Livingston – Tax Court of Canada narrowly construes the replacement property concept

Lyons J found that the use by the taxpayer, who was a co-owner of a dairy farm, of the proceeds of a sale of a part interest in his land co-ownership interest to purchase the interest of the other co-owner in the non-realty farming assets (e.g., the milk quota and farming equipment), which he used in continuing to carry on his dairy farming, did not entitle him to access the s. 44(1) rollover: the purchased farming assets did not "replace" the farmland he sold as required by s. 44(5)(a), as this concept required a "direct substitution" of "the same species of capital property;" and the purchased assets also were not acquired for a "similar" use to that of the farmland, as required by s. 44(5)(a.1).

Neal Armstrong – Summary of Livingston v. The Queen, 2015 TCC 24 under s. 44(5)(a).