28 March 1994 External T.I. 9333215 - COST OF DEPRECIABLE PROPERTY

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

What is cost of property for purposes of 85(1) where the property was previously transferred under 85(1) ?

Position TAKEN:

The cost would be the cost as previously determined under 85(1)(a) as modified by any other relevant provision.

Reasons FOR POSITION TAKEN:

Interpretation of the provision

			5-933321

XXXXXXXXXX D. Yuen
(613) 957-8953

Attention: XXXXXXXXXX

March 28, 1994

Dear Sirs:

Re: Paragraph 85(1)(e) of the Income Tax Act¹

We are writing in response to your letter of November 10, 1993 wherein you requested a technical interpretation of the meaning of the phrase "cost to the taxpayer of the property" found in subparagraph 85(1)(e)(ii) in a case where the property being transferred pursuant to subsection 85(1) was previously acquired by the transferor in a non-arm's-length transaction under the provisions of subsection 85(1).

It is your view that the "cost" referred to in subparagraph 85(1)(e)(ii) in the above situation is the amount that was deemed to be the cost of the property as previously determined under paragraph 85(1)(a) (being the amount agreed upon for purposes of paragraph 85(1)(a) in the previous election or the amount that was deemed by paragraph 85(1)(e) to be the agreed amount in respect of the property).

Our Comment

It is our view that, in the above situation, the "cost" referred to in subparagraph 85(1)(e)(ii) would be the cost of that property as previously determined under paragraph 85(1)(a), as modified by any other relevant provisions of the Act such as paragraphs 85(1)(b), (c), (e) and (e.2) and subsection 85(5.1).

The foregoing comment is given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and is not binding on Revenue Canada.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

¹ All statutory references in this letter are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993 (the "Act").

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