The taxpayer, which leased flight simulators which it had manufactured, subsequently sold those simulators. The Minister denied capital cost allowance claims of the taxpayer made prior to the sales on the grounds that the simulators were inventory.
Noël JA found that as ss. 45(1)(a) and 13(7)(a) applied to conversions of capital property (including depreciable property) from income-producing use into use as inventory (as well as to conversions into personal use), the claiming of capital cost allowance in the initial years was not inconsistent with a subsequent sale of the simulators on income account. (However, two of the simulators nonetheless were inventory in the years they were being leased by the taxpayer as two airlines had options to purchase them.)