(1)-(16)

Subsection 13(1) - Recaptured depreciation

Administrative Policy

S3-F4-C1 - General Discussion of Capital Cost Allowance

Pro-rating of capital cost on part disposition

In para. 1.73, CRA indicated that where the is a partial disposition of a depreciable property of a depreciable property of a prescribed class, the apportionment rule in s. 43 should be used for purposes of calculating recapture.

For example (para. 1.74), if the taxpayer’s sole depreciable property had a capital cost of $15,000 and total CCA allowed of $10,000, so that it had an undepreciated capital cost of $5,000, a sale of a ½ interest in the property for proceeds of $17,000 less selling costs of $1,000 would yield a capital gain of $8,500 (i.e., net proceeds of $16,000 minus the pro rata capital cost of $7,500) and recapture of depreciation of $2,500 (i.e., the proceeds would be limited to the pro rata capital cost of $7,500, which would be compared to the UCC of $5,000).

No reserve

1.97 If a recapture of CCA results from the disposition of property in a particular year but full payment is not received in that year, the taxpayer must nevertheless include the entire amount of the CCA recapture in income for that year. There is no entitlement to any reserve on the recaptured amount.

Terminal loss after cessation of business

1.100 There might still be property remaining in a particular class at the time a taxpayer ceases carrying on business. In this case, the taxpayer may qualify to claim a terminal loss when the property is disposed of even though income is no longer earned from the business at the time of the disposition. However, the taxpayer may not do so unless all the assets in the particular class are disposed of. This means that if a taxpayer retains property of the class without using it for any other purpose, no terminal loss in respect of the class can be claimed. Furthermore, the taxpayer is not entitled to claim CCA on the property in any subsequent year unless it is used in that year to earn income from a business or property as required for purposes of a deduction under paragraph 20(1)(a) of the Act and subsection 1100(1) of the Regulations. If, on the other hand, the taxpayer starts using the property for a non-income-producing purpose, there is a deemed disposition of the property at that time at its fair market value pursuant to paragraph 13(7)(a) of the Act. Such a deemed disposition could result in a CCA recapture or possibly in a terminal loss where no other property remains in the class.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense 476
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 669
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property 170
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 248
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28) 194
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27) 178
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29) 145
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) 184
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) 267
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3) 60
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) 140
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.5) 167
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) 53
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b) 204
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) 150
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) 55
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) 142
Tax Topics - Income Tax Act - Section 68 153
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) 65
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b) 117
Tax Topics - Income Tax Act - Section 8 - Subsection 8(2) 65
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1) 142
Tax Topics - Income Tax Act - Section 13 - Subsection 13(9) 207
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 299
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 214
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) 259
Tax Topics - Income Tax Act - Section 13 - Subsection 13(6) 191

29 July 2015 Internal T.I. 2015-0575921I7 - Recapture arising in statute-barred years

negative UCC balance arising in statute-barred year becomes recapture in 1st open year

A taxpayer added the cost of property acquired to a particular Schedule II class, and then claimed CCA on the property for numerous years including ones which now are statute-barred. CRA has now determined that such property was not depreciable property.

IT-478R2, para. 14 states:

If the revision to the property's capital cost causes the UCC decreases to exceed the UCC increases as of the end of a year now statute-barred, the recapture of that excess amount under subsection 13(1) will not be added into the taxpayer's income for that year or a subsequent year.

Is this correct? The Directorate responded:

…[T]he meaning of the word "allowed"…includes the amount of CCA claimed by the taxpayer and allowed as a deduction under paragraph 20(1)(a) for a taxation year that is statute-barred (even though such CCA deductions were unwarranted or otherwise made in error and can no longer be revised). …

If the total of all the decreases exceeds the total of all the increases to the UCC of a class as of the end of a taxation year, subsection 13(1) provides that this excess shall be included in computing the taxpayer's income for the year. The recapture of CCA that was included in the taxpayer's income then becomes a positive component in the calculation of the UCC of the particular class under element "B" in a subsequent taxation year. Unlike element "E", element "B" does not include any amount of recapture that should have been previously included in the taxpayer's income in a previous (including statute-barred) taxation year, but was not, in fact, included in income.

…[T]he CRA will not add an amount of recapture that otherwise should have been included in the taxpayer's income for a prior taxation year to a year that is beyond the normal reassessment period… . However,…where element "A" has been revised in the first non-statute-barred taxation year, such that there is an excess of UCC decreases over increases at the end of that year, an income inclusion under subsection 13(1) is necessary in order to resolve the negative UCC balance.

Accordingly…the CRA could (re)assess the particular taxpayer to include the appropriate amount of recapture in the taxpayer's income at the end of the first non-statute-barred taxation year in order to resolve the negative UCC balance. …[O]ur positions on the issues discussed in this letter will be updated…in new Income Tax Folio S3-F4-C1…due to replace IT-478R2 in the near future. …[V]iews expressed in this letter [which] represent a change in position…will apply on a prospective basis to property acquired or transactions entered into after December 31, 2015.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - E negative UCC balance arising in statute-barred year becomes recapture in 1st open year 227
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) negative UCC balance arising in statute-barred year becomes recapture in 1st open year 143

5 October 2012 Roundtable, 2012-0453201C6 F - Règles d'attribution- séparation & décès

recapture from rental property is property income from that property

Before finding that there was no attribution of recapture of depreciation by virtue of the exception from the application of s. 74.1(1) contained in s. 74.5(3)(a), CRA stated, in its summary:

[T]he nature of recapture of depreciation is analogous to the nature of the depreciation expense that was claimed in the past. That expense was for a rental property, so the recapture will be income from the property.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 74.5 - Subsection 74.5(3) s. 74.5(3) busting of attribution occurs even if they were living separate and apart for under 90 days before the death to the transferee common-law spouse 239

15 December 2011 Internal T.I. 2011-0413891I7 F - Récupération d'amortissement-Recapture CCA

successive business and property income use of rental property reflected in apportionment of source of ensuing recapture

A holding corporation earned deemed active business income under s. 129(6) from renting a building to an associated corporation for two years, and thereafter earned property income from renting the property to a non-associated corporation – and then disposed of the property, thereby realizing recapture of depreciation. Respecting a proposal that such recapture be prorated between active business income and property income based on the respective periods of time that the property generated the two types of income, the Directorate stated:

In the context of the situation under review, the position you propose, which is to treat a portion of the recaptured depreciation as income from an active business and another portion as property income, appears reasonable to us although there is no provision in the Act expressly supporting this conclusion.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 129 - Subsection 129(4) - Income or Loss reasonable to pro-rate recapture of depreciation between active business income and property income based on relative periods of use 216

Subsection 13(4) - Exchanges of property

Cases

Posno v. The Queen, 89 DTC 5423 (FCTD)

An airplane was found to be a replacement property for a previous airplane of the plaintiff, notwithstanding "no evidence that the plaintiff ever elected in his return for the year." [C.R: 44(1)]

The Queen v. G.T.E. Sylvania Canada Ltd., 74 DTC 6673, [1974] CTC 751 (FCA)

A reduction in the taxpayer's Quebec income tax that was effected by an amendment to the provincial legislation did not result in the taxpayer having "received ... other assistance" for purposes of s. 20(6)(h) of the pre-1972 Act. "[T]he respondent literally received nothing."

