S. Parnanzone (613) 957-2098
Dear XXXX
Re: Subsection 1103(1) of the Income Tax Regulations ("Regulations")
This is in reply to your letter of November 10, 1986, enquiring whether assets acquired for the purpose of earning income from property, rather than from a business, are eligible for the election under the above-noted provision of the Regulations. You make reference to paragraph 1 of Interpretation Bulletin IT-327 which appears to suggest that the election can be made.
In our view, the election under subsection 1103(1) of the Regulations can only be made in respect of properties acquired for the purpose of earning income from a business. The statement in paragraph 1 of 17-32: "... the calculation of income from business or property in a taxation year." is only intended to identify in a general way the subsections (e.g. subsections 20(16), 13(1)) of the Income Tax Act which are affected by the mentioned election in the Regulations. We agree, however, that the bulletin may appear confusing in this regard.
When a taxpayer, say, earns rental income from property, it is a question of fact as to whether or not the taxpayer is involved in a rental business so that the election in question may be made.
We trust the above comments are of assistance to you.
Yours truly,
ORIGINAL SIGNED By ORIGINAL SIGNÉ PAR
D. B. MORPHY
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch