Regulation 1101

Subsection 1101(1)


Dupont Canada Inc. v. Canada, 2001 DTC 5269, 2001 FCA 114

A sale by the taxpayer of most of the assets of its explosives manufacturing operation in Nipissing was found not to be a sale of a separate business in light of the fact that such division and other manufacturing operations were operated through the provision (principally in Mississauga) of centralized services, including all borrowing and financing, cash management, foreign exchange management, the granting of credit, invoicing of customers, collection of accounts, purchasing, processing of supplier invoices and preparation of expense reports. It also was important that the Du Pont brand name and trade marks were used consistently for all of the taxpayer's products, but they ceased to be an attribute of the explosives manufactured at the explosives plant after the sale. Because the depreciable assets that were sold were included in the same class as depreciable assets retained by the taxpayer, the recaptured capital cost allowance realized by the taxpayer was reduced accordingly.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) - Paragraph 4(1)(a) centralized operation 170

MNR v. Pevato, 65 DTC 5183, [1965] CTC 300 (Ex Ct), briefly aff'd 67 DTC 5058 (SCC)

In finding that the taxpayer did not realize recapture of depreciation when it sold its interest in a hotel and constructed a motel, because they were included in the same class, Gibson J. stated:

"... the business of the respondent was that of an innkeeper or hotel or motel keeper at all material times, which is in essence the business of providing accommodation to guests. In my opinion it is irrelevant whether the facilities as opposed to the room accommodation in the Parklane Hotel and those in the Canadiana Motel are different; that the Parklane Hotel was a partnership, whereas the interest of the respondent in the Canadiana Motel is that of a single proprietor; that the physical plant of the Canadiana Motel was not completed until after the disposition by the respondent of the physical plant of the Parklane Hotel, and that there was a smaller number or different category of employees at the Parklane Hotel ..."

See Also

Dupont Canada Inc. v. The Queen, 99 DTC 1132 (TCC), aff'd 2001 FCA 114

Lamarre Proulx TCJ. applied (at p. 1139) the principle that "there will be one business when there is interlacing and interdependence to such a degree that there may be found only one income producing unit" to find that the explosives division of the taxpayer was a business separate from its other operations notwithstanding "that there was some unified management at the upper level of the Appellant's administration and centralised services and rules". Accordingly, a sale of the division gave rise to recapture of depreciation.

Administrative Policy

7 June 2017 CPTS Roundtable, 2017-0695131C6

Q.5 - normal course dispositions of oil and gas properties generally are not of a separate business

Is a corporation in the business of exploring, developing and producing hydrocarbons at various locations in Canada carrying on a single business such that the acquisition or disposition of a property is not the acquisition or disposition of a separate business for purposes of Reg. 1101(1)? CRA responded:

[T]he determination of whether a person is carrying on a single business or multiple separate businesses is fact driven and a general answer would not be appropriate.

We do acknowledge that, in the oil and gas industry, it is common for businesses to acquire properties and dispose of non-core properties on a continual basis. Generally, the acquisitions and dispositions during the normal course of business would not be considered acquisitions or dispositions of separate businesses.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Proceeds of Disposition Q.1 - Daishowa extends beyond reforestation and reclamation obligations only on a case-by-case basis 213
Tax Topics - Income Tax Act - Section 66 - Subsection 66(15) - Canadian Resource Property - Paragraph (d) Q.2 - a Canadian resource royalty interest requires a right to “take production” 135
Tax Topics - Treaties - Income Tax Conventions - Article 13 Q.3 - Canada-U.K. Treaty does not exempt shares deriving their value from Canadian oil and gas licences – even where the Canadian business is carried on “in” them 193
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(ii) Q.4 - by analogy to mining, hydrocarbons may be similar properties 348
Tax Topics - Income Tax Act - Section 4 - Subsection 4(1) Q.5 - application of Scales test to determining whether there is a separate business 224
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 26 Q.7 - refinery catalysts are Class 26 property 87
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 49 Q.8 - taxpayers generally have the documentary evidence on hand to allocate costs between pipelines and pipeline appendages 117

Subsection 1101(1ac)

Administrative Policy

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

Where a taxpayer owns buildings that are used in an active business and subsequently leases one of those buildings, that building will be transferred to a separate class with the eventual sale proceeds being credited to that class.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) building transferred to separate class when becomes rental property 189

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

non-arm's length transfer followed by rental

On the facts in 15 August 1990 T.I. 900372 (where a building was transferred to a new subsidiary (Company B), which thereupon commenced to use the building for rental purposes), 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 Act - Section 13 - Subsection 13(5) transfer to separate class occurs immediately upon rental and following Reg. 1102(14)(d) transfer 91

29 March 1996 External T.I. 9606715 - SEPARATE CLASSES

Separate classes are not required for each unit when an apartment building is converted into a condominium building, as there would be no acquisition or disposition, and IT-274R, para. 3 indicates that only one class is required if multiple unit are acquired in the same building.

