The taxpayer received equipment on the winding-up of the wholly-owned subsidiary and, five days later, transferred the same assets to another subsidiary.
In connection with finding that the equipment qualified in the taxpayer's hands as depreciable property, McLachlin J. stated (at para. 7):
The fact that the assets produced revenue, as the reasons of L’Heureux-Dubé J. demonstrate, establishes that they continued to be used for the purpose of producing income, avoiding the effect of s. 13(7)(a) and the exclusion under Regulation 1102(1)(c). The fact that the revenue was small or earned over a short period of time does not take them out of this category. We need not decide whether a different result might flow if the evidence viewed as a whole showed that the assets possessed a non-revenue function: see Clapham v. M.N.R., 70 D.T.C. 1012 (T.A.B.); Bolus-Revelas-Bolus Ltd. v. M.N.R., 71 D.T.C. 5153 (Ex. Ct.). Nor is the case of assets held for such a short period of time that the revenue produced was too small to calculate (e.g., the case of the instantaneous or same day rollover) before us. Here the assets served only one function, to produce income.
L’Heureux‑Dubé J in her concurring reasons stated (at paras. 63-65):
[T]o avoid absurdity in the context of the present case, s. 20(1)(a) must be understood as follows:
...there may be deducted…such part of the capital cost . . . of [income-producing] property [or, alternatively, property acquired for the purpose of producing income]….
…[T]o satisfy this first part of the test, it is sufficient to presume that if the property produces revenue, it indeed meets the requirements of Regulation 1102(1)(c). …
The second part of the test… determined by an objective evaluation of the specific facts and circumstances of each case in relation to appropriate jurisprudence, having regard to whether the taxpayer acted in accordance with reasonably acceptable principles of commerce and business practices.