has not previously been considered by this Directorate and accordingly we are unable to provide you with a definitive response in view of the comments in the above-mentioned interpretation bulletin. We have however, as indicated to you in a recent telephone conversation with Mr. Gary Donell, communicated your concerns and forwarded a copy of your correspondence, to our Technical Publications Directorate for their consideration.
Yours truly,
Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch
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