Administrative Policy

4 November 2016 External T.I. 2016-0666901E5 - New Class 14.1 and replacement property rules

rollover lost on transition from ECP to Class 14.1 property

Is it correct that, following the repeal of the eligible capital property rules effective January 1, 2017, no replacement property provisions will apply to a voluntary disposition of farm quota occurring after January 1, 2017, or to a disposition of farm quota that occurs prior to January 1, 2017 if the replacement property is not acquired before that date? CRA responded:

In the case of a voluntary disposition, subsections 13(4) and 44(1) will only apply if the former property was immediately before the disposition a former business property as defined in subsection 248(1) of the Act. One of the characteristics of a former business property is that the property is real or immovable property or an interest therein. As ECP, and consequently, property included in new Class 14.1, is generally intangible property, we agree that such property will generally not be former business property.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Former Business Property farm quota or other former ECP excluded 44

84 C.R. - Q.85

The amendment, effective February 2, 1978, which specifically reduced the capital cost by investment tax credits, was enacted only for greater certainty.

80 C.R. - Q.44

Where a grant in respect of depreciable property to be acquired over a number of years is greater than the first costs incurred, the excess grant will reduce the first additional costs incurred after that year.

Subsection 13(4.1) - Replacement for a former property

Administrative Policy

1996 Tax Executives Institute Round Table, Q. XIV (No. 5 - 963910)

Where a taxpayer had already decided to expand its packaging operation by acquiring a second packaging machine when the existing machine was partially destroyed by fire, the requirements of s. 13(4.1)(a) would not have been met.

1 February 1990 T.I. (July 1990 Access Letter, ¶1321)

Where a taxpayer in the business of operating rest homes sold the rest homes and bought a hotel, the operation of the hotel generally would not be considered to be a similar business.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 44 - Subsection 44(5) 33

Paragraph 13(4.1)(b)

Administrative Policy

S3-F3-C1 - Replacement Property

Similar business categories

1.41 …[T]wo businesses will be considered to be similar if they both fall within the same one of the following categories:

  • merchandising - retailing and wholesaling;
  • farming;
  • fishing;
  • forestry and forest products;
  • extractive industries, including refining;
  • financial services;
  • communications;
  • transportation;
  • construction, including subcontracting; and
  • manufacturing and processing.

1.42 … [W]here a business falls into more than one, a similar business will be one that falls into any one of these categories in which the business operates.

Example 5

A plywood plant may fit into the forestry and forest products category, and also into the manufacturing and processing category. As a result, if the plywood plant is sold, any business that also falls under the forestry and forest products or manufacturing and processing categories will generally be considered a similar business … .

1.43 A taxpayer who changes from one business category to another but continues to deal in the same product will normally be considered to be in a similar business. …

Similar services businesses

1.44 Service industries, such as hotels, restaurants, repairs, professional services, barber and hairdressing shops, funeral parlours, laundries, real estate agencies, tourism, and entertainment, are not included in the general business categories referred to in ¶1.41, because most of these industries are too varied and different to permit categorization. … [S]imilar business will generally be interpreted in a reasonably broad manner.

Words and Phrases
similar business

Subsection 13(4.3)

Administrative Policy

S3-F3-C1 - Replacement Property

Overview of ss. 13(4.2) and (4.3)

1.47 The term former business property includes a property that is the subject of an election under subsection 13(4.2). This means that the replacement property rules may apply where a taxpayer has disposed of or terminated a limited-period franchise, concession or licence. A taxpayer can defer any recapture or capital gain on the disposition or termination of such a property where the conditions in subsection 13(4.2) are met.

Subsection 13(5) - Reclassification of property

Administrative Policy

S3-F4-C1 - General Discussion of Capital Cost Allowance

Reasons for transfer

1.123 Subsection 13(5) contains the rules for computing the UCC of property of a prescribed class that has been transferred from one class to another. Generally, the rules in subsection 13(5) apply where:

  • a transfer between two classes is necessary because of an amendment to the Act or Regulations;
  • misclassified property is transferred to its proper class pursuant to subsection 13(6);
  • a taxpayer makes an election under section 1103 of the Regulations to include all depreciable property in a particular class or to transfer certain depreciable property between classes; or
  • property that has been properly included in a class is subsequently transferred to another class because of a change of its use in the income-earning process.

Effect of transfer

1.125 Paragraph 13(5)(a) deems transferred property:

  • to be depreciable property of the class to which the property is transferred (the new class); and
  • not to be depreciable property of the class in which it was previously included (the old class).

This effectively provides for the transfer of the capital cost to the new class.

Effective CCA rate

1.127 Subparagraph 13(5)(b)(ii) establishes the rate to be used to calculate the depreciation previously claimed on the transferred property. That rate is the effective rate of CCA deducted in respect of the old class in a particular year. Consider a scenario in which a class has a 20% maximum rate. If a taxpayer claims $125 on a UCC of $1,000, the effective rate is 12.5%. It is this 12.5% rate that should be used to determine the amount of depreciation allowed in that year on property later transferred to another class.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense 476
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 669
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property 170
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 248
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28) 194
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27) 178
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29) 145
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) 184
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) 267
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3) 60
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) 140
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.5) 167
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) 53
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b) 204
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) 150
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) 55
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) 142
Tax Topics - Income Tax Act - Section 68 153
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) 65
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b) 117
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) 403
Tax Topics - Income Tax Act - Section 8 - Subsection 8(2) 65
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1) 142
Tax Topics - Income Tax Act - Section 13 - Subsection 13(9) 207
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 299
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 214
Tax Topics - Income Tax Act - Section 13 - Subsection 13(6) 191

30 June 2000 External T.I. 1999-0013945 - Rental property

building transferred to separate class when becomes rental property

Where a taxpayer owns buildings that are used in an active business, subsequently leases one of those buildings and it has a cost greater than $50,000, will it be transferred to a separate class and, if eventually sold, will the proceeds be credited only to that class? CRA responded:

Where a particular building that has a cost in excess of $50,000 and that is used in a taxpayer's active business subsequently becomes a rental property, subsection 13(5)… will apply to the reclassification of the building from its former class in Schedule II…to a separate class, as prescribed by regulation 1101(1ac)…. (The taxation year in which a property becomes a “rental property” is a question of fact.) As such, any proceeds received on a subsequent disposition of that rental property will be credited to the separate class and recapture or a terminal loss will be calculated accordingly.

…[P]rovided a taxpayer uses a property for the purpose of gaining or producing income, both before and subsequent to any reclassification of that property, subsections 13(7) and 45(1)… would not apply at the time the property is reclassified.

10 April 1997 External T.I. 9704225 - RENTAL PROPERTY

transfer to separate class occurs immediately upon rental and following Reg. 1102(14)(d) transfer

On the facts in 15 August 1990 T.I. 900372, would Reg. 1102(14)(d) apply to Company B so that upon the commencement of the rental of the properties by Company B, the buildings would then be transferred into separate classes pursuant to Reg. 1101(1ac)? CRA responded:

[O]n the initial transfer, paragraph 1102(14)(d)… would apply to Company B, and immediately upon Company B commencing to rent the buildings, those buildings would be reclassified in separate prescribed classes in accordance with subsection 1101(1ac)… and subsection 13(5)… .

