Corporation A erected, at its expense and for exclusive use in its transport business, a detached garage on the land on which the principal residence of its individual shareholder (the “Taxpayer”) is located. The land subjacent to the garage is leased to it by the Taxpayer. In finding that Corporation A would be entitled to claim capital cost allowance ("CCA") only if it held the right of superficies to the garage (i.e., by deed it was agreed that the Taxpayer would have no right of accession to the garage), CRA stated:
[A]ssuming that Corporation A is owner by way of superficies of the garage … then the garage, which is used by Corporation A to earn business income, would be depreciable property if the conditions set out in the definition of "depreciable property" … are satisfied.
… Thus, the garage could potentially fall into Class 1(q) of Schedule II of the Regulations. ...
On the other hand, if the taxpayer owns the garage, the taxpayer would not be entitled to CCA because the facts do not allow us to conclude that the taxpayer uses it for the purpose of earning income. Indeed, under paragraph 1102(1)(c) of the Regulations, depreciation is deductible only if the property was acquired for the purpose of gaining or producing income.