15 August 1990 T.I. 900372

13(5) applies to move to separate class upon becoming a ental property

Company A owns several properties, comprising buildings acquired after 1971 for more than $50,000 and all included in Class 3, and land, which are used in its business. It transfers the properties to a newly incorporated subsidiary (Company B) under s. 85(1), which commences to rent the properties to Company A as its only activity. Does Reg.1101(1ac) apply upon commencement of the rental of the properties so that each of the buildings would then be transferred into a separate class? CRA responded:

Assuming that Company A is not involved in real estate rental business, we confirm your interpretation above. However…subsection 13(5)…applies to reclassify the properties from the class 3 pool to the separate classes.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5) 13(5) transfer where business-use buildings become rental properties 62

89 C.R. - Q.6

RC regards a taxpayer's entire holdings in respect of a condominium building to be a single property with a single capital cost.

84 C.R. - Q.53

Pre-1972 rental properties of two corporations will be included in the same class following an amalgamation, or following the winding-up of one corporation by the other under s. 88(1).

Subsection 1101(5b.1)

Administrative Policy

7 October 2022 APFF Roundtable Q. 4, 2022-0942131C6 F

CRA is willing to adapt a prescribed requirement, that an election be made by letter attached to the return, to internet filings

A taxpayer must file an election pursuant to Reg. 1101(5b.1) for each eligible non-residential building for which the taxpayer intends to claim the additional CCA. In rejecting the suggestion that classification of a qualifying non-residential building in a separate Class 1(a) or 1(b) on its return was sufficient for the taxpayer to be considered to have made the election, CRA stated that the text of Reg. 1101(5b.1) stated otherwise, and that the “taxpayer must, therefore, send to the Tax Centre serving the taxpayer a letter attached to the taxpayer's income tax return stating the taxpayer's election for each eligible non-residential building for the taxation year in which the subject building is acquired.” CRA further stated:

[I]t is possible for the taxpayer to make the election under subsection 1101(5b.1) I.T.R. over the Internet using either of the following methods:

  • by using the "T2 Attach-a-doc" service
  • indicating this election in the notes to the financial statements in the General Index of Financial Information (GIFI) of the tax return.

13 March 2017 External T.I. 2016-0626641E5 F - Election - Subsection 1101(5b.1) Reg.

only one Reg. 1101(5b.1) election is required where work on an addition to a non-residential building extends over more than one year

A corporation makes two additions in two consecutive taxation years to a pre-2007 non-residential building, and made the election under Reg. 1101(5b.1) election (an “Election”) respecting the first addition ("Addition 1"). Can it include a second addition ("Addition 2") in the same separate class as the one in which Addition 1 was included? Would this position be different in the situation of an addition that was commenced in one taxation year and continued into the next taxation year? CRA stated:

Addition 1 was deemed to be a separate building under subsection 1102(23) since the main building was not included in a separate class by virtue of subsection 1101(5b.1). … Addition 2 would be deemed to be a separate building under subsection 1102(23) since Addition 2 was made to the main building… . Consequently, the taxpayer may make the Election in respect of Addition 2… to benefit from additional CCA under paragraph 1100(1)(a.1) or … (a.2). Addition 2 would therefore be included in a class separate from Addition 1.

Where the work on an addition to the main building begins in a taxation year and ends in the following taxation year, we are generally of the view that the taxpayer is considered to have acquired the addition at the end of the first taxation year and that subsection 1102(23) will apply at that time to deem the capital cost of the addition on that date to be a separate building. Consequently…the Election can be made for the first taxation year… .

However… the capital cost incurred in the second year does not constitute an addition deemed to be a separate building…since the addition in the first year was a separate building under subsection 1102(23) that was included in a separate class by virtue of subsection 1101(5b.1). As a result, the capital cost incurred in the second year would be included in the same class as for the addition in the first year and no Election would be required in the second taxation year.