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 1101 - Subsection 1101(1ac) non-arm's length transfer followed by rental 102

7 June 1993 External T.I. 79308775 F -

transfer to separate class when business-use building commenced to be rented pending its sale

Corporation ABC use various buildings in the same business and which are part of the same CCA class. A building which no longer is needed in the business is rented pending its sale. Is the property a rental property? CRA stated:

[T]he building which is now used principally by Corportion ABC for the purpose of earning rents constitutes a “rental property”…and must be transferred to a separate class by virtue of sections 1101(1ac)or (1ae) of the Regulations (based on the capital cost of the building in question) and, in this regard, in accordance with the rules in subsection 13(5)… .

15 August 1990 T.I. 900372

13(5) transfer where business-use buildings become rental properties
may also be listed as 1990-277

Company A uses several buildings in an operating business, then later incorporates a subsidiary, transfers its real estate to the subsidiary on a rollover basis and the subsidiary leases the properties back to Company A. In these circumstances, s. 13(5) would apply to reclassify the properties from one class 3 pool to separate classes upon their commencement for use as rental properties.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 1101 - Subsection 1101(1ac) 13(5) applies to move to separate class upon becoming a ental property 111

Subsection 13(5.1) - Rules applicable

Administrative Policy

S4-F7-C1 - Amalgamations of Canadian Corporations

continuity of s. 13(5.1) on amalgamation

1.35 Where one predecessor corporation has a leasehold interest in a property owned by a second predecessor corporation, the application of section 87 to the amalgamation will only be accepted where subsection 13(5.1) is applied concurrently as if the new corporation is the same corporation as, and a continuation of, the first mentioned predecessor corporation. In this way, the UCC of the leasehold interest is carried over to the new corporation. If and to the extent the Regulations permit, the new corporation may claim capital cost allowance in respect of the leasehold interest. The predecessor corporation may not claim a terminal loss in respect of the leasehold interest and the capital cost allowance claimed by it becomes subject to the recapture rules in the hands of the new corporation.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 100 - Subsection 100(2.1) s. 100(2.1) applies to non-qualifying amalgamation 58
Tax Topics - Income Tax Act - Section 111 - Subsection 111(12) application following amalgamation 103
Tax Topics - Income Tax Act - Section 116 - Subsection 116(1) deemed tcp following amalgamation 155
Tax Topics - Income Tax Act - Section 165 - Subsection 165(1) Amalco can continue objection and receive refunds 145
Tax Topics - Income Tax Act - Section 169 Amalco can continue objection 97
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) reserve after amalgamation 50
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Shareholder shareholder need not hold shares 82
Tax Topics - Income Tax Act - Section 251 - Subsection 251(3.1) deemed non-arm's length relationship on amalgamation 164
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(b) realted party, majority and 50% group exceptions 448
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(iii) reserve after amalgamation 50
Tax Topics - Income Tax Act - Section 66.7 - Subsection 66.7(7) successoring where non-wholly owned amalgamation 85
Tax Topics - Income Tax Act - Section 69 - Subsection 69(13) no disposition of predecessor property on general principles 103
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1.4) s. 87(5) not applicable 104
Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(3) non-87 amalgamation/no FX gain 159
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3) no deemed dividend to dissenter on amalgamation 81
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1) election filing by Amalco 103
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.1) s. 87(1.1) qualifies for all s. 87 purposes 60
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1.2) successoring where non-wholly owned amalgamation 85
Tax Topics - Income Tax Act - Section 87 - Subsection 87(10) deemed listing of temporary Amalco shares 114
Tax Topics - Income Tax Act - Section 87 - Subsection 87(11) gain if high PUC is sub shares 47
Tax Topics - Income Tax Act - Section 87 - Subsection 87(1) presumptive satisfaction of s. 87(1)(a)/dissent and squeeze-outs onside 260
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(a) new corp/deemed year end coinciding or not with acquisition of control 0
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(b) Amalco must follow predecessor's valuation method subject to truer picture doctrine 58
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(c) reserve after amalgamation 103
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(d) cost amount carryover 135
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(e.1) s. 100(2.1) applies to non-qualifying amalgamation 58
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(o) no continuity rule for non-security options 133
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2) - Paragraph 87(2)(q) pre-amalgamation services 96
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.11) loss-carry back to parent 159
Tax Topics - Income Tax Act - Section 87 - Subsection 87(2.1) dovetailing with s. 88(1.1) 38
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3.1) 328
Tax Topics - Income Tax Act - Section 87 - Subsection 87(3) PUC shifts 181
Tax Topics - Income Tax Act - Section 87 - Subsection 87(4) fractional share cash/ACB or value shift/implied non-recognition for predecessor shares 247
Tax Topics - Income Tax Act - Section 87 - Subsection 87(7) dovetailing with s. 78 and 112(12) 171
Tax Topics - Income Tax Act - Section 87 - Subsection 87(9) allocation of s. 87(9)(c)(ii) excess as parent chooses 218
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1) - Paragraph 88(1)(d) late designation 106
Tax Topics - Income Tax Act - Section 88 - Subsection 88(1.1) dovetailing with s. 87(2.1) 56
Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) partnership dissolution on amalgamation 123
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) deemed non-arm's length relationship on amalgamation 415
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) deemed non-arm's length relationship on amalgamation 323
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) class continuity on non-arm's length amalgamation 311
Tax Topics - Income Tax Regulations - Regulation 8503 - Subsection 8503(3) - Paragraph 8503(3)(b) pre-amalgamation services 96

3 May 2000 T.I. 993323

"Subsection 13(5.1) of the Act does not require that the leasehold interest must have been included in Class 13 of Schedule II of the Regulations at the time of the acquisition."

29 January 1997 T.I. 964013

Where the taxpayer had a leasehold interest in land and acquired the land, s. 13(5.1)(b) would deem the property to be depreciable property of a prescribed class. However, as there is no class in Schedule II which land came within, no claim for capital cost allowance could be made, although the land would be subject to the recapture and terminal loss provisions of the Act.

30 August 1989 T.I. AC 58003

The capital cost of a property to a taxpayer for purposes of s. 13(5.1)(b) is the capital cost after taking into account subsection 13(5.2). Accordingly, ss.13(5.1)(b) and 13(5.2)(a) do not conflict.

Subsection 13(5.2) - Deemed cost and depreciation

Administrative Policy

2 April 2013 External T.I. 2012-0470591E5 F - Sale of automobile acquired after being leased

s. 13(5.2)(b) addition must be taken into account for s. 13(2) purposes, including re no recapture

Where the lessee of an automobile acquired the automobile for continued use in its business, would it be included in Class 10.1 (by reason of the addition provided under s. 13(5.2)(a)) or in Class 36? Would s. 13(2) apply so that no recapture of depreciation would occur on the disposition of the automobile, notwithstanding an intent of s. 13(5.2) to generate recapture of depreciation respecting amounts added under s. 13(5.2)(b)? CRA responded:

The deemed cost of the automobile must be taken into account under paragraph 13(5.2)(a) to determine whether the individual cost of the automobile exceeds the amount determined for the purposes of subsection 13(2). If this is the case and the automobile is depreciable property, it will be included in Class 10.1.

[Re Q.2] by reason of subsection 13(2), the proceeds would not include any recapture of depreciation (i.e., the excess calculated by virtue of subsection 13(1)) for an automobile that would be included in Class 10.1, even if that excess occurred, among other things, as a result of paragraph 13(5.2)(b).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.2) - Paragraph 13(5.2)(b) the deemed s. 13(5.2)(b) cost addition is recognized for s. 13(2) purposes 84

IT-233R "Lease-Option Agreements; Sale-Leaseback Agreements"

General discussion.

