M. Siegel (613) 995-2455 July 9, 1986
Dear Sirs:
This is in reply to your letters of June 4 and June 26, 1986 concerning the application of subsection 13(5.1) of the Income Tax Act (the "Act").
You have provided us with the following fact situation:
1. Opco is a corporation resident in Canada which carries on the business of real estate development. Opco acquired a leasehold interest in a shopping centre. The leasehold interest is a Class 3 asset under Schedule II of the Act.
2. Landco is a wholly-owned subsidiary of Opco which acquired the fee simple in the land upon which the shopping centre was constructed.
If Landco is wound up there would be a merger of the fee simple and leasehold interest such that Opco will have the fee simple in the land and the shopping centre. It is our opinion, based on the facts as presented, that paragraph 13(5.1)(b) of the Act will apply to determine the capital cost of the shopping centre as a Class 3 asset to Opco upon the winding up of Landco.
This opinion is based on our best interpretation of the law. It is not, however, an advance income tax ruling and is therefore not binding on the Department.
We hope this information will be of assistance to you.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch