Principal Issues: 1) When does a taxpayer acquire bare owner rights ("droits de nue-propriété") with respect to a rental property situated in France (the usufruct being established under French law) for the purposes of the Act, where such rights have been acquired pursuant to a will. 2) Whether the cost of major repairs can be deducted in computing the income of the bare owner.
Position: 1) In the particular situation described, CCRA would generally consider that the legatee would acquire the property bequeathed at the time of the person's death. Pursuant to subsections 70(5) and 107(2) of the Act, the cost of such property to the legatee would correspond to its fair market value at the time of its acquisition by the legatee.
2) Under par. 1102(1)(c) of the Regulations, the bare owner would not be entitled to capital cost allowance ("CCA") at least until the extinction of the usufruct because the rental income generated by the rental property belongs to the usufructuary. However, par. 13(7)(b) may be applicable at the extinction of the usufruct to allow the bare owner (then the full owner of the rental property) to claim CCA, subject to the restrictions established in subsection 1100(11) of the Regulations.
Reasons: Wording of the Act and current positions.