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.
DATE March 8, 1983
TO - AUDIT REVIEW DIVISION
FROM-- PUBLICATIONS DIVISION A. Glen Thornley
ATTENTION Mr. J.T. Waszut
RE: IT-259R , Paragraphs 21, 16 & 17
This is in reply to your memorandum dated March 1, 1983 regarding the meaning of "replacement property" for purposes of subsection 44(1).
As discussed with you on March 7, 1983, your concern that a taxpayer could buy and sell vacant land many times and accumulate capital gain deferrals indefinitely for the sales as long as he purchased replacements of vacant land within the time frames required by subsection 44(2) is unwarranted. A taxpayer is allowed to defer the capital gain arising from an expropriation of vacant land by purchasing other vacant land as a "replacement property". Should he subsequently sell the replacement vacant land and attempt to defer a capital gain on it by purchasing another replacement property, subsection 44(1) would require that the property immediately before the disposition be a "former business property" as defined in section 248. It is our opinion that the original replacement property, being vacant land, could not meet that requirement.
During our conversation on March 7, 1983 you expressed the opinion that in subsection 44(5) the words "if it was acquired by the taxpayer for the same or similar use as the use to which he put the former property," would exclude vacant land from the definition of replacement property as "non-use" does not constitute use. From a purely theoretical view point, we would agree with you, however, if the taxpayer claimed that his vacant property was being held as an investment or for rental purposes we would be hard pressed to deny that it was a capital property acquired for a use. Ray Thompson's group in Corporate Rulings supports our position that vacant land that is appropriated may be replaced by other vacant land pursuant to the provisions of subsection 44(1) of the Act.
Notwithstanding the foregoing, we will review the above captioned paragraphs of IT-259R to determine if any ambiguity exists. Thank you for bringing this matter to our attention.
For Director Publications Division
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