The taxpayer, which produced and distributed breakfast cereals, sold that business to an affiliated Canadian company. Although it conceded that the FMV of the (Class 29) machinery and equipment included in the sale was $56.5 million, it took the position that the reference in s. 69(1)(b) to the disposition of “anything” referred to the sale of its business as a going concern. Since that going concern value was depressed by the amount of the pension obligations which were assumed by the purchaser, its deemed proceeds under s. 69(1)(b) were $48.3 million, and allocating this amount to the Class 29 property produced proceeds of disposition thereof of $48.3 million.
In confirming CRA’s reassessment to increase the recapture of depreciation realized based on proceeds of disposition of $56.5 million, Spiro J stated (at paras. 17, 20):
No text in the Act reflects an intention by Parliament to require taxpayers to use different methods for computing proceeds of disposition of depreciable property depending on whether the depreciable property was sold on its own to a non-arm’s length purchaser or as part of the sale of a business as a going concern. …
[T]he fair market value of a business as a going concern plays no role in determining the proceeds of disposition, or consequential recapture, of depreciable property under the Act.