Subsection 14(1) - Eligible capital property — inclusion in income from business
Administrative Policy
6 June 1994 T.I. 5-933716
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 in respect of which the partnership has never deducted cumulative eligible capital amounts, the corporation will add $30,000 to its capital dividend account.
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 of ss.63(3)(b) and 146(1)(c).
Subsection 14(3) - Acquisition of eligible capital property
Administrative Policy
15 January 1996 T.I. 5-952799 -
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) should be reversed on a subsequent disposition of the property to another person ("C") for proceeds exceeding the eligible capital expenditure, regardless of whether the transfer to C is an arm's length or a non-arm's length disposition.
Subsection 14(5) - Definitions
Cumulative Eligible Capital
Cases
RCI Environnement Inc. v. The Queen, 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 connection with an acquisition of a business as a going concern represented proceeds of "disposition" on general principles given that the agreement was extinguished, and also was received on capital account given that (from the perspective of the taxpayer) an acquisition of a non-competition agreement in connection with its business would have been on capital account.
"The majority opinion expressed by this Court in Goodwin Johnson ... according to which the quality of the amount should be analyzed on the basis of the payer, is no longer good law ..." (para. 51).
The Queen v. Toronto Refiners & 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 Toronto and a further $9 million from the City in respect of damages occasioned as a result of its inability to relocate its business following the acquisition.
After noting that, in the context of s. 14, "'consideration' ... must be understood as the thing that the recipient of a payment gives in exchange for the payment", Sharlow J.A. found that the consideration given by the taxpayer for the $9 million payment was the release of any claim by it for compensation for the destruction of the goodwill of its business, and that under the mirror image rule the amount was not an eligible capital amount because the expropriation was effected for civic purposes rather than for the purposes of producing profit, and an expenditure made by the taxpayer for this purpose would not qualify as an eligible capital expenditure.
Teleglobe Inc. v. The Queen, 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 stipulated purchase price that was less than the price at which an arm's length purchaser had committed (pursuant to the same agreement under which the asset sale occurred) to purchase the common shares of the taxpayer. Such purchase price excess was reported for income tax purposes by the taxpayer as the cost of cumulative eligible capital (i.e., goodwill).
The Court indicated (at p. 7524) that:
"Absent factors which would make the transaction impeachable, the agreement of the parties determines the cost to the corporation of issuing shares in exchange for property",
and that
"The cost to the Appellant of issuing shares as part consideration for the assets ... is the amount agreed between the parties, as evidenced by the stated capital of the common shares in the Appellant".
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 for the trucking by the taxpayer of goods and materials to a Syncrude plant was made by NAR to get rid of its contractual arrangements with the taxpayer and to avoid all future litigation. Since the payment was made from NAR's standpoint as a deductible expense and not to acquire a capital asset, the proceeds were not received by the taxpayer in respect of an eligible capital amount, and instead were proceeds of disposition of its rights under the contract with NAR.
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 agreement under which it had acted as manager, was proceeds of disposition rather than an eligible capital amount. Under the mirror image rule, if the taxpayer had made the payment rather than receiving it, the payment would have been a deductible expense rather than a capital expenditure, since the purpose of the payment was to settle a breach of contract action rather than to acquire the capital structure of the taxpayer's business.
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 attract custom."
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 of selling real estate franchises, and such sales accordingly gave rise to business income rather than the receipt of credits to its cumulative eligible capital.
Mahoney, J. in the Court of Appeal stated: "In applying the so-called 'mirror-image rule' in the circumstances, the face to be seen in the mirror by the Appellant is not that of the actual purchaser of one of its franchises acquiring a capital asset but its own face, that of a trader in franchises."
The Queen v. Leopold Lague Ltd., 82 DTC 6310, [1981] CTC 348 (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 rather than a sale on income account: (1) the assigned contract covered 3 of the 22 bus routes serviced by the taxpayer and thus constituted a large part of the productive structure of its business; (2) this was the first such sale by it; and (3) at the time of tendering for the contract (as opposed to executing it) the taxpayer had no assurance of being able to resell it.
