Cases
Colbert v. The Queen, 94 DTC 6620 (FCTD)
Wetson J. found that the taxpayer had transferred all the assets and goodwill of his chicken farm with the exception of the land and the chicken quota, to a corporation, and that the non-salary income received by him from the corporation was rental income. Accordingly, the land retained by him did not qualify as a former business property.
The Queen v. Augart, 92 DTC 6610 (FCTD)
Farm land which the taxpayer used for grazing animals (his own breeding stock as well as horses which he boarded for other people) was not a former business property of the taxpayer in light of the minimal revenues he derived from such activities.
Buonincontri v. The Queen, 85 DTC 5277, [1985] 1 CTC 370 (FCTD)
It was held that an 11 suite apartment building had been purchased by a tailor for the purpose of retaining it and renting it, and was accordingly a rental property given the ordinary meaning of the word "rent". In addition, the rental income earned was property income rather than business income. The building accordingly was not a former business property.
See Also
Glaxo Wellcome Inc. v. The Queen, 96. DTC 1159 (TCC), aff'd 98 DTC 6638 (FCA)
The predecessor of the taxpayer bought an 18-acre parcel of land in 1965 with the intention of using it for an anticipated future expansion of its pharmaceutical business, and sold the parcel in 1988 (and bought a 62-acre site further to the west to meet his future expansion requirements) after realizing that the 18-acre site (which in the meantime had remained vacant) was inadequate for its expansion requirements.
In finding that the parcel did not qualify as a "former business property", Bowman TCJ. stated (at p. 1164) that:
"It was intended to be used, it was waiting to be used, but in any meaningful sense of the term it was not being used."
Re Trizec (1986), 28 DLR (4th) 161 (Man. C.A.)
"Land is not, in law, the soil we touch, but the rights attached to it. Such rights include the right to work the soil, to mine beneath the surface and build in the air space above it: the incorporeal rights to light, support and the use of water flowing across land." The appellant was liable for municipal assessment in respect of air rights which it occupied.
Administrative Policy
4 March 2015 T.I. 2014-0550761E5 F - 44(1) et disposition partielle
Insurance proceeds received for the destruction of part of a building (which, unlike the balance of the building, was used fro business use) qualified as "compensation for property damaged" (para. (f) of the "proceeds of disposition" definition) rather than "compensation for property destroyed" (para. (c)), so that it was necessary for the destroyed property to qualify as a "former business property" in order for the replacement property rollover to potentially apply to the reinvestment of the insurance proceeds. CRA stated (TaxInterpretations translation):
[T]he portion of the building which was destroyed by fire was used in its totality to earn income from a business and therefore conformed with the definition of a former business property. If in the light of the damages to the building and the scale of the work to be effected it turns out that a new property is acquired by the taxpayer, section 44 can apply … .
See summary under s. 44(1).
2014 Ruling 2014-0523551R3 - Disposition of a Former Business Property
Holdco, which leases properties for heavy industrial use to Opco (which is related) with the exception of some leasing of the properties to third parties, will sell the properties and purchase properties in another location within the required time limit for leasing to Opco for use in the same business. Ruling that the properties are former business properties.
22 May 2003 T.I. 2003-001180 -
"Notwithstanding the fact that a property owned by a corporation earns rental income that may be considered active business income, it is an excluded rental property for purposes of the definition of former business property."
25 June 1999 T.I. 5-991106 -
An apartment building would be a rental property and, therefore, disqualified even if the taxpayer worked full-time at renovating and restoring it.
29 March 2000 T.I. 2000-001280
The replacement property rules in s. 44 may apply when freehold land is acquired to replace a leasehold interest in land for the purpose of carrying out the same or similar business, given that a leasehold interest in land qualifies as an interest in real property.
25 August 1994 T.I. 940084 (C.T.O. "P'ships as Related Persons")
One partnership cannot be a "related person" to another partnership for purposes of the definition of a former business property.
19 August 1994 T.I. 941617 (C.T.O. "Former Business Property")
Four properties which were acquired by a holding company at different times and held under four separate titles would be considered to be four properties rather than one property notwithstanding that they all were acquired for the purpose of use by an operating company related to the holding company. Accordingly, the primary use test would be applied to each of the four properties.
19 November 1991 Memorandum (Tax Window, No. 13, p. 12, ¶1599)
Vacant land held for the purposes of future expansion of a business does not meet the definition of former business property because it is not used for the purpose of gaining or producing income from a business.
7 October 1991 T.I. (Tax Window, No. 10, p. 11, ¶1502)
Where a corporation acquires real property as capital property for use in an active business and at some later juncture the real property is treated as inventory and is sold some years later, then although there is no disposition of the property at the time of its conversion from capital property to inventory, s. 44(1) has no application because at the time of the sale the property was not a former business property.
13 December 1989 T.I. (May 1990 Access Letter, ¶1214)
Buildings which were leased to a wholly-owned subsidiary or related corporation for use in manufacturing operations of those corporations did not qualify as former business properties.
88 C.R. - Q.47
The exclusion for rental properties applies where the land and buildings are held by a holding company and leased to Opco.