7 March 1991 Income Tax Severed Letter - Deductibility of right of way and easement costs

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.

Subject: Industry Issue Report #06
Right of Way & Easement Costs

We are writing in reply to you memorandum of January 16, 1991, in which you requested our confirmation that the positions relied upon by you which are reflected in report #06 are the current policies of Rulings in regards to the issue of deductibility for tax purposes of amounts incurred by a taxpayer to acquire an easement or right of way on property owned by another party. A copy of report #06 is attached to this memorandum for your quick reference.

We confirm that our general positions with respect to right of way and easement costs as stated in our memoranda dated July 6, 1989 (7-4076), July 4, 1986 (7-0395) and December 7, 1981, continue to be our current positions on the matter. However, we have the following suggestions for your consideration to modify the report:

• 1. In the second paragraph under the heading of "Tax Implications", the second sentence should be amended to replace "that may be written off" with "that may be added to its cumulative eligible capital".
• 2. The third paragraph under the same heading as above should be expanded to include the difference between the annual claims under paragraphs 20(1)(a) and (b) (i.e. 4% vs. 5 1/4% of cost to the taxpayer, respectively).
• 3. In the fourth paragraph under the heading of "Background", the tax treatment of the surface rights rentals should be modified to reflect our comments in the memo to file with respect to surface rights rentals, a copy of which is attached to this memorandum.

We hope that our comments are helpful to you.