Subsection 14(1) - Eligible capital property — inclusion in income from business
Administrative Policy
6 June 1994 External T.I. 9337165 - GOODWILL
Where on the sale of the business of a partnership of three equal partners (two individuals and a corporation), $360,000 is received for goodwill...
26 September 89 T.I. (February 1990 Access Letter, ¶1098)
A taxable capital gain pursuant to s. 14(1)(a)(v) is not considered business income, and therefore does not constitute earned income for purposes...
Finance
29 July 2019 Finance Comfort Letter respecting Eligible Capital Property (ECP) Transitional Issue
A CCPC disposed of eligible capital property (ECP) before the Budget 2016 date, but with part of the proceeds not becoming receivable until after...
Articles
Alison Spiers, "ECP Planning: Some Practical Considerations", Canadian Tax Focus, Vol. 6, No. 4, November 2016, p 1
Given a judicial view that goodwill is inseparable from the business to which it adds value, it would appear that the accrued gain on goodwill...
Paragraph 14(1)(a)
Administrative Policy
6 May 2005 External T.I. 2005-0116981E5 F - Rollover under section 85 of an ECP
Mr. X made an election under s. 110.6(19) in respect of his trading business carried on, on February 22, 1994, and, as a consequence, had an...
Paragraph 14(1)(b)
Administrative Policy
7 October 2005 Roundtable, 2005-0140891C6 F - Disposition d'une immobilisation
Opco transferred business assets, including goodwill with a nil CEC and a $1 million FMV to a new subsidiary ("Newco"). The proceeds of...
Subsection 14(1.01)
Administrative Policy
9 November 2005 Internal T.I. 2005-0154301I7 F - Choix concernant les immobilisations admissibles
On a sale of a residential care facility, the taxpayer allocated substantially all of the sale price to operating agreements with the Quebec...
9 June 2005 Internal T.I. 2005-0117851I7 F - Choix du paragraphe 14(1.01) de la Loi
The Directorate indicated that an election under s. 14(1.01) could not be made where the gain on the disposition of eligible capital property was...
Subsection 14(3) - Acquisition of eligible capital property
Administrative Policy
27 October 2006 External T.I. 2006-0212001E5 F - Immobilisations admissibles - Quotas
In addition to having acquired 45,300 chicken quota units from its shareholders (so as to engage a basis grind under s. 14(3) because it did not...
15 January 1996 External T.I. 9527995 - REVERSAL OF REDUCTION IN ECE
Where an eligible capital property has been transferred by a taxpayer ("A") to a non-arm's length person ("B"), the grind to B under s. 14(3)...
Subsection 14(5) - Definitions
Cumulative Eligible Capital
Cases
RCI Environnement Inc. v. Canada, 2009 DTC 5940, 2008 FCA 419
A lump sum received by the taxpayer in consideration for the cancellation of a non-competition agreement that it previously had received in...
Canada v. Toronto Refiners and Smelters Ltd., 2003 DTC 5002, 2002 FCA 476
The taxpayer received pursuant to the Expropriation Act (Ontario) $3 million in respect of the acquisition of its land and building by the City of...
Teleglobe Canada Inc. v. R., 2002 DTC 7517, 2002 FCA 408
In connection with a privatization transaction and at a time that it was still owned by the federal Crown, the taxpayer purchased assets for a...
Pe Ben Industries Co. Ltd. v. The Queen, 88 DTC 6347, [1988] 2 CTC 120 (FCTD)
A payment made by Northern Alberta Railway ("NAR") to the taxpayer as compensation to the taxpayer for the termination by NAR of a major contract...
The Queen v. Goodwin Johnson (1960) Ltd., 86 DTC 6185, [1986] 1 CTC 448 (FCA)
The sum of $830,000 received by the taxpayer, which had been the manager of a logging operation, in settlement of its action for termination of...
The Queen v. Demco Management Ltd., 85 DTC 5603, [1986] 1 CTC 92 (FCA)
Mahoney, J. stated that a definition of the goodwill of a private hospital "should bear in mind that the basis of its worth was its power to...
Samoth Financial Corp. Ltd. v. The Queen, 85 DTC 5473, [1985] 2 CTC 275 (FCTD), aff'd 86 DTC 6335, [1986] 2 CTC (FCA)
The plaintiff, which purchased the exclusive right to sell Century 21 franchises to licensed real estate brokers, was found to be in the business...
The Queen v. Leopold Lague Ltd., [1981] CTC 348, [1981] DTC 5254 (FCTD)
The assignment by a school bus operator of a 3-year contract with a school board constituted the disposition of an eligible capital property...
The Queen v. Timagami Financial Services Ltd., 82 DTC 6268, [1982] CTC 314 (FCA)
Where the consideration for sale of goodwill is to be paid to the vendor over a series of years, then 1/2 of the amounts so paid are included as...
Pepsi-Cola Canada Ltd. v. The Queen, 79 DTC 5387, [1979] CTC 454 (FCA)
A payment of $100,000 made to the taxpayer upon the termination of an agreement between the taxpayer and Schwepps Powell Ltd. under which the...
See Also
Henco Industries Limited v. The Queen, 2014 DTC 1161 [at at 3528], 2014 TCC 192
A subdivision property of the taxpayer, a developer, was blockaded by Six Nations protesters. To diffuse the conflict, the Ontario government...
R & C Commrs v. Mertrux, [2012] UKUT 274 (Tax and Chancery Chamber)
The taxpayer was a Mercedes dealer, licensed through Daimler-Chrysler UK ("DCUK"). DCUK exercised its rights under its dealer agreements to...
Winsor v. The Queen, 2008 DTC 2116, 2007 TCC 692
An amount received by the taxpayer from the federal government as compensation for the cancellation by the federal government of his fishing...
Fortino v. R., 97 DTC 55, [1997] 2 CTC 2184 (TCC), briefly aff'd on procedural grounds 2000 DTC 6060 (FCA)
Amounts received by the individual vendors of shares for entering into a non-compete covenant with the purchaser did not represent eligible...
Les Placements A & N Robitaille Inc. v. MNR, 96 DTC 1062, [1996] 1 CTC 2141 (TCC)
Archambault TCJ. found that a business of manufacturing or reconditioning and selling boats or other nautical products had goodwill that was not...
Consumers Software Inc. v. The Queen, 95 DTC 518, [1993] 2 CTC 3129 (TCC)
Proceeds received by the taxpayer from the sale of a software program (coupled with the granting of a non-compete covenant but with the retention...
Administrative Policy
S4-F2-C1 - Deductibility of Fines and Penalties
1.21 If a fine or penalty is incurred in connection with the acquisition of an eligible capital property, the fine or penalty is an eligible...
12 January 2015 External T.I. 2014-0555071E5 - POD subject to earn-out
In an arm's length sale the corporate "Vendor" disposes of the "Property" (including land options agreements, permits, engineering data and...
9 February 2015 External T.I. 2013-0480881E5 F - Disposition of Eligible Funeral Arrangement Contracts
Amounts received on the sale of a funeral home business which are allocated to prepaid funeral contracts or other "eligible funeral arrangements"...
23 May 2014 External T.I. 2014-0518921E5 F - Calcul de l'élément A du MCIA
In 2008 a taxpayer with nil cumulative eligible capital disposed of the assets of an active business including goodwill to a related corporation...
29 October 2013 External T.I. 2013-0489911E5 - Disposition of CRCE intangibles
A developer of an electricity generation project transfers the related contracts and development work (the "Intangible Expenditures") to another...
12 July 2011 Internal T.I. 2010-0366321I7 - Tax treatment of break fees received
In finding that a break fee arguably gave rise to an inclusion in income as an eligible capital amount if it were not already included in income...
27 January 2011 External T.I. 2010-0380081E5 - Trailing commissions
In response to a query as to whether a payment received for the transfer of brokerage clients in respect of whom trailer commissions were being...
17 February 1995 Ministerial Correspondence 9503794 - RETIREMENT OF FISHING LICENCES
Any payment made to a fisherman to retire a fishing licence or other right or privilege to commercially fish is an eligible capital amount.
11 January 1995 Internal T.I. 9402947 - RETIRING FISHING LICENSES
Payments received by fishermen under a compensation program to retire or decrease their fishing rights represent eligible capital amounts under...
30 March 1994 Internal T.I. 9407577 - PLAYER CONTRACTS - PROCEEDS OF DISPOSITION
Proceeds received by the vendors on the sale of a sports team in respect of players' contracts will not be eligible capital amounts because the...
17 January 1991 Internal T.I. 7-90326
Damages paid by a principal business corporation to an investor limited partnership including amounts in respect of interest assessed against the...
Variable A
Variable A.1
Administrative Policy
22 March 2016 Internal T.I. 2013-0506561I7 - Property acquired on a return of capital
A return-of-capital distribution by the foreign affiliate of a Canadian corporation of eligible capital property (in this case, intellectual...
21 September 2004 External T.I. 2004-0067881E5 F - MCIA- lien de dépendance
Regarding the introduction of Element A.1 in legislative proposals regarding the CEC definition first proposed on December 20, 2002, CRA stated:...
16 December 2003 External T.I. 2003-0027245 F - MCIA-ACQUIS. D'UNE PERSONNE LIEE
A taxable Canadian corporation ("Transferor") transferred, on September 30, 2003, its active business, including the goodwill, to a new...
Variable E
See Also
7958501 Canada Inc. v. Agence du revenu du Québec, 2020 QCCQ 2424, aff'd 2022 QCCA 315
A private company (“SherWeb”), which provided the use of software developed by it to paying subscribers, transferred its software and other IP...
Administrative Policy
11 September 2015 Internal T.I. 2015-0586301I7 - Premiums received on re-opening of debt
Rather than issuing fresh notes, a company obtained the noteholders’ agreement to extend the current notes’ maturity, and received a premium...
20 December 2002 External T.I. 2002-0164735 F - PRODUIT DE DISPOSITION ACHALANDAGE
On a sale of the business of a pharmacist, the goodwill value of $750,000 (payable in 72 equal monthly instalments) is based on the number of...
