Subsection 1101(1)
Cases
Du Pont Canada Inc. v. The Queen, 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.
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)
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.
Subsection 1101(1ac)
Administrative Policy
30 June 2000 T.I. 1999-001394 -
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.
29 March 1996 T.I. 960671
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.
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
9 November 2012 CTF Atlantic Roundtable Q. , 2012-0465981C6
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.
10 June 2013 T.I. 2013-0489101E5 F - Ajout à un édifice - choix en vertu de 1101(5b.1)
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). In Year 4, the taxpayer expanded the area of the building by 45% (the "Addition"). 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 separately to Addition), CRA stated (TaxInterpretations translation):
The Addition, irrespective of the consequential increase in the total Building area, can be classified in a separate class by reason of an 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 respected. 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.
2011 Roundtable Q. , 2011-0411811C6 F
given that CCA is claimed at the partnership level, where a partnership produces the T5013 return for its fiscal year, it has to attach a letter indicating the election under Reg. 1101(5b.1).