CRA finds that “cost” under s. 127(32) did not include costs of processing property after its acquisition

The rules in s. 127 require the recapture of the cost of property previously claimed as investment tax credits where the property is, for instance, converted to commercial use or sold. S. 127(32) provides inter alia that, in this context, the cost “shall not exceed the amount paid by the taxpayer to acquire the particular property from a transferor [thereof].”

CRA, in a diffident analysis, suggested that, in light of this wording in relation to trees which were converted into logs and then used to test some experimental lumber-producing equipment, the cost likely only included the cost of the trees (i.e., the stumpage fees paid to the province) and not all the additional costs incurred in processing the trees.

Neal Armstrong. Summary of 31 July 2023 Internal T.I. 2021-0876331I7 under s. 127(32).