5-920242
A. Payette
24(1) (613) 957-8953
19(1)
February 27, 1992
Dear Sirs:
Re: Paragraph 13(28)(b) of the Income Tax Act (the "Act")
This is in reply to your letter dated January 14, 1992 wherein you requested our interpretation of the available-for-use rules in a situation where Corporation X, which is a principal business real estate corporation and owns several rental properties, purchases a fully constructed but vacant building from an arm's length party, which it intends to use to derive rental income.
At the end of X's taxation year in which it acquired the property, the building is still vacant; furthermore, the corporation did not receive any rental income from that property in that year although the corporation was actively seeking tenants throughout the year of acquisition.
Our comments
Subsection 13(28) of the Act provides that
"... property that is a building or part thereof of a taxpayer shall be considered to have become available for use by the taxpayer at the time that is the earliest of
(a) the time at which all or substantially all of the building is first used by the taxpayer for the purpose for which it was acquired,
(b) the time at which the construction of the building is complete,...".
The determination of whether a building is considered to have become available for use by a taxpayer is a question of fact that can only be resolved by examining all of the relevant facts of the particular situation. We offer the following general comments which may be of assistance to you with respect to your concerns of when a building has become available for use pursuant to subsection 13(28) of the Act.
The fact that a corporation is actively seeking tenants is an indication that the building was acquired for the purpose of gaining or producing income for purposes of paragraph 1102(1)(c) of the Income Tax Regulations. It is not, however, an indication that the building is available for use within the meaning of subsection 13(28) of the Act.
Also, we are of the opinion that the word "construction" used in paragraph 13(28)(b) refers to the state of the building and not to the construction activity of the taxpayer.
The above comments represent our opinion of the law as it applies generally. As indicated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, an opinion is not an advance ruling and accordingly, is not binding on Revenue Canada, Taxation.
We trust that our comments will be of assistance.
Yours truly,
for DirectorMerchandising, Manufacturing,Partnerships, Trusts sectionRulings DirectorateLegislative and IntergovernmentalAffairs Branch