Section 68 - Allocation of amounts in consideration for property, services or restrictive covenants

Cases

Transalta Corporation v. Canada, 2012 DTC 5040 [at 6757], 2012 FCA 20

A partnership bought the assets of an electric company at a price that was $190 million in excess of the regulated book value (the amount on which...

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Words and Phrases
goodwill

H. Baur Investments Ltd. v. The Queen, 90 DTC 6371, [1990] 2 CTC 122 (FCTD)

The Court refused to depart from a supplementary agreement as to the allocation of purchase price between land, building and equipment in a sale...

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The Queen v. Golden et al., 86 DTC 6138, [1986] 1 CTC 274, [1986] 1 S.C.R. 209

The phrase "the disposition of any property" means the sale of a particular item or items of property and "the expression 'something else' must be...

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Words and Phrases
disposition
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property "property" includes a contract right, or potentially covenant to deliver knowhow 78
Tax Topics - Statutory Interpretation - Context 27

The Queen v. Demco Management Ltd., 85 DTC 5603, [1986] 1 CTC 92 (FCA)

It was held by Mahoney, J.A. that for the purpose of computing the capital gain from the disposition of a hospital there was no requirement that...

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Salt v. The Queen, 84 DTC 6395, [1984] CTC 414 (FCTD)

Proceeds of disposition of two lots were allocated between the two lots by using the average price per square foot since "there was no feature of...

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Millers Credit Jewellers Ltd. v. The Queen, 84 DTC 6205, [1984] CTC 218 (FCTD)

Although a building on expropriated land was worthless to the expropriating municipality, a portion of the proceeds (equal to the building's...

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Golden v. The Queen, 83 DTC 5138, [1983] CTC 112 (FCA), aff'd supra.

Given the reciprocal effect of a s. 68 allocation, the determination under S.68 is not to be approached from the viewpoint of the vendor only. The...

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Elworthy v. The Queen, 82 DTC 6067, [1982] CTC 62 (FCTD)

The allocation between bare land and building was affected by B.C. legislation which prohibited tearing down the building, which otherwise would...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Fair Market Value - Land 64

A.G. Canada v. Matador Inc., 80 DTC 6022, [1980] CTC 51, 80 DTC 6018 (FCA)

It was held that an allocation of the sale price of land including building, where the sale agreement was silent on the question of allocation,...

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Roywood Investments Ltd. v. The Queen, 79 DTC 5451, [1980] CTC 19 (FCTD), aff'd 81 DTC 5148, [1981] CTC 206 (FCA)

In determining what portion of a purchase price was paid for a building, the Court may consider the evidence of accountants and real estate...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(c) 70
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) land with building was acquired only for purpose of generating capital gain 50

The Queen, v. Leclerc, 79 DTC 5440, [1979] CTC 527 (FCTD)

$429,000 of the aggregate purchase price of $650,000 was allocated to building, notwithstanding that the deed of sale, following some negotiation...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence 71

R. v. Malloney’s Studio Ltd., 79 DTC 5124, [1979] CTC 206, [1979] 2 S.C.R. 326

S.20(6)(g) of the old Act did not apply to the taxpayer's sale of premises pursuant to an agreement which provided that the lands should be "clear...

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The Queen v. Jessiman Brothers Cartage Ltd., 78 DTC 6205, [1978] CTC 274 (FCTD)

The taxpayer, which previously had transported mail for Canada Post in the Winnipeg area, sold its fleet of 60 trucks to Canada Post for $91,675....

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 178 - Subsection 178(2) 18

The Queen v. Moulds, 78 DTC 6068, [1978] CTC 146 (FCA)

The taxpayer acquired land with two small apartment buildings on it in 1961 because he conidered the site to be suitable for the construction of a...

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Locations of other summaries Wordcount
Tax Topics - General Concepts - Estoppel 105

Dominion Stores Ltd. v. MNR, 66 DTC 5111, [1966] CTC 97 (Ex Ct)

In finding that the taxpayer in fact received an amount in respect of the issuance by it of "free" trading stamps on the purchase of groceries by...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) portion of sales allocated to trading stamps 136

Seaboard Advertising Co. Ltd. v. MNR, 65 DTC 5188, [1965] CTC 310 (Ex. Ct.)

The taxpayer paid $230,000 for the acquisition of substantially all the business of its competitor, including $100,000 which was allocated to...

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See Also

Wagner v. The Queen, 2012 DTC 1234 [at 3645], 2012 TCC 8

An agreement of a corporation ("Château Dollard") owned equally by the three individual taxpayers to sell its assets for $13,750,000 was replaced...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) common interest in sharing tax saving 114

FLSmidth Ltd. v. The Queen, 2012 DTC 1052 [at 2745], 2012 TCC 3, aff'd 2013 DTC 5118 [at 6147], 2013 FCA 160

Paris J rejected the taxpayer's submission (to the effect that the phrase "can reasonably be regarded" in s. 20(12) did not permit the Minister to...

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Robert Glegg Investment Inc. v. The Queen, 2008 DTC 2466, 2008 TCC 20, aff'd , 2009 DTC, 2008 FCA 332

The taxpayer, which sold its shares of a company ("Glegg Industries") at the same price as that received by the minority shareholders of Glegg...

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Tsiaprailis v. Canada, 2005 DTC 5119, 2005 SCC 8, [2005] 1 S.C.R. 113

After referring (at para. 51) to the “need to compartmentalize global payments into their constituent portions to determine which are...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f) payment in settlement of disability arrears was taxable under surrogatum principle as being "pursuant to" the plan 169

Staltari v. The Queen, 95 DTC 506, [1995] 2 CTC 2239 (TCC)

Beaubier TCJ. affirmed the Minister's reassessment treating all but $15,000 of a $115,000 sum purportedly paid to an arm's length dismissed...

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Spies v. The Queen, 94 DTC 1964, [1994] 2 CTC 2439 (TCC)

All the proceeds received by the taxpayer in connection with the sale of his land to TransCanada Pipelines Limited ("TCP") were to be...

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Inshore Investments Ltd. v. The Queen, 92 DTC 6162, [1992] 1 CTC 189 (FCTD)

A written agreement between the taxpayer (a venture capital corporation) and another corporation ("Taiga") provided for the sale by the taxpayer...

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Gérald Léonard and Suzette Léonard v. Minister of National Revenue, 91 DTC 545, [1991] 1 CTC 2353 (TCC)

The taxpayers were successful in allocating a higher portion of the purchase price to livestock and the cost of milk quotas, and a lower portion...

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Administrative Policy

17 February 2021 External T.I. 2018-0768051E5 F - Contrat de crédit-bail

Regarding a lease to “Aco” of a truck tractor (the “Vehicle”) with a term of 48 months and a bargain purchase option at maturity, CRA...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii) leasing contract cannot be recharacterized as a secured loan funding an acquisition of depreciable property 246
Tax Topics - Income Tax Act - Section 49 - Subsection 49(3) a portion of the lease payments under a lease with a bargain purchase option recharacterized as consideration for the option 146
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5.2) acquisition of leased vehicle pursuant to bargain purchase option followed by sale of vehicle could engage s. 13(5.2) 131
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) truck tractor is prescribed property 26
Tax Topics - General Concepts - Substance lease payments, but not the lease itself, could be recharacterized 93

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

Categories covered

1.80 … As it pertains to depreciable property, the provisions of section 68 can apply to consideration for:

  • both depreciable...

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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 556
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A 791
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property 218
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1) 275
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28) 254
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27) 222
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29) 155
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2) 212
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2) 351
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3) 70
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1) 166
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.5) 207
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2) 65
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b) 230
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c) 170
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e) 65
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1) 152
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a) 75
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b) 212
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1) 431
Tax Topics - Income Tax Act - Section 8 - Subsection 8(2) 75
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1) 152
Tax Topics - Income Tax Act - Section 13 - Subsection 13(9) 229
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) 321
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 237
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) 317
Tax Topics - Income Tax Act - Section 13 - Subsection 13(6) 221

18 July 2011 External T.I. 2010-0370561E5 F - Location avec option d'achat

Where there is a real estate lease with a purchase option, is a portion of the rent paid under a lease with a bargain purchase option allocated to...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) where lease is coupled with bargain purchase option, a portion of the rents must be allocated to option proceeds 164
Tax Topics - General Concepts - Substance lease is a lease in the absence of sham 92

4 April 2005 External T.I. 2004-0099411E5 F - Transfert de contrat de crédit-bail

Corporation A signed a four-year lease, at the end of which it could exercise a bargain purchase option on the property for $5. It then...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) CRA position on allocating lease payments to bargain purchase option extended to assignment of the lease agreement 83

92 C.R. - Q.9

Paragraph 6 of IT-96R5 (respecting circumstances in which it is not necessary to allocate consideration to a conversion feature) applies where a...

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September 1991 Memorandum (Tax Window, No. 10, p. 16, ¶1479)

Where various assets are sold for a single price without a contractual allocation of the price among the assets sold, and the parties make...

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89 C.M.TC - Q.3

s. 68 continues to have application to the issue of allocation between two properties.

88 C.R. - F.Q.12

Where there is no agreed allocation, each taxpayer should prorate the purchase price based on relative fair market values.

80 C.R. - Q.16

RC will look beyond the written allocation of arm's length parties where the parties do no follow the agreed allocation, where the total selling...

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80 C.R. - Q.41

In MURB offerings, it is reasonable to regard down payments of cash and promissory notes and mortgage draws as being applied first to goods and...

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IT-220R2 "Capital Cost Allowance - Proceeds of Disposition of Depreciable Property"

Detailed discussion under heading "Combined Consideration".

IT-96R "Options Granted by Corporations to Acquire Shares, Bonds or Debentures"

[para. 9] In the case of a security with a conversion feature which is not severable from the security and cannot be separately traded, no part of...

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IT-304R "Capital Cost Allowance - Condominiums"

Where a unit or strata lot is purchased, an allocation is required to be made between the cost of the undivided interest in the land and the...

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Paragraph 68(a)

See Also

Godcharles v. Agence du revenu du Québec, 2021 QCCA 1843

A group of unrelated individuals were the co-owners of a seniors’ residence (“SR”), which was leased by them to the corporate operator of...

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Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) - Subparagraph 69(1)(b)(i) s. 69 cannot reduce inflated proceeds to vendor 435
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c) transaction was not at arm’s length given the dominant role of their architect 413
Tax Topics - General Concepts - Fair Market Value - Land goodwill portion of retirement residences business determined as the residual from valuing the residence using the cost method 272

Paragraph 68(c)

Articles

Michael Coburn, "Practical Strategies for Dealing with the Restrictive Covenant Provisions", 2014 Conference Report (Canadian Tax Foundation), 8:1-29

Burden on CRA of establishing unreasonableness/reasonableness of nil allocation (pp.17-19)

Effectively, the courts have created a test where the...

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Jack Bernstein, "Canadian Intangibles, Noncompete Payments, and Allocations of Purchase Price", Practitioner's Corner, Tax Notes International, 26 March 2012, p. 1011

High-level overview.