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.
Dear Sirs
Re: Replacement Property Rules
This is in reply to your letter dated July 25, 1991 concerning the application of the replacement property rules in sections 13 and 44 of the Income Tax Act (the "Act") to the series of transactions described below:
Facts
1.
2.
24(1)
3.
4.
5.
6.
Our Comments
The situation outlined in your letter appears to relate to specific proposed transactions with identifiable taxpayers. Confirmation of the tax consequences relating to specific proposed transactions will only be provided in response to a request for an advance income tax ruling. The procedures for requesting an advance ruling are set out in Information Circular 70-6R2 dated September 28, 1990. We can, however, offer the following general comments
The Department's general position with respect to the application of the replacement property rules is outlined in Interpretation Bulletins IT259R2, "Exchanges of Property" dated September 30, 1985 and IT-491, "Former Business Property" dated September 3, 1982.
Paragraph 1 of IT-259R2 states that the replacement property rules in subsections 13(4) and 44(1) of the Act are available in respect of the disposition of property that is either:
(i) stolen, destroyed or expropriated, or
(ii) a former business property.
Paragraph 2 of IT-491, in part, states, "Subsection 248(1) defines "former business property" to mean capital property that was used by the taxpayer primarily for the purpose of gaining or producing income from a business and that was real property or an interest therein, but does not include a rental property of the taxpayer."
As the 24(1) sold by Cco were not stolen, destroyed or expropriated and are not real property or an interest therein, the replacement property rules are not available to Cco to defer all or part of any recapture of capital case allowance or any capital gain in respect of the disposition of such 24(1)
We trust these comments are of assistance.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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