The above discussion was subject to the available-for-use rules.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(23) further work on an addition does not fall into a separate class 115

10 June 2013 External T.I. 2013-0489101E5 F - Ajout à un édifice - choix en vertu de 1101(5b.1)

separate class election could be made for a building addition

In Year 1 (and after March 18, 2007), the taxpayer constructed an "eligible non-residential building" (per Reg. 1104(1)), but did not elect under Reg. 1101(5b.1) (an "Election"). In Year 4, the taxpayer expanded the area of the building by 45% (the "Addition"), which also required it to acquire some additional land. After describing the application of the rules in Reg. 1102(23) (Addition deemed to be separate building) and Reg. 1102(24) (floor area test applied to combination of the Addition and original building), CRA stated (TaxInterpretations translation):

[T]he Addition, irrespective of the consequential increase in the total Building area, can be classified in a separate class by reason of the Election, provided that the conditions of subsection 1102(23) and the test as to the utilization of at least 90% of the total floor area for non-residential use as contemplated in subsection 1102(24), are satisfied. In this regard, the Election respecting the Addition must be made by attaching a letter to the income tax return for taxation year 4 in advance of the filing due date, as the Election is contemplated for the year during which the Addition is made.

Finally, in the event that the conditions of subsections 1104(23) and 1104(24) are met, the acquisition of land would not affect the application of the election respecting the Addition.

9 November 2012 CTF Atlantic Roundtable, 2012-0465981C6 - CTF Atlantic - Filing Electronically

When a tax return is filed electronically, how can the taxpayer satisfy a requirement to "elect in the return" (see s. 50(1)) or "by letter attached to the return ... elect..." (see Reg. 1101(5b.1))? CRA responded:

[E]lections, designations, agreements, waivers, and special elective returns must be submitted in paper format by the appropriate due dates... .

A taxpayer can indicate in the software that they are making an election and the software will build an Election indicator field. ... Completion of this field code does not constitute an election; it is designed only to inform us that an election form or a letter/note containing the required information is being submitted in paper format


The Minister has discretion as to how to accept elections. With respect to the election under subsection 1101(5b.1) of the Regulations, the CRA will not deny the election on the basis that it was mailed separately and not attached to the electronic return.

7 October 2011 Roundtable, 2011-0411811C6 F - Règlement 1101(5b.1)

Reg. 1101(5b.1) election can be made in partnership T5013, or by a partner

A Inc. and B Inc. (with calendar year ends) are members of a partnership with a January 31 year end that acquired an eligible non-residential building. In finding that it is the partnership rather than A Inc. and B Inc. that is required to make the make the Reg. 1101(5b.1) election, CRA stated:

[W]here a partnership acquires an eligible non-residential building, the additional capital cost allowance provided for in ITR paragraphs 1100(1)(a.1) and (a.2) must be claimed at the partnership level. … Thus, the CRA considers that it is not possible to permit a member of a partnership to directly claim capital cost allowance for an eligible non-residential building, as this would be contrary to the rules respecting the computation of a partnership's income … .

… [W]hen a partnership files a T5013 for its fiscal year, it must attach a letter indicating the election under ITR subsection 1101(5b.1). Where all the conditions of ITR subsection 1101(5b.1) are satisfied, we confirm that an election made by a partner of a partnership is deemed to have been made by each partner of that partnership.

4 March 2010 External T.I. 2009-0348411E5 F - Bâtiment non-résidentiel admissible

separate classes and separate letter elections for separate additions to the same non-eligible non-residential building

After indicating that a second addition made in 2009 to a building (the “main building”) that was not an eligible non-residential building under Reg. 1102(4) could be included in a separate class from a first addition made in 2008 to the main building, CRA stated:

Consequently … a taxpayer must make the election under subsection 1101(5b.1) of the Regulations for each eligible non-residential building for which the taxpayer wishes to claim the additional CCA under subsection 1101(1)(a.2) of the Regulations. … [T]herefore, the 2009 addition will be classified in a separate class from the 2008 addition. In this regard, the election to include the 2009 addition in a separate class must be made by attaching a letter to the 2009 income tax return by the filing due date for the return since this is the year in which the 2009 addition was acquired.