In 1994, when the capital cost of a taxpayer’s building was $91,000 and the total depreciation deducted since acquisition was $12,000, the taxpayer elected pursuant to s. 110.6(19) and designated $103,000 as the proceeds of disposition. The gain resulting from this election was reduced pursuant to s. 110.6(21), so that the taxpayer reported a capital gain of $10,000. As a result of the election, the capital cost of the building, as reduced by the s. 110.6(21)(b) amount, was $101,000. However, for CCA purposes, the capital cost of $101,000 was reduced pursuant to s. 13(7)(e)(i) to $91,000, and the UCC to $79,000.
The taxpayer died in 2003, without having claimed CCA since 1995, and his spouse acquired the building pursuant to s. 70(6).
The Directorate indicated that, in light of s. 70(13) providing that the capital cost to the taxpayer immediately before his death was to be determined without regard to s. 13(7) for most s. 70 purposes, the capital cost was $101,000, and the cost amount would be $89,000, i.e., not reflecting s. 13(7)(e) adjustments. Thus, the deceased's proceeds of disposition of the depreciable property would be $89,000 pursuant to s. 70(6)(d), and the capital cost calculated pursuant to s. 70(13) would also be used to calculate the UCC for recapture purposes, so that the proceeds of disposition of $89,000 would not result in recapture of depreciation to the deceased.
The deceased taxpayer's proceeds of disposition of $89,000 would also represent the cost to the spouse of acquiring the property, as per s. 70(6)(d). S. 70(6)(e) provides that paragraph 70(5)(c) applies, pursuant to which the deceased taxpayer's capital cost was $101,000. Consequently, for the purposes of ss. 13 and 20, the spouse's capital cost was deemed to be $101,000 and the excess of that capital cost over the spouse's cost of $89,000, being $12,000, was deemed to have been allowed as depreciation.