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 eligible capital amounts in computing the vendor's income in the years of payment as opposed to the earlier year of sale: in the year of sale, the amounts to be paid in subsequent years were not then "payable".
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 taxpayer was the exclusive agent for the bottling and sale of Schwepps products in the Montreal area, was held to be a payment for goodwill. The taxpayer had built up a good name and reputation for its business in Schwepps products, as evidenced by a substantial increase in sales, and for the purpose of effecting a transfer of its goodwill to Schwepps the taxpayer had given Schwepps a customer list. [C.R.: 18(1)(a) - "Capital expenditure v. expense]
See Also
Henco Industries Limited v. The Queen, 2014 DTC 1161 [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 passed a by-law prohibiting any use of the property (rendering it valueless), and then agreed to pay the taxpayer $15,800,000 in exchange for relinquishing its rights to the property and under a court order against the protesters, and for a release.
After finding that the $15,800,000 was a capital receipt which was not income under s. 9 (see s. 9 - compensation payments), C Miller J found in applying the mirror image rule that, as the hypothetical consideration which the taxpayer would have received for a hypothetical payment by it of the $15,800,000 would have been the loss of its goodwill (para. 199), which would not have qualified as an eligible capital expenditure, the (actual) $15,800,000 payment received was not an eligible capital amount.
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 terminate the agreements. This would normally require 24 months' notice, but could be 12 months in limited circumstances. The dealers and DCUK disputed which period applied, and eventually arrived at a settlement in which dealers would receive a "territory release payment" ("TRP") for surrendering the dealership after 24, 18, or 12 months, with a higher TRP for an earlier termination. The taxpayer elected to take the earliest termination and highest TRP, which was paid by a third party ("Leadley") that took over the taxpayer's dealership.
Under UK tax law, an amount paid for goodwill would qualify for "roll-over relief," but an amount paid for the surrender of a right (such as the right to be a Mercedes dealer) would give rise to capital gains treatment.
The Upper Tribunal found (reversing the First-tier Tribunal) that, although the basic TRP (i.e. for a 24-month termination) could be attributed to goodwill, the additional amount for early termination could not. It stated that the "natural inference" was that, in receiving a higher TRP because of early termination, "Mertrux was being paid to forgo the opportunity to continue to earn profits as a dealer, as it was entitled to under the Dealer Agreement, as varied by the [settlement]" (para. 20).
Contrary to the First-Tier Tribunal's finding, the characterization of the payments from Leadley's perspective (who had no reason to pay compensation for the loss of the dealership) was irrelevant. The Tribunal stated (at para. 22):
In any case, it is inherently unlikely that Leadley paid the whole of the TRP for goodwill of Mertrux. The reality is surely that it paid the TRP because DCUK required it to as a condition of becoming a dealer. From Leadley's point of view, the TRP will have been the price of obtaining a dealership from DCUK.
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 licence was not an eligible capital amount given that (having regard to the mirror image rule) the federal government had no business purpose in making the payment and, in fact, its purpose in extinguishing the licences was so that they could not be used in any business.
Fortino v. The Queen, 97 DTC 55 (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 capital amounts because the vendors were not engaged in any business. The evidence did not reveal that the business of the corporation was, in reality, carried on by its shareholders.
Les Placements A & N Robitaille Inc. v. MNR, 96 DTC 1062 (TCC)
Archambault TCJ. found that a business of manufacturing or reconditioning and selling boats or other nautical products had goodwill that was not purely personal to the shareholder-manager of the corporate owner of the business given that, on the evidence, a sale of such business would have occurred for a purchase price in excess of the value of the tangible assets. However, the goodwill was valued by applying a relatively low capitalization rate (four times) to the business's normalized earnings given the competitive nature of the business, the risk of expropriation of the premises occupied by the business, and the dependence of the profitability of the business on the expertise and efforts of the shareholder-manager.
