A corporation sold land for $300,000 and a building (having a capital cost of $300,000 and an undepreciated capital cost of $260,000) for $200,000 to an affiliated corporation, so that s. 13(21.2) applied. On the sale, it realized a capital gain of $50,000 and a terminal loss of $60,000 – except that, pursuant to s. 13(21.1), the capital gain became nil and the terminal loss became $10,000, so that pursuant to s. 13(21.1), the deemed proceeds of disposition of the building were $250,000. The Directorate stated:
[T]he expression “that would otherwise be the transferor’s proceeds of disposition of the transferred property” used in paragraph 13(21.2)(b) means the proceeds of disposition of the building determined having regard to subsection 13(21.1) … [i.e.] $250,000 … [so that] the vendor would be deemed to own a property with a capital cost of $10,000.