Paragraph 13(5.2)(b)

Administrative Policy

2 April 2013 External T.I. 2012-0470591E5 F - Sale of automobile acquired after being leased

the deemed s. 13(5.2)(b) cost addition is recognized for s. 13(2) purposes

Where the lessee of an automobile acquired the automobile for continued use in its business, would it be included in Class 10.1 (by reason of the addition provided under s. 13(5.2)(a)) or in Class 36? CRA responded:

The deemed cost of the automobile must be taken into account under paragraph 13(5.2)(a) to determine whether the individual cost of the automobile exceeds the amount determined for the purposes of subsection 13(2). If this is the case and the automobile is depreciable property, it will be included in Class 10.1.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.2) s. 13(5.2)(b) addition must be taken into account for s. 13(2) purposes, including re no recapture 164

Subsection 13(5.4) - Idem [Deemed recapture]

Articles

Atlas, "Income Tax Issues in Real Estate Leasing", 1989 Corporate Management Tax Conference, p. 3:18

S.13(5.4) will only rarely apply.

Subsection 13(6) - Misclassified property

Administrative Policy

S3-F4-C1 - General Discussion of Capital Cost Allowance

Reassessment or deemed transfer

1.130 It sometimes happens that a taxpayer claims and is allowed CCA as a result of the property being placed in an incorrect class. This can arise where:

  • the taxpayer has misclassified depreciable property;
  • the taxpayer should have reclassified property pursuant to a change in the Act or the Regulations; or
  • there was a change in a property's use in the income-earning process.

The CRA may reassess the years involved to correct the misclassification and the CCA claimed. However, if such a correction has not been made, the Minister may make a direction under subsection 13(6) in respect of a tax year to deem a property to be of the incorrect class for the years prior to the year for which direction is made and to be transferred to the correct class beginning in the year for which the direction is made. Only property that was still on hand at the beginning of the year in respect of which a direction is made is transferred.

1.131 A taxpayer can request that a correction be made beginning with the first year in which the misclassified property was acquired or became misclassified. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense 476
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 669
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property 170
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 248
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28) 194
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27) 178
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29) 145
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) 184
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) 267
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3) 60
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) 140
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.5) 167
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) 53
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b) 204
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) 150
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) 55
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) 142
Tax Topics - Income Tax Act - Section 68 153
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) 65
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b) 117
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) 403
Tax Topics - Income Tax Act - Section 8 - Subsection 8(2) 65
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1) 142
Tax Topics - Income Tax Act - Section 13 - Subsection 13(9) 207
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 299
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 214
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) 259

IT-190R2 "Capital Cost Allowance - Transferred and Misclassified Property".

21 November 1991 T.I. (Tax Window, No. 13, p. 5, ¶1604)

Where a taxpayer has a property which would have been in Class 34 but for the revocation of a certificate from the Ministry of Energy, Mines and Resources, and the taxpayer has claimed and been allowed capital cost allowance in the incorrect class, a direction may be made under s. 13(6) to deem the property to have been transferred to the correct class in respect of the first year which is not statute-barred.

Subsection 13(7) - Rules applicable

Paragraph 13(7)(a)

Cases

C.A.E. Inc. v. Canada, 2013 DTC 5084 [at 5944], 2013 FCA 92

change in use on depreciable property conversion to inventory

The taxpayer, which leased flight simulators which it had manufactured, subsequently sold those simulators. The Minister denied capital cost allowance claims of the taxpayer made prior to the sales on the grounds that the simulators were inventory.

Noël JA found that as ss. 45(1)(a) and 13(7)(a) applied to conversions of capital property (including depreciable property) from income-producing use into use as inventory (as well as to conversions into personal use), the claiming of capital cost allowance in the initial years was not inconsistent with a subsequent sale of the simulators on income account. (However, two of the simulators nonetheless were inventory in the years they were being leased by the taxpayer as two airlines had options to purchase them.)

Administrative Policy

22 June 2015 Internal T.I. 2014-0553731I7 - Deduction of Terminal Loss - Wind-up

property remaining idle after deemed acquisition as depreciable property not a change of use

On the winding-up of Subco into Parentco (which had held only investments) under s. 88(1), Parentco received the "Property," which had been depreciable property owned by Subco and used in its business. Parentco did not acquire the Property for the purpose of earning income and never received income from the Property, and it was held idle for XX years before being disposed of to an arm's-length purchaser for proceeds of disposition less than its UCC.

CRA first concluded that the property retained its character as depreciable property in the hands of the parent. In then concluding that the terminal loss was not realized until the year of the sale, CRA stated:

The CRA has determined in past documents (see for example IT-478R, 9700547 and 2002-0143645) that paragraph 13(7)(a) does not apply if property remains idle since this does not constitute a "use for some other purpose". As a result…there is no deemed disposition of the Property immediately after the Wind-up… .

See summaries under Reg. 1102(14) and s. 20(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) deemed depreciable property in fact not used for income-producing purpose 183
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(14) depreciable property of sub deemed to be depreciable property when acquired by parent 417

26 November 2013 Annual CTF Roundtable, 2013-0493811C6 - Change in use

CAE not followed

Respecting the statements in C.A.E. that the change of use rules apply to the conversion of inventory to depreciable property or vice versa, CRA stated that it did not agree. Among other concerns:

[I]t would be challenging for both taxpayers and the CRA to apply the change in use rules in the manner outlined by the FCA. Reporting requirements and potential tax liability for every change from inventory to (income-earning) capital use, and vice versa, could represent a significant compliance and administrative burden. …

[T]he CRA will not be changing its general position on the change in use rules as currently presented in Interpretation Bulletins IT-102R2 and IT-218R.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 45 - Subsection 45(1) - Paragraph 45(1)(a) CAE not followed 113

IT102R2 "Conversion of property, other than real property, from or to inventory" 22July 1985

8. Where capital property is converted to inventory, the action of conversion does not constitute a disposition within the meaning of paragraphs 13(21)(c) and 54(c). It is, however, recognized that the ultimate disposition of a property that was so converted may give rise to a gain or loss on capital account, a gain or loss on income account or a gain or loss that is partly capital and partly income. Accordingly, with respect to capital property that has been converted to inventory, taxpayers may calculate capital gains or losses, if any, on the basis that a notional disposition of such property occurred on the date of conversion.

IT-218R "Profit, Capital Gains and Losses from the Sale of Real Estate, including Farmland and Inherited Land and Conversion of Real Estate from Capital Property to Inventory and Vice Versa".

10....where real estate is converted from capital property to inventory...for real estate that is used for the purpose of gaining or producing income from a business or property, its conversion to inventory will not constitute a change in use...and the proceeds from its ultimate sale will be treated in accordance with 15 below....

12. Vacant land that is capital property used by its owner for the purpose of gaining or producing income will be considered to have been converted to inventory at the earlier of

(a) the time when the owner commences or causes the commencement of improvements thereto with a view to selling it, and

(b) the time of making application to the relevant authority for approval of a plan to subdivide the land into lots for sale, provided that the taxpayer proceeds with the development of the subdivision.

