ARCHIVED - Rental Properties - Capital Cost of $50,000 or More

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NO: IT-274R

DATE: April 9, 1990

Rental Properties - Capital Cost of $50,000 or More

REFERENCE: Subsection 1101(1ac) of the Regulations (also subsections 1100(11) and (14), 1101(1ad) and (5b) and 1103(1) of the Regulations)


This bulletin replaces and cancels Interpretation Bulletin IT-274 dated December 22, 1975. Current revisions are designated by vertical lines.


This bulletin deals with the requirement to include in a separate capital cost allowance class each rental property acquired at a capital cost of $50,000 or more.

Discussion and Interpretation

1. Subsection 1101(1ac) of the Regulations prescribes a separate class for each rental property (as defined by subsection 1100(14) of the Regulations) that a taxpayer has acquired after 1971 at a capital cost of $50,000 or more, other than a building the erection of which commenced or was agreed to in writing before 1972. These provisions also apply to all deemed acquisitions of rental property under the Act but do not apply to acquisitions in the specific circumstances outlined in subsection 1101(1ad) of the Regulations. Also excepted are properties that are leasehold interests in real property described in subsection 1100(13) of the Regulations which are required to be included in a separate class for all such leasehold interests by virtue of subsection 1101(5h) of the Regulations.

2. In determining the capital cost of a rental property only the portion of the total purchase price that would be allocable to Class 1, 3, 6 or 13 is considered in deciding whether the rental property should be in a separate class. For example, the proper portion of the total purchase price of a furnished apartment building is allocated to land, furniture and building (the rental property).

3. In the case of a condominium building or row-housing structure where a taxpayer has acquired one or more units, the cost of the unit or the aggregate cost of all the units within the same building or structure will constitute one separate class if this cost or aggregate cost is $50,000 or more. If a taxpayer owns units in different buildings or structures, the separate class provisions of subsection 1101(1ac) of the Regulations apply to any individual building or structure that has an aggregate cost to the taxpayer of $50,000 or more. Where the cost of the unit includes a share in the common property, the proper portion should be allocated to land and other classes of property held in common to determine the cost of the rental property itself.

4. Ordinarily additions made after 1971 to a rental property acquired before 1972 do not put it in a separate class under subsection 1101(1ac) of the Regulations even though the capital cost of the additions may be $50,000 or more. Each rental property acquired after 1971 for less than $50,000 must be put in a separate class if subsequent additions increase its capital cost to at least $50,000. Subsection 13(5) of the Act outlines the procedure for transferring the property into the separate class (see the current version of IT-190).

5. A separate class is not prescribed for a share in a rental property acquired by a taxpayer for less than $50,000 under a tenancy in common or joint tenancy even though the total capital cost of the property is $50,000 or more. However, a separate class is prescribed for each rental property, having a total capital cost of $50,000 or more, that is partnership property even if one or more partners' interest in the partnership is less than $50,000.

6. For taxation years prior to 1994, multiple-unit residential buildings (MURBS) under Classes 31 and 32 of Schedule II are excluded from the definition of rental property pursuant to paragraph 1100(14)(a) of the Regulations. Thus MURBS are not subject to the rental loss restrictions on capital cost allowances in subsection 1100(11) of the Regulations until taxation years after 1993. However, by virtue of subsection 1101(5b) of the Regulations, where a property of Class 31 or 32 of Schedule II has a capital cost to the taxpayer of $50,000 or more, a separate class for it is prescribed; therefore, the principles regarding separate classes for rental properties with capital costs of $50,000 or more which are discussed in this bulletin will apply in the case of Class 31 or 32 buildings. For further information on MURBS, refer to the current version of IT-367.

7. Subsection 1101(1ac) of the Regulation applies whether the rental income from the rental property is income from a business or property. Where the income is from a business, a taxpayer may elect under subsection 1103(1) of the Regulations (see the current version of IT-327) to transfer to Class 1 all properties (including rental properties) otherwise included in Classes 2 to 12 inclusive and acquired for the purpose of gaining or producing income from the same business. When the election is made, each rental property acquired after 1971 with a capital cost of $50,000 or more transferred to Class 1 must be put in a separate Class 1.

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