A resident individual received a gift of (or alternatively, an inheritance of) a rental property situated in a foreign country from a non-resident relative. The building included in the property had a cost to the non-resident of $1.0 million and has an FMV of $1.4 million.
In the case of the gift, CRA noted that although s. 69(1)(c) would deem the building’s cost to the resident to be its FMV of $1.4 million, the ½ step-up rule in s. 13(7)(e)(ii) would reduce the capital cost of the building to the resident to $1.2 million, so that the starting undepreciated capital cost of the building would also be that amount.
S. 13(7)(e)(ii) does not apply where the transfer is as a consequence of the death of the transferor. Accordingly, the cost to the resident of the building on its inheritance would be the full $1.4 million.