The sole asset of a corporation sold to a 3rd party is goodwill with a fair market value of $200,000. Can the corporation make a s. 111(4)(e) designation respecting its goodwill, viewed as a Class 14.1 property with an FMV and capital cost of $200,000 and nil, respectively? CRA responded:
Since January 1, 2017, goodwill relating to a business is Class 14.1 depreciable property. Consequently, it is capital property and, based on the facts set out above, was owned by the corporation immediately before the corporation was subject to a loss restriction event. In addition, according to the facts provided, the goodwill is not a depreciable property to which subsection 111(5.1) would apply … .
Therefore, the corporation can designate the goodwill in accordance with paragraph 111(4)(e).