Eligible Capital Expenditure
Cases
Brooke Bond Foods Ltd. v. The Queen, 84 DTC 6144, [1984] CTC 115 (FCTD)
Amounts expended for plans and specifications of a building that ultimately was not constructed were expended for the purpose of creating a...
The Queen v. Royal Trust Corp. of Canada, 83 DTC 5172, [1983] CTC 159 (FCA)
In an underwriting agreement, the taxpayer agreed to issue common shares to the underwriter at $8.00 per share and pay an underwriting commission...
See Also
Devon Canada Corporation v. The Queen, 2018 TCC 170
Two public-company predecessors by amalgamation of the taxpayer made cash payments for the surrender by employees of their options previously...
Rio Tinto Alcan Inc. v. The Queen, 2016 TCC 172, aff'd 2018 FCA 124
The taxpayer (“Alcan”) incurred various investment dealer, legal and other fees in connection with its successful hostile bid for most of the...
Potash Corporation of Saskatchewan Inc. v. The Queen, 2011 DTC 1163 [at at 873], 2011 TCC 213
The taxpayer incurred legal and accounting fees in 1997 and 1998 of approximately $1.9 million in connection with a complicated reorganization of...
Martin v. The Queen, 2009 DTC 1251, 2009 TCC 152 (Informal Procedure)
"Commissions" paid by the taxpayer (a chartered accountant) generally over the course of several months to the former owners of accounting...
Graham Construction Engineering (1985) Ltd. v. The Queen, 97 DTC 342 (TCC)
Professional fees incurred in connection with a share reorganization of the taxpayer in which its shareholders transferred their shares to a...
212535 Oil & Gas Ltd. v. MNR, 96 DTC 1263, [1996] 1 CTC 2416 (TCC)
Each taxpayer closed the purchase of a 10% interest in a resource property by giving the vendor an interest-bearing demand promissory note for...
The Queen v. de Loppinot, 78 DTC 6477, [1978] CTC 705 (FCTD)
An agreement between a retiring chartered accountant ("Peloquin") and a firm of chartered accountants - wherein the firm agreed to pay Peloquin...
Administrative Policy
14 March 2016 Internal T.I. 2015-0609671I7 - Earnout, Amalgamation, Cost of Shares and ECE
A Canadian Acquisitionco acquired Canadian Targetco for a cash base price plus earnout obligations, and then immediately merged with Targetco...
22 March 2016 Internal T.I. 2013-0506561I7 - Property acquired on a return of capital
What is the cost (and amount incurred as an expense) for intellectual property with an unlimited life acquired by a corporation resident in Canada...
30 July 2015 External T.I. 2014-0552041E5 F - Permis XXXXXXXXXX
CRA found that a government licence which could be renewed each year on the payment of a fee was an eligible capital property rather than a Class...
S4-F2-C1 - Deductibility of Fines and Penalties
1.21 If a fine or penalty is incurred in connection with the acquisition of an eligible capital property, the fine or penalty is an eligible...
27 June 2014 External T.I. 2014-0526931E5 F - Vente d'une liste de clients par un employé
An employer agrees to purchase the customer list of an employee prior to his cessation of employment. CRA stated (TaxInterpretations...
29 October 2013 External T.I. 2013-0507121E5 - Website costs
Determining whether website costs are in the nature of income or capital should entail an analysis of each component of the site. The...
31 March 2011 Internal T.I. 2011-0291701I7
Expenses incurred by a public corporation with respect to an unsuccessful bid to acquire a public company were capital expenditures which...
12 June 2003 Internal T.I. 2003-001100
As a result of selling a business the taxpayer was no longer able to fulfill its obligations under a supply contract and negotiated a termination...
5 March 2003 External T.I. 2002-0151405 - Transaction Costs - Aborted Acquisition
Respecting the question whether various fees incurred by a taxable Canadian corporation with respect to the proposed acquisition of another...
18 February 2002 External T.I. 2002-01883
In a Canadian asset acquisition by a Canadian corporation ("Buyco"), $20 of the total $200 purchase price is allocated to pension surplus. CCRA...
1 March 2001 External T.I. 2001-0068715 - Expenses incurred aborted debt offering
Expenses incurred by a taxpayer with respect to an aborted debt offering where there was no substituted transaction would qualify as eligible...
7 February 1992 TI (Tax Window, No. 16, p. 19, ¶1739)
The proceeds of sale of a sports franchise would be an eligible capital amount to the vendor and an eligible capital expenditure to the purchaser.
28 March 1991 Memorandum (Tax Window, No. 2, p. 25, ¶1186)
Costs incurred by an oil or gas company to acquire an easement to build a pipeline or to acquire a right of way to build a road are eligible...
Subsection 14(7) - Replacement property
Administrative Policy
17 April 2012 External T.I. 2011-0427411E5 F - Bien de remplacement-immobilisation admissible
Where the taxpayer sells his business including client lists, purchased shares of a corporation carrying on a similar business will not qualify as...