Given that s. 13(21.1)(a) only reduces the terminal loss on a building if the disposition of the land resulted in a capital gain, would s. 13(21.1)(b) apply to the disposition of a building if the subjacent and immediately contiguous land had been disposed of at a loss in a previous year? The Agency responded:
[T]he conditions for applying paragraph 13(21.1)(b) would be satisfied since the taxpayer owned the land subjacent to, or immediately contiguous to the building at some time before the disposition of the building and paragraph 13(21.1)(a) does not apply, as the land was not disposed of in the same year as the building. The provisions of paragraph 13(21.1)(b) would ensure that the terminal loss is reduced even if the land had been disposed of at a loss in a previous year.