Consumers Software Inc. v. The Queen, 95 DTC 518 (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 by the taxpayer of copyright in several general-purpose program modules) represented eligible capital amounts given that: licensing the program and the sale of related products were the source of the majority of the taxpayer's business income and were virtually the sole source of income for its sales office in the United States; and it was not a dealer or trader in software.
Administrative Policy
9 July 2015 Folio S4-F2-C1
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 capital expenditure provided all the other tests in the subsection 14(5) definition of eligible capital expenditure are met.
12 January 2015 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 technical and environmental reports) acquired in the development phase of a proposed wind turbine farm. The proceeds allocated to the Property's disposition are deducted from the Vendor's cumulative Canadian exploration expense ("cumulative CEE") pool, and any remaining proceeds are considered to relate to goodwill. Respecting the portion allocated to goodwill, CRA stated:
[T]he taxpayer is entitled to receive a maximum amount in respect of goodwill that may be reduced where the electricity generation capacity of the wind turbine system is below a certain stated capacity. …[Based on IT-462] provided that the maximum amount represents the fair market value of goodwill at the time of the disposition and provided that there is a reasonable expectation that the electricity generation capacity of the wind turbine system will be met, the maximum amount will be considered to be POD pursuant to element E of the CEC definition. If the electricity generation capacity is not met and the amount of the proceeds is later determined to be less than originally determined, the amount calculated in element E would be reduced accordingly. If this results in a positive CEC balance and the taxpayer's business has ceased, a deduction in accordance with the provisions of paragraph 24(1)(a) might be possible.
9 February 2015 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" are generally considered by CRA to give rise to eligible capital amounts rather than being exempted by s. 148.1(2)(b)(ii). See summary under s. 148.1(2)(b).
23 May 2014 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 ("CCPC" - which did not hold any other eligible capital property) without taking any s. 110.6 deduction. In 2013, CCPC disposed of the goodwill to an arm's length purchaser at a price in excess of its cost. CRA stated (TaxInterpretations translation):
[T]he reduction by virtue of A.1 [of A] does not apply for a taxation year in which the disposition occurs. … [E]lement A.1 must be taken into account in calculating the CEC of CCPC for the 2008 to 2012 taxation years. As for…2013, element A.1 does not operate to reduce the CEC given that CCPC disposed, before the end of the taxation year to a person with whom it dealt at arm's length, of the goodwill acquired from the taxpayer for an amount greater than the eligible capital expenditure.
29 October 2013 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 taxpayer who then completes the building of the plant. The project satisfies Reg. 1219, so that the Intangible Expenditures ere eligible for treatment by the developer as Canadian renewable and conversation expense and as Canadian exploration expense. Would the Intangible Expenditures represent eligible capital property?
CRA noted that an "eligible capital amount" ("ECA") is defined (per s. 14(1), and "E" of CEC under s. 14(5)) to exclude an amount that is deducted in computing any balance of undeducted expenses. As s. 66(12.1)(a) provides that the amount receivable by the developer for the Intangible Expenditures will reduce its CCEE balance, the amount will not qualify as an ECA. Consequently, the Intangible Expenditures will not be considered "eligible capital property," which is defined under s. 54 to mean property a part of the proceeds of disposition of which would qualify as an ECA.
12 July 2011 Memorandum 2010-0366321I7
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 under s. 9(1) or s. 12(1)(x), , CRA indicated that the break fee was received by the taxpayer in respect of a business carried on by it. Furthermore, as "by virtue of subparagraph 39(1)(a)(i), a capital gain does not include any gain arsing from the disposition of an eligible capital property" the receipt of the break fee did not give rise to a capital gain.
27 January 2011 T.I. 2010-038008 -
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 received would be a deductible payment, CRA stated:
Where such a transaction consists of the sale of an entire business, or an entire division of a business, it would generally be expected that the receipt would be on account of capital.
