What the "Archived Content" notice means for interpretation bulletins

NO: IT-491SR

DATE: APRIL 8, 1993

SUBJECT: INCOME TAX ACT
Former Business Property

REFERENCE: SPECIAL RELEASE

Application

This Special Release revises IT-491 dated September 3, 1982. This revision applies to dispositions of property occurring after July 13, 1990. For dispositions prior to July 14, 1990, please refer to the original version of this bulletin.

Bulletin Revisions

1. Paragraph 2 of the bulletin is deleted and replaced with the following:

2. Paragraph 44(1)(b) requires that the capital property must qualify as a former business property "immediately before the disposition." Subsection 248(1) defines "former business property" to mean capital property that was used by the taxpayer or a person related to the taxpayer primarily for the purpose of gaining or producing income from a business, and that was real property or an interest in real property, but does not include rental property of the taxpayer. The words "used... primarily" refer to the use made of the property during the taxation year in which the disposition was made. This means that the principal use of the property was to earn qualified business income (but not rent) during that period. Where no use was made of the property (including no leasing of the property) during the year of disposition, the use made of the property in the previous taxation year will be considered.

2. Paragraph 3 of the bulletin is deleted and replaced with the following:

3. "Rental property" is excluded from the definition of "former business property" and is further defined to mean real property owned by the taxpayer and used in the particular year principally for the purpose of gaining or producing gross revenue that is rent. Accordingly, even though a property is used to earn qualified business income, it would be disqualified as a former business property if it was used in the taxation year in which it was disposed of principally for the purpose of producing rent. However, if a property is leased by the taxpayer to a person related to the taxpayer and is used by that related person principally for any purpose other than gaining or producing gross revenue that is rent, it is not included in the definition of rental property.

3. Paragraph 9 of the bulletin is deleted.

If you have any comments regarding the matter discussed in this release, please send them to:

Director, Technical Publications Division
Legislative and Intergovernmental Affairs Branch
Revenue Canada, Taxation
875 Heron Road
Ottawa, Ontario
K1A OL8