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.
September 5, 2001
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your letter of April 19, 2001, XXXXXXXXXX, concerning the tax treatment of expenditures incurred by British Columbia residents in respect of their "leaky condominiums".
The Canada Customs and Revenue Agency (CCRA) is responsible for administering the Income Tax Act and strives to carry out this goal fairly and uniformly for all taxpayers. Please be assured that owners of leaky condominiums who repair their homes are not faced with additional tax burdens.
Like all other homeowners in Canada, taxpayers who incur expenses to repair or improve their home are not allowed a tax deduction as these are generally personal and living expenses. However, where the condominium is used to earn income, reasonable expenses incurred to repair the property would generally be allowed as a current deduction or, where the expenditure is capital in nature, as a deduction on account of capital cost allowance (which is deducted over the useful life of the property, similar to depreciation).
The Income Tax Act and Regulations do not deal specifically with the "leaky condominium" situation in British Columbia. Moreover, the Act does not define what constitutes a capital expenditure or a repair of a current nature. However, the courts have identified certain factors that should be considered in making such determinations. These factors are explained in detail in Interpretation Bulletin IT-128R, Capital Cost Allowance - Depreciable Property, a copy of which is attached.
As the determination of whether an expenditure is of a capital or a current nature involves considering all the relevant facts of each particular situation, the CCRA, unfortunately, cannot provide a general statement that would apply to all situations and for a wide range of expenses that might be incurred on account of remediation work considered necessary in the "leaky condominium" situation. In addition, in order for condominium owners to be entitled to claim a deduction in respect of capital cost allowance or current expenses, the property must be used in an activity that has a reasonable expectation of profit.
I appreciate being made aware of these concerns.
Yours sincerely,
Martin Cauchon
Attachment
C.C. Minister's Office
Political Assistant
Patrick Massicotte
May 30, 2001 957-9232
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