On a sale of a residential care facility, the taxpayer allocated substantially all of the sale price to operating agreements with the Quebec Ministry, and took the position that the election under s. 14(1.01) (which at the time had provided that the election could be made regarding eligible capital property other than goodwill) was available as the operating agreements represented ECP other than goodwill. Before noting that the distinction would cease to matter as a result of a proposed retroactive amendment to s. 14(1.01), the Directorate accepted that the agreements represented goodwill stating:
[A] private institution under contract must also sign an operating agreement with the MSSS [Quebec Ministry] under which the institution undertakes to provide services as a CHSLD [care facility] … . In return, the MSSS provides the necessary funding for the operation of the institution.
… [T]he operating agreements constitute goodwill … since the acquisition of one or more operating agreements by a purchaser can only be made if the Minister … has approved the assignment of the underlying licence. In other words, the transfer of operating agreements by one institution under contract to another must be preceded by the transfer of the underlying licence. Thus, since the transfer of the operating agreements cannot be made without the transfer of the business to the new purchaser, we are of the view that the operating agreements constitute goodwill … .