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 indicated that the proceeds of disposition of the building were to be determined first under s. 13(21.1) before applying s. 13(21.2)(b), quoting in this regard the Explanatory Notes:
If, after subsection 13(21.1) has been applied to a disposition, there would otherwise remain a terminal loss, and the disposition is one to which subsection 13(21.2) applies, that provision may defer the disposing taxpayer's recognition of the remaining loss.