Patents or other intangible property

See Also

Kaushik v. The Queen, 2006 DTC 2277, 2005 TCC 207 (Informal Procedure)

Before going on to find that the taxpayer was not using a patent in a business so that no capital costs allowance or eligible capital expenditures could be recognized, Bowman C.J. stated (p.2279) "a patent is, in almost any circumstances that I can think of, a capital asset".

Administrative Policy

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 determination depends predominantly on the expected useful life of the website, although "some components of the development costs are likely capital in nature."

To the extent that expenses are in the nature of capital, they may be added to the capital cost of "applications software" as described in Class 12 of Schedule II. Such costs include the labour costs incurred to design and develop software to carry out the website functions. Some components may instead be "data network infrastructure equipment" or "systems software" described in Class 46.

A particular capital expenditure that is not a depreciable property may instead be an "eligible capital expenditure" described in s. 14(5) or the Act.

24 November 2010 External T.I. 2010-0380521E5 - Web page costs

Respecting whether expenditures made by a taxpayer to develop a web page on the Internet would be a capital or current expense, CRA stated (per its summary) that:

Where the "web page" will only have a relatively short useful life the related costs should be treated as a current expense. However, if the "web page" is expected to have a long useful life then the costs should be treated as a capital expense.

CRA also indicated that the costs of application software purchased from third parties to develop a web page, and the labour costs of development, would likely constitute "applications software" under Class 12 of Schedule II, rather than "systems software."