Proposed s. 13(38)(d)(iii) provides in the case of a taxation year straddling January 1, 2017, a taxpayer would have had a particular amount included from a business for the particular year under s. 14(1)(b) (as that paragraph applied immediately before January 1, 2017, the taxpayer can elect to include the particular amount in income from its business for the particular year, provided inter alia the taxpayer has incurred an eligible capital expenditure (ECE) in respect of a business before January 1, 2017. In a situation where a taxpayer has disposed of all of its business in a straddle year but before January 1, 2017, and the intangible business assets disposed of only include internally generated goodwill with no cost, will s. 13(38)(d)(iii) apply even though no ECE in respect of the business was incurred before January 1, 2017? CRA responded:
Where a taxpayer’s only intangible asset is internally-generated goodwill with no cost, that taxpayer cannot be said to have made or incurred an ECE in respect of the business. As such, the taxpayer would not meet the requirements of the election in subparagraph 13(38)(d)(iii). It is our understanding that this result is consistent with tax policy.