Paragraph 13(7)(b)

Administrative Policy

S1-F3-C2 - Principal Residence

Limitation on change of use

2.61 If a taxpayer has completely or partially changed the use of property from principal residence to income-producing, subsection 13(7) provides for a deemed acquisition of the property or portion of the property so changed that is depreciable property. For purposes of claiming CCA, the deemed capital cost of such depreciable property is its fair market value as of the date of the change in use unless that fair market value is greater than its cost to the taxpayer. In that case, the deemed capital cost of such depreciable property is equal to its cost to the taxpayer plus an amount which represents the taxable portion of the accrued gain on the property (before any reduction to that gain by means of the principal residence exemption) to the extent that a section 110.6 capital gains deduction has not been claimed in respect of that amount (this latter rule has no particular significance for dispositions of residence properties occurring after February 22, 1994, because of the elimination of the $100,000 lifetime capital gains exemption for dispositions after that date).

29 June 1995 Internal T.I. 7-951102 -

S.13(7)(a) or (b) does not apply where a motor vehicle acquired for the purpose of producing income from employment, begins to be used for the purpose of producing business income. "However, paragraph 13(7)(d) of the Act may apply if there is a change in the proportion of the use of the motor vehicle for business purposes relative to its use to earn employment income."

Paragraph 13(7)(c)

Administrative Policy

3 March 2015 Internal T.I. 2014-0527841I7 F - Avantage imposable pour aéronef

apportionment of aircraft use between business and personal

In a situation where there was personal use of a corporate aircraft by the individual shareholder (Mr. A) of the "grandfather" (indirect parent) of the corporate owner of the aircraft and by Mr. A's father, CRA indicated that in accordance with ss. 13(7)(c) and (d), the capital cost of the aircraft was required to be annually apportioned between business and personal use.

See summary under s. 246(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) benefits from personal use of corporate aircraft based on the cost of similar benefit from arm's length supplier 168
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.4) - Paragraph 15(1.4)(c) s. 15(1.4)(c) applied to extend scope of Massicotte indirect benefit doctrine 158
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) s. 15(1.4)(c) applied to extend scope of Massicotte indirect benefit doctrine 781

September 1991 Memorandum (Tax Window, No. 9, p. 22, ¶1456)

Where there is personal use by a partner of capital property of the partnership, the partnership's entitlement to CCA in respect of the property, and to the deduction of operating costs, is limited to the portion of the capital cost of the property used in the partnership business.

Paragraph 13(7)(e)

Administrative Policy

20 November 2012 External T.I. 2012-0463191E5 F - Acquisition - personne ayant lien de dépendance

increased recapture as a result of previous application of s. 13(7)(e)(i) to acquisition of building from son

The taxpayer’s son sold a building to the taxpayer at an amount (equal to its fair market value) that exceeded the son’s capital cost. After claiming capital cost allowance on the building for a few years, the taxpayer sold it at a gain to a third party. CRA confirmed that as a result of the operation of s. 13(7)(e)(i), the recapture of depreciation realized by the taxpayer on the building’s disposition was increased.

19 January 2017 External T.I. 2015-0576751E5 F - Trust, Disposition of depreciable property, Assumption

s. 13(7)(e) applicable to s. 107(2.1) distribution but not s. 104(5) deemed disposition
Application of s. 13(7)(e) to deemed disposition

Does s. 13(7)(e) apply on a deemed disposition under s. 104(5)? CRA responded:

The Act does not contain a provision that would cause a trust to be related to itself for the purposes of paragraph 13(7)(e). On the deemed disposition…the trust is not related to itself so that it is not deemed to not deal at arm’s length with itself. Consequently, paragraph 13(7)(e) is not applicable….

Application of s. 13(7)(e) to s. 107(2.1) distribution

The correspondent suggested that s. 13(7)(e) is not applicable to a distribution of property under s. 107(2.1) because s. 107(2.1)(b) merely deems the beneficiary to have acquired the property but does not provide that the beneficiary is deemed to have acquired the property from the trust. CRA responded:

The preamble to subsection 107(2.1) provides that…the trust must dispose of property in favour of one of its beneficiaries. …

[T]he context and wording of the preamble to subsection 107(2.1) and paragraph (c) of the definition of disposition in subsection 248(1) provide a basis for concluding that the trust is deemed to have disposed of the property in favour of the beneficiary by virtue of paragraph (a) and that, under paragraph (b), the beneficiary is deemed to have acquired the property of the trust.

Paragraph 251(1)(b) provides that a beneficiary and a trust… are deemed not to deal with each other at arm's length. Where a trust makes a disposition to a beneficiary in the context of subsection 107(2.1)…paragraph 13(7)(e) can apply if the other requirements of paragraph 13(7)(e) are met.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2) s. 107(2) generally available where beneficiary assumes trust debt 158
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Personal Trust non-commital as to whether assumption of debt could constitute tainting consideration 175
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(2.1) s. 13(7)(e) applicable to depreciable property distribution 117
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) trust cannot have a NAL relationship with itself 39

S1-F3-C2 - Principal Residence

Limitation on change of use

2.61 If a taxpayer has completely or partially changed the use of property from principal residence to income-producing, subsection 13(7) provides for a deemed acquisition of the property or portion of the property so changed that is depreciable property. For purposes of claiming CCA, the deemed capital cost of such depreciable property is its fair market value as of the date of the change in use unless that fair market value is greater than its cost to the taxpayer. In that case, the deemed capital cost of such depreciable property is equal to its cost to the taxpayer plus an amount which represents the taxable portion of the accrued gain on the property (before any reduction to that gain by means of the principal residence exemption) to the extent that a section 110.6 capital gains deduction has not been claimed in respect of that amount (this latter rule has no particular significance for dispositions of residence properties occurring after February 22, 1994, because of the elimination of the $100,000 lifetime capital gains exemption for dispositions after that date).

S3-F4-C1 - General Discussion of Capital Cost Allowance

Overview

1.60 … [T]here are special rules in paragraph 13(7)(e) applicable to depreciable property acquired from a person or partnership with whom the taxpayer did not deal at arm's length. In such cases, the purchaser's capital cost of the property for CCA purposes will correspond to the seller's cost increased by one-half of the capital gain.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense 476
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 669
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property 170
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 248
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28) 194
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27) 178
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29) 145
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) 184
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) 267
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3) 60
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) 140
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.5) 167
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) 53
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b) 204
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) 150
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) 142
Tax Topics - Income Tax Act - Section 68 153
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) 65
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b) 117
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) 403
Tax Topics - Income Tax Act - Section 8 - Subsection 8(2) 65
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1) 142
Tax Topics - Income Tax Act - Section 13 - Subsection 13(9) 207
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 299
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 214
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) 259
Tax Topics - Income Tax Act - Section 13 - Subsection 13(6) 191

25 September 1996 External T.I. 5-962794 -

Where a taxpayer designated $12,000 in a s. 110.6(19) election in respect of a property that she had acquired at a cost of $10,000 and had never claimed capital cost allowance, a subsequent sale of the property for $11,000 would not result in a terminal loss.

23 May 1996 External T.I. 5-960465 -

person potentially may not deal at arm's length with itself

Where there is a deemed dispostion and reacquisition of property under s. 149(10), the corporation in question will not be considered to be related to itself, and it will be a question of fact whether that person is not dealing with itself at arm's length for the purposes of various provisions including s. 13(7)(e) - unless a provision such as s. 13(7)(e.1) specifically provides that the transaction is not an arm's length one.