17 February 1995 Memorandum 4-950379
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 Memorandum 940294 (C.T.O. "Retiring Fishing Licences")
Payments received by fishermen under a compensation program to retire or decrease their fishing rights represent eligible capital amounts under the mirror image rule.
30 March 1994 T.I. 940757 (C.T.O. "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 purchaser of a sports team is allowed to write off the amount allocated to the acquisition of the players' contracts over the estimated playing life of the players. The amounts allocated to players' contracts will be considered the proceeds of disposition of capital property.
17 January 1991 Memorandum 7-90326 -
Damages paid by a principal business corporation to an investor limited partnership including amounts in respect of interest assessed against the partners as a consequence of a failure to renounce agreed amounts were eligible capital expenditures to the principal business corporation.
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 capital asset, and were an eligible capital expenditure rather than a deductible expense.
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 of $0.54 per share. The underwriter sold the shares to the public at $8.00 per share. The underwriting commissions constituted an "outlay or expense" under the definition that was paid for services rendered by the underwriter in connection with pricing, distributing and managing the public issue of its shares, rather than a discount, notwithstanding that there was a firm underwriting. The exclusion from deductibility in the pre-1979 version in S.20(1)(e) of commissions paid to a person to whom the shares were issued, was not intended to apply to the provision of s. 14(5)(b)(i) excluding amounts made nondeductible by some other provision of the Act. Finally, expenditures incurred in the raising of capital to be used in the company's operations meet the test in s. 14(5)(b)(i) (incorporating by reference s. 18(1)(a)) and in the preamble that they be made "for the purpose of gaining or producing income from the business". The fees therefore qualified as eligible capital expenditures made by the taxpayer.
See Also
Potash Corp. of Saskatchewan Inc. v. The Queen, 2011 DTC 1163 [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 the manner in which it financed its investment in its US subsidiaries. The end result of the reorganization was that it financed that investment through a Luxembourg subsidiary so that cash flow paid out of the US subsidiaries was subject to US withholding tax of 5% and to Luxembourg income tax of 5% - whereas if it had continued to maintaing its previous structure, such distributions would have been subject to a 30% US withholding tax rate due to an adverse change in the US tax regime.
In finding that these were capital expenses, Hershfield J noted (at para. 88) that they were paid in order to create an entirely different "pipeline" or structure for maintaining the after-tax cash flow of the taxpayer, noted (at para. 92) that in Imperial Tobacco (and similarly in Kaiser Petroleum) "that an outlay made in the course of a corporate reorganization to achieve an assurance that some end goal will be completed or achieved in a manner that will have value, will be on capital account," and that although the tax benefits of this new structure would last only three years due to impending changes in the US-Luxembourg treaty, this nonetheless represented an enduring benefit becasue more than the current period was benefited (para. 98).
In finding that the expenditures satisfied the income-producing purpose test in the definition of a eligible capital expenditure, Hershfield J stated (at para. 108):
...expenditures incurred to improve the efficiency of the investment to enable better exploitation of its own business by increasing its debt service capability and increasing its funding of Canadian operations are expenditures incurred for the purpose of earning income.
Martin v. The Queen, 2009 DTC 1251, 2009 TCC 152
"Commissions" paid by the taxpayer (a chartered accountant) generally over the course of several months to the former owners of accounting practices acquired by him and calculated as a percentage of the fees collected by him from the acquired practices, were eligible capital expenditures rather than totally deductible expenses notwithstanding that the amounts were not paid as a lump sum and were not in instalments on account of a fixed purchase price, given that the purpose of the agreements with the recipients of the "commissions" was to obtain a lasting benefit by expanding the taxpayer's clientele.
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 holding company were found not to be incurred in connection with any activities which formed part of the business by which the taxpayer earned income and were incurred in connection with its dealings with its own shareholders as shareholder. Accordingly such fees were for capital purposes and, as capital expenditures, were to be treated in accordance with a concession of the Minister, as eligible capital expenditures.
