Corporation A sold a building with a cost of $3,800,000 to an associated corporation (Corporation B) for its FMV of $4,200,000, so that s. 13(7)(e) reduced its cost to Corporation B to $4,000,000. Corporation B then resold the immovable for $4,150,000 to arm’s length purchasers, and incurred disposition expenses of $40,000.
Can Corporation B claim a capital loss of $90,000 on the subsequent disposition?
CRA indicated that s. 39(1)(b)(i) precluded the recognition of capital loss and “to the extent that the proceeds of disposition of such property are less than its capital cost, the proceeds of disposition will be applied against the UCC of the class.”