24 June 1994 T.I. 932568 (C.T.O. "Transfer of Property to a Partner")

Because of the references in the opening of ss.13(7)(e) and 14(3) to "notwithstanding any other provision of this Act", those provisions will apply in non-arm's length situations to effectively restrict the "bump" for depreciable or eligible capital property under s. 98(5)(d).

24 July 1991 T.I. (Tax Window, No. 8, p. 18, ¶1430)

Where the aggregate of all gains realized by an individual on the transfer of various capital properties exceeds the capital gains exemption claimed under s. 110.6, the individual may designate for purposes of s. 13(7)(e)(i) the assets to which the exemption applies.

29 December 1989 T.I. (May 1990 Access Letter, ¶1223)

Where depreciable property is transferred from the partnership to Opco, the depreciables would not be considered to be transferred from the individual partners some of whom were at arm's length and some of whom were not at arm's length. Instead, all the depreciables would be treated as being transferred in either an arm's length transaction or a non-arm's length transaction.

Subparagraph 13(7)(e)(i)

Administrative Policy

4 January 2012 Internal T.I. 2011-0408081I7 F - Transactions entre une société et ses actionnaires

s. 13(7)(e)(i) capital cost equals consideration paid even where in excess of FMV

A shareholder sells depreciable property to the corporation for a sum exceeding more than its fair market value ("FMV").

CRA confirmed that the capital cost of the depreciable property to the corporation would exceed the property’s FMV at the transfer time of the transfer – so that if the property were sold immediately thereafter for its FMV, the corporation could incur a terminal loss, and if it were sold a few years later for an amount exceeding that determined under s. 13(7)(e)(i), there would be a capital gain and no recapture.

However, CRA noted that the excess of the consideration received by the shareholder over the property’s FMV would be a taxable s. 15(1) benefit.

Paragraph 13(7)(f)

Articles

Ralph Neville, "Acquisition of Control and Corporate Losses", 1992 Conference Report (CTF), C. 25

½ step-up rule does not apply for capital gains purposes (p.25:7)

If a designation is made under paragraph 111(4)(e) with respect to depreciable property, paragraph 13(7)(f) of the Act deems the capital cost of the property, for the purposes of future capital cost allowance (CCA) and recapture, to be the capital cost of the property before the deemed disposition plus three-quarters of the excess of the proceeds of disposition over the capital cost. This has the effect of both increasing the undepreciated capital cost (UCC) for the purpose of claiming CCA and ensuring that any future recapture of CCA will be calculated on the basis of this new capital cost. The capital cost for purposes of calculating future capital gains, however, is the proceeds of disposition designated in the election.

Paragraph 13(7)(g)

Administrative Policy

5 October 2018 APFF Roundtable Q. 16, 2018-0768871C6 F - Dépenses de bureau à domicile et d’automobile

example of proration of capped s. 13(7)(g) capital cost
In 2019-0799241E5 F, CRA corrected Section 3.2 (3rd paragraph) by indicating that property taxes and home insurance costs of a home office generally are NOT deductible under ss. 8(13) and 8(1)(i).

In the course of a discussion of the deductibility of home office and automobile expense of an independent contractor where the property is held in co-ownership, CRA stated:

[S]ection 67.4 provides an additional rule in respect of a motor vehicle owned by more than one person. Under that section, where a person owns a motor vehicle jointly with one or more other persons, the reference in paragraph 13(7)(g) to the amount of $30,000 is replaced by the product of the multiplication of that amount, by the ratio between the FMV of the person's interest in the vehicle and the FMV of the interests in the vehicle of all those persons.

For example, if a taxpayer has a $60,000 interest in a passenger vehicle worth $80,000, under section 67.4, the amount of $30,000 in paragraph 13(7)(g) which would be applicable to that taxpayer is $22,500 ($60,000 divided by $80,000, and multiplied by $30,000.)

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A capital cost of co-ownership interest 62
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property depreciable property must be owned 66
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense payment of expenses of taxpayer by another does not preclude “incurring” by taxpayer 161
Tax Topics - Income Tax Act - Section 9 - Nature of Income payment of taxpayer’s expenses by another might give rise to s. 9 or 80 inclusion 171

7 October 2016 APFF Roundtable Q. 5, 2016-0652861C6 F - Véhicules électriques - rabais

vehicle assistance paid indirectly (to dealer) covered

By virtue of a program put in place by the Quebec government, a subsidy, which can amount to $8,000, is offered where an electric vehicle is purchased or rented. Where the car dealer is a partner in this "Drive Electric Program" and the participant authorizes the government to pay the rebate directly to the dealer, this assistance is actually a deposit paid or to be paid to the dealer on the purchase or lease. What is the incidence of the subsidy on CCA where the pre-tax cost of the vehicle is $25,000, $35,000 or $45,000?

After noting that such assistance did not reduce the cost of the vehicle for purposes of s. 6(2), CRA stated:

[T]he capital cost of an electric vehicle determined after the application of paragraph 13(7)(g) will be reduced by the amount of assistance that the taxpayer received or is entitled to receive… .

[A]n electric vehicle whose cost is $25,000 will be included in Class 10 and an electric vehicle whose cost is $35,000 or $45,000 will be included in Class 10.1.

Furthermore, in the examples, the capital cost of the electric vehicles for CCA purposes will be $17,000, $22,000 or $22,000, respectively. Finally… the capital cost of the electric vehicle will be the same whether the amount of assistance is paid directly to the participant or the participant authorizes the government to pay the amount of the assistance to a partner dealer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(e) use of manufacturer’s electricity-use standard 88
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A installation cost included 31
Tax Topics - Income Tax Act - Section 6 - Subsection 6(2) Quebec government assistance does not reduce cost of purchased vehicle, but treated as compensation to dealer-lessor prorated over term of lease 249
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A cost not reduced under general principles by government assistance 137

Subsection 13(7.1) - Deemed capital cost of certain property

Cases

Prince Albert Pulp Co. Ltd. v. The Queen, 92 DTC 6189 (FCA)

In finding that the reduction of capital cost pursuant to s. 13(7.1) occurs in the year in respect of which the investment tax credit was utilized, rather than the subsequent year in which the return was filed claiming that credit, Hugessen J.A. stated (p. 6190):

"On their ordinary meaning the words 'has deducted' and 'deducted' in subsection 13(7.1) refer to operations effected in respect of the taxation year to which those deductions were applied, notwithstanding that the actual mathematical operations themselves may have taken place at a subsequent time."

Words and Phrases
deducted

Canadian Pacific Ltd. v. The Queen, 88 DTC 6265, [1988] 1 CTC 429 (FCA)

S.36 does not preclude the application of s. 13(7.1). The capital cost of expenditures that were deemed to be additions to classes of depreciable property by s. 36 were reduced by the amount of government assistance received.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) 41

The Queen v. AEL Microtel Ltd., 86 DTC 6348, [1986] 2 CTC 108 (FCA)

Although development incentives paid pursuant to the Regional Development Incentives Act (Canada) (the "RDIA") for the acquisition of manufacturing facilities were based on the number of jobs created as well as on the approved capital cost of the new facility, the full amount of the incentives were paid "in respect of" the acquisition by the taxpayer of the facilities. Under the RDIA, "there are no separate criteria for the payment of development incentives directly referable to job creation."