212535 Oil & Gas Ltd. v. MNR, 96 DTC 1263 (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 $3.5 million. Three months later, when it was discovered that the 10% interest had a fair market value of at least $4.75 million, it was agreed that the $3.5 million promissory note would be replaced by one for $4.75 million.
Rip TCJ. found that the additional $1.25 million was incurred by each taxpayer on account of capital for the purpose of gaining or producing income from its business and, therefore, was an eligible capital expenditure. Because there was no intent by the taxpayers or the vendor that the second note would represent any payment of the original note, the exclusion for amounts paid "as, on account or in lieu of payment of any debt" did not apply.
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 20% of the fees generated from Peloquin's clients for the five-year period following the date of the agreement and to service those clients in Peloquin's name, and Peloquin agreed to become at least nominally a member of the firm, and to service those clients if asked to do so by the firm - was characterized as a type of partnership contract rather than an agreement for the sale of the goodwill of Peloquin's practice. Fees paid to Peloquin accordingly were characterized as partnership draws rather than capital expenditures.
Administrative Policy
9 July 2015 Folio S4-F2-C1
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 capital expenditure provided all the other tests in the subsection 14(5) definition of eligible capital expenditure are met.
27 June 2014 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 translation):
[A]n amount paid for a customer list and for a non-compete agreement, which procures an enduring advantage for the purchaser, constitutes an eligible capital expenditure.
29 October 2013 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.
31 March 2011 Memorandum 2011-0291701I7 -
Expenses incurred by a public corporation with respect to an unsuccessful bid to acquire a public company were capital expenditures which qualified as eligible capital expenditures on the basis that there was a plan to merge the target's business with that of the taxpayer and the comments in BJ Services as to the characterization of amounts incurred in order to enhance shareholder value. However, expenses incurred with respect to a proposed business combination were deductible under s. 9. Costs incurred by the target in obtaining professional advice and communicating with shareholders also were deductible.
12 June 2003 Memorandum 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 of the contract in consideration for the payment by it of a termination fee. The fee paid was on capital account given that it was made in relation to the cessation of a business of the taxpayer. However, the taxpayer would be allowed to treat the termination payment as an eligible capital expenditure.
5 March 2003 T.I. 2002-015140
Respecting the question whether various fees incurred by a taxable Canadian corporation with respect to the proposed acquisition of another taxable Canadian corporation that did not proceed would qualify, the Agency indicated that although, while normally the requirement that the expense be incurred for the purpose of earning income from a business will not be satisfied for the fees that are incurred in respect of aborted attempts to acquire shares, "the CCRA will accept that these fees qualify as eligible capital expenditures if the taxpayer can demonstrate that the taxpayer intended to make the business of the target corporation part of a similar business that the taxpayer already operated ... [and] the CCRA will generally accept that a taxpayer intended to make the business of the target corporation part of a similar business where the taxpayer planned to amalgamate with, or wind-up, the target corporation after the acquisition."
18 February 2002 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 stated that:
"The $20 paid by Buyco for the pension surplus would be a capital outlay by Buyco, for which there is no deduction in the Income Tax Act. This is based on the presumption that a pension surplus would likely be excluded from the definition of ECE by virtue of paragraph (f) of the definition of this term in subsection 14(5) of the Act."
1 March 2001 T.I. 2001-006871 -
Expenses incurred by a taxpayer with respect to an aborted debt offering where there was no substituted transaction would qualify as eligible capital expenditures if the plan had been to borrow the funds for the purpose of gaining or producing income from a business (as opposed to income from property). No deduction would be available under s. 20(1)(e).
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 capital expenditures rather than part of the capital cost of the pipeline.
Subsection 14(7) - Replacement property
Administrative Policy
17 April 2012 T.I. 2011-0427411E5 F -
Where the taxpayer sells his business including client lists, the purchase of shares of a corporation carrying on a similar business will not qualify as a replacement property under s. 14(7) given that shares are excluded having regard to s. 14(5), "eligible capital expenditure", (f)(iii) from eligible capital property.