4 June 1998 Ministerial Letter 9809318 - RESTORATION COSTS - HERITAGE BLDGS.

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: The tax treatment of expenses to preserve and restore heritage property.

Position: Question of fact.

Reasons: The tax treatment of restoration or preservation expenses depends on whether the expenditures are of a current or capital nature. We have established a number of guidelines which are based on previous jurisprudence.

June 4, 1998

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to respond to your letter, in which you suggested that tax incentives be provided to help encourage developers to preserve heritage properties. A copy of your letter was forwarded to Mr. Dhaliwal by the office of the Secretary of State (Parks), on March 19, 1998.

Generally, expenditures for restoring of preserving a building are allowed either as a current expense and deducted in full, immediately, or treated as a capital expenditure and deducted, in part, each year, according to the rules for depreciable. Essentially, whether an expenditure is of a current or capital nature is a question of fact, and all details of a particular situation must be analyzed to make a proper determination. However, the Department has established a number of guidelines based on previous court decisions that are relevant in this regard. These guidelines are covered in the enclosed Interpretation Bulletin IT-128R, Capital Cost Allowance - Depreciable Property.

Any changes to the rules relating to the income tax treatment of expenditures in respect of heritage properties would require a change in tax policy and an amendment to the Income Tax Act, both of which are the responsibility of the Department of Finance. I note that a copy of your letter was also sent to that department.

I trust that the above explains the Department's position regarding expenditures for preserving or restoring a heritage property.

		Yours sincerely,

		Denis Lefebvre
		Assistant Deputy Minister
		Policy and Legislation Branch

Enclosure

J. Gibbons
957-2135
April 28, 1998

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