Consumers' Gas Co. Ltd. v. The Queen, 86 DTC 6132, [1986] 1 CTC 380 (FCTD), aff'd 87 DTC 5008, [1987] 1 CTC 79 (FCA)

Reimbursements received by the taxpayer from governmental authorities for relocating its pipelines at their request did not constitute "assistance" because it was never reimbursed for more than the costs which it incurred.

Words and Phrases
assistance
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Compensation Payments recurring compensation for moving capital assets on capital account 101

The Queen v. British Columbia Forest Products Ltd., 85 DTC 5577, [1986] 1CTC 1 (FCA)

"Parliament has expressly contemplated that a taxpayer may 'receive' assistance from a government in the form of a 'deduction from tax.'" The taxpayer's capital cost of depreciable properly accordingly was reduced by investment tax credits. (Pre-1978 version of s. 13(7.1)).

Words and Phrases
receive
Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Context 81

Consumers' Gas Company Ltd. v. The Queen, 82 DTC 6300, [1982] CTC 339 (FCTD), aff'd, 84 DTC 6058, [1984] CTC 83 (FCA)

Amounts received from government (and private) sources to compensate in whole or in part for the cost of relocating pipelines were not a "grant, subsidy or other assistance" within the meaning of former s. 13(7)(e).

Words and Phrases
subsidy

Fonthill Lumber Ltd. v. The Queen, 81 DTC 5333, [1981] CTC 406 (FCTD)

The amount of a government forgivable loan is deducted from the capital cost at the time that the conditions for forgiving the loan are met, not at the time that the funds were advanced. (s.13(7)(e))

Ottawa Valley Power Co. v. MNR, 69 DTC 5166, [1969] CTC 242 (Ex Ct), aff'd 70 DTC 6223, [1970] CTC 305, [1970] S.C.R. 941

S.20(6)(h) of the pre-1972 Act did not apply where Ontario Hydro, at its own cost, expended approximately $1.9 million to convert the facilities of the taxpayer for the supply of 60 cycle power rather than 25 cycle power, given that the rule had no application to a case where a public authority actually granted to a taxpayer capital property for use in its business at no cost to him and given that the rule could have no application to "ordinary business arrangements between a public authority and a taxpayer in a situation where the public authority carries on a business and has transactions with a member of the public in the same kind as the transactions that any other person engaged in such a business would have with such a member of the public" (p. 5171).

Administrative Policy

2 April 2014 External T.I. 2014-0521041E5 F - Application de 13(7.1)

no s. 13(7.4) election required where s. 13(7.1) applies

A taxpayer receives government assistance to build a manure pit. Does s. 13(7.1) apply automatically and, if it does not apply, is the s. 13(7.4) election available? CRA responded:

In this case, if the government assistance is received or receivable in the same year in which the manure pit becomes depreciable property, subsection 13 (7.1) automatically applies. …

[S]ubsection 13(7.1) should apply and that the cost of the manure pit could be reduced by the government assistance received so that an election under subsection 13(7.4) would not be required and the amount of government assistance received will not be included in the taxpayer's income in the year received (unless the amount of government assistance received exceeds the cost of the pit).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.4) general requirements for s. 13(7.4) to apply 201

31 January 2013 Internal T.I. 2012-0466641I7 F - Réduction du coût en capital d'un bien

reduction for Quebec M&P ITC occurs in year following incurring of the eligible expenses

The entitlement to the Quebec investment tax credit does not arise until the very end of the taxation year in which the eligible expenditures were incurred. After referring to the stipulation therein that the reduction under s. 13(7.1)(f) occurs for assistance to which the taxpayer is entitled before the particular time, CRA concluded (TaxInterpretations translation):

[A] taxpayer is entitled to receive the ITC in respect of such property at the time the calculation of the ITC for Quebec manufacturing and processing equipment is to be made, being at the end of the taxpayer’s taxation year. Consequently, the reduction in capital cost of property must occur in the taxation year following that in which the taxpayer incurred eligible expenses respecting the Quebec ITC.

12 October 1992 External T.I. 5-922359 -

S. "13(7.1) of the Act does not apply in general in respect of business arrangements between a public authority and a taxpayer where the public authority carries on a business and enters into transactions with a taxpayer of the same kind as the transactions that any other person engaged in such a business would have for business reasons."

19 September 1990 Memorandum 902190

A government loan which is unconditionally repayable would not constitute government assistance for purposes of s. 13(7.1). However, where a repayment was conditional upon achieving a projected sales level, the loan would not be considered to be unconditionally repayable.

Articles

John Tobin, "Infrastructure and P3 Projects", 2017 Conference Report (Canadian Tax Foundation), 10:1-31

Whether P3 progress payments are cost reductions or revenue (p. 10:9-10)

One challenge is determining how to treat progress payments during the construction phase. Proponents will often make progress payments to reduce the cost of construction, intending to decrease the amount of long-term financing needed for the project. The CRA has ruled that the interim payments reduce construction costs (and the value of the concession) pursuant to subsection 13(7.1). [fn 21: … 2003-0051741R3, 2004, as supplemented by…2004-0105611R3…] This policy was adopted when the customary amount of the “interim payments” was not substantial in the context of total project cost. However, in more recent transactions, proponents have prepaid substantially all of the construction-period expenses on substantial completion, leaving financing in place only for operating expenditures such as payroll and overhead. Projectcos continue to rely on the above-referenced rulings and treat the prepayments as reducing the capital cost of class 14 assets. In general, determining the nature of the rights between the parties is a question of interpretation of the project agreement. If a substantial portion of the revenue from the project is being received at the end of each construction phase, such amounts may be treated as construction revenue rather than as a government subsidy toward a capital asset. The CRA also stated that payments during the operation phase do not relate to an earlier period and therefore are not within subsection 13(7.1). Instead, such amounts are income as received …[fn 23 … IT-464R …quoted in … 2012-045508117].

Subsection 13(7.4) - Deemed capital cost

See Also

GMAC Leaseco Corporation v. The Queen, 2015 DTC 1141 [at 908], 2015 TCC 146

amounts replaced reduced lease income rather than contributing to leased vehicles' cost

GMAC received "support payments" from GMC in order to inflate the residual values stated in its leases of cars to GMC customers, thereby reducing the lease payments but resulting in a likely loss on lease termination. GMAC was obligated to pay GMC to the extent that the net amount of such losses was less than the support payments previously received.

Graham J found that the support payments were not earned until lease termination (when the repayment obligation could be quantified. GMAC argued that because the support payments were not earned when received, the exclusion in s. 12(1)(x)(v) for income receipts did not apply, so that s. 13(7.4) election to exclude those amounts from income, and apply them instead to the UCC of its Class 10 assets, had been validly made. Graham J found (at para. 40) that for the same reason that a support payment was unearned (i.e., there was "no legal right to keep the amount,") it also was not received for s. 12(1)(x) purposes. He also questioned (in f.n. 10) whether the s. 13(7.4) elections would have been available in any event because the "support payments were received to replace lost income rather than in respect of the cost of the vehicles."

See summaries under s. 9 – timing, s. 12(1)(x), s. 9 – compensation payments, and s. 9 – computation of profit.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x) amount subject to potential repayment obligation was not received 240
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Timing capital tax accrued from day to day 206
Tax Topics - Income Tax Act - Section 9 - Compensation Payments payments received in consideration for reducing lease payments were compensation for lost lease income, and s. 9 income 248
Tax Topics - Income Tax Act - Section 9 - Computation of Profit surcharges received by lessor at lease termination for excess use were income 242
Tax Topics - Income Tax Act - Section 9 - Timing inducement payments received by lessor from manufacturer not income until potential repayment obligation quantified 199

Administrative Policy

2 April 2014 External T.I. 2014-0521041E5 F - Application de 13(7.1)

general requirements for s. 13(7.4) to apply

A taxpayer receives government assistance to build a manure pit. Does s. 13(7.1) apply automatically and, if it does not apply, is the s. 13(7.4) election available? Before concluding that “subsection 13(7.1) should apply … so that an election under subsection 13(7.4) would not be required,” CRA noted:

In a situation where subsection 13(7.1) does not apply, the election under subsection 13(7.4) can be made in order that the capital cost to the taxpayer of the property is reduced by the amount of government assistance received. The application of subsection 13(7.4) is in respect of the cost of a depreciable property acquired by the taxpayer in the year, in the three taxation years immediately preceding the year or in the taxation year immediately following the year. To be valid, an election must be made no later than on or before the day on or before which the taxpayer is required to file the taxpayer’s return of income for the year, or, where the property is acquired in the taxation year immediately following the year, for that following year. One of the requirements of subsection 13(7.4) is that the amount of government assistance received would be included in the taxpayer's income under paragraph 12(1)(x) but for the application of subsection 13(7.4).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.1) no s. 13(7.4) election required where s. 13(7.1) applies 115

4 May 1992 Tax Executive's Roundtable, Question 11 (December 1992 Access Letter, p. 48)

RC does not insist on any particular format for the election, but requires some positive indication that the election has been made.

27 February 1991 Memorandum (Tax Window, Prelim. No. 3, p. 25, ¶1131; July 1991 Access Letter)

If an inducement payment can be used at the sole discretion of the taxpayer to reduce the cost of current capital expenditures, the amount will be included in the taxpayer's income under s. 12(1)(x) and no election will be permitted under s. 13(7.4).

IT-273R2, "Government Assistance - General Comments," para. 12

the election should be made by means of a signed letter accompanying the applicable tax return.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 53 - Subsection 53(2.1) 16

Subsection 13(7.5) - Deemed capital cost

Administrative Policy

S3-F4-C1 - General Discussion of Capital Cost Allowance

Access road example

1.48 …

Example 4

In order to be able to establish a sports arena at a particular location, a taxpayer builds a road to the arena at a cost of $10 million. The road is owned by the municipality in which the arena is located, but the municipality provides the taxpayer with exclusive access to two parts of the road indefinitely. The fair market values of these access rights are $200,000 and $300,000.

Results:

  1. The taxpayer is deemed under paragraph 13(7.5)(b) to have acquired a road (Class 17 property) at a cost equal to $10 million.
  2. The access rights are considered to be part of the capital cost of the road (Class 17) because of paragraph 13(7.5)(c). The capital costs of these rights are considered to be $200,000 and $300,000, respectively.

Exclusion for non-prescribed property

1.49 … If the other person's property is not property described in subsections 1102(14.2) or 1102(14.3) of the Regulations, or if the cost was incurred before March 7, 1996, such cost would generally be a non-deductible, non-depreciable capital outlay that qualifies as an eligible capital expenditure. …

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense 476
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 669
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property 170
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 248
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28) 194
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27) 178
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29) 145
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) 184
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) 267
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3) 60
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) 140
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) 53
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b) 204
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) 150
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) 55
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) 142
Tax Topics - Income Tax Act - Section 68 153
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) 65
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b) 117
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) 403
Tax Topics - Income Tax Act - Section 8 - Subsection 8(2) 65
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1) 142
Tax Topics - Income Tax Act - Section 13 - Subsection 13(9) 207
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 299
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 214
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) 259
Tax Topics - Income Tax Act - Section 13 - Subsection 13(6) 191

Paragraph 13(7.5)(b)

Administrative Policy

27 March 2014 External T.I. 2014-0520941E5 F - Industrial mineral mine and related expenditures

access road deemed to have been "acquired"

The costs of a temporary access road to a quarry would not be considered to be in respect of a "specified temporary access road" as defined in Reg. 1104(2), and would qualify under Class 17. If it did not otherwise qualify as depreciable property on the basis of being constructed on leased land, it would be deemed to be depreciable property under s. 13(7.5)(b) as it would be prescribed property under Reg. 1102(14.3). CRA stated:

[P]aragraph 13(7.5)(b) provides a presumption, for taxation years ending after March 6, 1996, in respect of certain costs incurred by a taxpayer on account of capital for the building of, for the right to use or in respect of a property to which subsection 1102(14.3) of the Regulations applies, including a road, other than a specified temporary access road, that would not be considered depreciable property if that provision did not apply. By virtue of that legislative presumption, the taxpayer is deemed to have acquired the prescribed property at that time at a capital cost equal to the amount of the cost incurred by the taxpayer on account of capital for the building of, for the right to use or in respect of, the property.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 17 access road to quarry was Class 17 property notwithstanding that not owned 158
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(1) - Paragraph 1100(1)(g) ordinary meaning of "mineral" 41
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Start-Up and Close-Down Expenditures expenditures deductible where incurred prior to acquisition decision 148

Subsection 13(9)

Administrative Policy

S3-F4-C1 - General Discussion of Capital Cost Allowance

Deemed disposition on asset migration

1.107 … In applying paragraph 13(7)(a) in respect of a person not resident in Canada, subsection 13(9) provides that a reference to "gaining or producing income" in relation to a business is to be read as a reference to "gaining or producing income from a business wholly carried on in Canada or such part of a business as is wholly carried on in Canada.”

1.108 Accordingly, if a person not resident in Canada changes the use of property from a use in a business, or part of a business, wholly carried on in Canada to a use for some other purpose, there is a deemed disposition of the property at its fair market value at the time of the change. Paragraph 13(7)(a) will therefore apply to a non-resident who carries on a business both in Canada and in another country and transfers to the other country a property used in the part of the business wholly carried on in Canada. …

1.109 If a disposition of property by a person not resident in Canada results in a recapture of CCA, the recapture is included in the non-resident's income by virtue of subparagraph 115(1)(a)(ii) or 115(1)(a)(iii.2). This treatment will also apply to a deemed disposition under subsection 13(7).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense 476
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 669
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property 170
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 248
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28) 194
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27) 178
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29) 145
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) 184
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) 267
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3) 60
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) 140
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.5) 167
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) 53
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b) 204
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) 150
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) 55
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) 142
Tax Topics - Income Tax Act - Section 68 153
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) 65
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b) 117
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) 403
Tax Topics - Income Tax Act - Section 8 - Subsection 8(2) 65
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1) 142
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 299
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 214
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) 259
Tax Topics - Income Tax Act - Section 13 - Subsection 13(6) 191

16 September 2011 Internal T.I. 2010-0383571I7 - Transfer of Property to a US Head Office

where depreciable equipment used in the Canadian branch of a US corporation is moved to its US head office, s. 13(9) will apply to cause s. 13(7)(a) to deem the equipment to be disposed of and reacquired at FMV.

Subsection 13(16) - Election concerning vessel

Administrative Policy

16 August 1995 T.I. 951240 (C.T.O. "Vessels - Partial Disposition & 13(16) Election")

A partial disposition of a vessel will qualify as a disposition of a vessel for purposes of s. 13(16).