4 October 1995 Internal T.I. 9521497 - CCA ON DECEASED'S RETURN

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.

Principal Issues:

- does reg. 1100(2.5) apply to the beneficiary of a property acquired under ss 70(5) or 70(6)?

Position:

yes

Reasons:

Nothing in the Act to prohibit the application of 1100(2.5) to deemed dispositions

				October 4, 1995

Edmonton Tax Services            			Trusts Section
Client Assistance Directorate    			L. Holloway
Estate and Trust                 			(613) 957-2104

Attention:  G. Service
                                 			952149

CCA claimed on Deceased's Final Return

This is in reply to your memorandum dated August 8, 1995, concerning whether capital cost allowance would be allowed on a deceased's final return where:

i) the asset owned at time of death was a class 10.1 asset (passenger vehicle costing more than the prescribed amount);

ii) the deceased had owned this asset for the entire year prior to death; and

iii) there is a deemed disposition of the asset under subsection 70(5) or where the asset is transferred to spouse under subsection 70(6) of the Income Tax Act (the "Act").

Paragraph 20(1)(a) of the Act, together with Regulation 1100(2.5) provides that where a taxpayer owns at the beginning of a particular year a passenger vehicle costing more than the prescribed amount and disposes of it before the end of that particular year, the taxpayer can claim a deduction equal to 50% of the CCA deduction that would otherwise been available had the vehicle not been disposed of during the year.

It is our opinion that the Act allows for CCA to be claimed under Regulation 1100(2.5) where there has been a deemed disposition of the asset under subsection 70(5) or where subsection 70(6) is otherwise applicable on a spousal rollover. As the definition of disposition in section 54 includes any transaction or event entitling a taxpayer to proceeds of disposition and both subsections 70(5) and 70(6) provide that the deceased is deemed to have received proceeds of disposition immediately before death, we see nothing in the Act to prohibit the application of Regulation 1100(2.5) to such deemed dispositions.

We agree with your final comment that "Either way the beneficiary(s) is able to take a full year's CCA under Regulation 1100(2.2)(e & h) for the full year". While the transferor's claim for CCA under Regulation 1100(2.5) would be prorated by the number of days in the taxation year preceding his date of death, the transferee, by virtue of not dealing at arm's length with the transferor would be entitled to a full year's CCA in the year of acquisition.

T. Murphy
A/Section Chief
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch