A corporation makes two additions in two consecutive taxation years to a pre-2007 non-residential building, and made the election under Reg. 1101(5b.1) election (an “Election”) respecting the first addition ("Addition 1"). Can it include a second addition ("Addition 2") in the same separate class as the one in which Addition 1 was included? Would this position be different in the situation of an addition that was commenced in one taxation year and continued into the next taxation year? CRA stated:
Addition 1 was deemed to be a separate building under subsection 1102(23) since the main building was not included in a separate class by virtue of subsection 1101(5b.1). … Addition 2 would be deemed to be a separate building under subsection 1102(23) since Addition 2 was made to the main building… . Consequently, the taxpayer may make the Election in respect of Addition 2… to benefit from additional CCA under paragraph 1100(1)(a.1) or … (a.2). Addition 2 would therefore be included in a class separate from Addition 1.
Where the work on an addition to the main building begins in a taxation year and ends in the following taxation year, we are generally of the view that the taxpayer is considered to have acquired the addition at the end of the first taxation year and that subsection 1102(23) will apply at that time to deem the capital cost of the addition on that date to be a separate building. Consequently…the Election can be made for the first taxation year… .
However… the capital cost incurred in the second year does not constitute an addition deemed to be a separate building…since the addition in the first year was a separate building under subsection 1102(23) that was included in a separate class by virtue of subsection 1101(5b.1). As a result, the capital cost incurred in the second year would be included in the same class as for the addition in the first year and no Election would be required in the second taxation year.
The above discussion was subject to the available-for-use rules.