20 May 1997 External T.I. 9711405 - TERMINAL LOSS

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:

will terminal loss apply to rental business?

Position:

yes

Reasons:

20(16)

                                      		971140
XXXXXXXXXX		                                S. Tevlin

Attention: XXXXXXXXXX

May 20, 1997

Dear Sirs:

Re: Terminal Loss

We are writing in response to your letter of January 14, 1997 wherein you requested our opinion with respect to the above noted subject. In particular you enquired as to whether a terminal loss would be available to a taxpayer that has disposed of a depreciable property that has been used to earn rental income. In this regard we offer the following general comments.

Pursuant to subsection 20(16) of the Income Tax Act, a taxpayer may deduct a terminal loss in computing income from a business or property. Generally, a terminal loss results whenever a taxpayer has disposed of all of the property included in any of the classes described in Schedule II of the Income Tax Regulations (the "Regulations"). In the situation where a taxpayer is carrying on more than one business, subsection 1101(1) of the Regulations requires that the taxpayer use a separate class for the properties that relate to each of the separate businesses.

We have included a copy of Interpretation Bulletin IT-478R entitled "Capital Cost allowance - Recapture and Terminal Loss", which summarizes Revenue Canada's current position on that subject matter.

We apologize for the delay in responding to your request.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch