0808414 B.C. – Federal Court of Appeal finds that the proceeds of depreciable property were not reduced by assumed pension obligations

The taxpayer sold a contract-manufacturing business to an affiliated Canadian company. Although it conceded that the FMV of the (Class 29) machinery and equipment included in the sale would have been $56.5 million if sold alone, it argued that such FMV should be reduced by the estimated amount of the pension obligations assumed by the purchaser ($8.2 million) since the business was sold as a going concern.

After referring to Daishowa‑Marubeni, Webb JA stated:

[T]he pension obligations were not imbedded in the Equipment, they arose because the vendor had pension obligations to its employees. …

[I]n applying section 69 of the Act, the proceeds of disposition are not determined for the business per se, but rather separately for each particular asset comprising the business … that was sold. The pension obligations and any other liabilities or obligations assumed by the purchaser would be part of the consideration paid for the various assets. Such obligations and liabilities would not reduce the fair market value of the Equipment.

Neal Armstrong. Summary of 0808414 B.C. Ltd. v. Canada, 2025 FCA 193 under s. 69(1)(b).