Does the position in 2002-0151405, respecting an aborted attempt to acquire shares, that “these fees qualify as eligible capital expenditures if the taxpayer can demonstrate that the taxpayer intended to make the business of the target corporation part of a similar business that the taxpayer already operated,” still apply following the repeal of the eligible capital property system? CRA responded:
…CRA has applied … IT-143R3 [para. 23]:
“Since an outlay or expense is an eligible capital expenditure only if it is incurred for the purpose of gaining or producing income from a business, legal and accounting fees incurred in an abortive attempt to acquire shares of a corporation would normally not qualify. Where, however, the taxpayer can demonstrate that he or she proposed to make the business of the corporation part of a similar business which the taxpayer already operated, the fees may qualify as eligible capital expenditures.”
Effective January 1, 2017, the Eligible Capital Property system was repealed and replaced with a new capital cost allowance class, Class 14.1. We confirm that the CRA will continue the position as outlined in paragraph 23 of IT-143R3 under the new Class 14.1 rules.