ABC Inc. leased Building A to Opco, a sister corp. which used Building A in an active business. In January 2013, Building A was expropriated (with Opco moving its business to premises of an unrelated corporation). In May 2013, ABC Inc. acquired a replacement building (Building B) which it leased to an unrelated corporation for use in that tenant's active business. In confirming that the s. 44(5) replacement property rollover was not available, CRA stated (TaxInterpretations translation):
[S]ince Building B was not used by ABC Inc., or a person related to it, to gain or produce income from a business in which Building A was used or a similar business, that building would not qualify as a replacement property.
However, CRA noted that if ABC Inc. had rented Building B to XYZ Inc., another corporation related to ABC Inc., with XYZ Inc. using it in an active business, it would suffice if XYZ Inc. used it in the same or a similar business. CRA stated:
[I]t does not matter if the person who uses Building B is different from the one who used Building A. It is sufficient if the person who uses Building B is related to ABC Inc., being the owner of the building, and that the business in which Building B is being used is the same or similar to that carried on by Opco in using Building A, the former business property.