A shareholder sells depreciable property to the corporation for a sum exceedingits fair market value ("FMV").
CRA confirmed that the capital cost of the depreciable property to the corporation would exceed the property’s FMV at the time of the transfer – so that if the property were sold immediately thereafter for its FMV, the corporation could incur a terminal loss, and if it were sold a few years later for an amount exceeding that determined under s. 13(7)(e)(i), there would be a capital gain and no recapture.
However, CRA noted that the excess of the consideration received by the shareholder over the property’s FMV would be a taxable s. 15(1) benefit.