Non-arm's length transactions
When you acquire depreciable property in a non-arm's length transaction, there are special rules to follow to determine the property's cost. These special rules do not apply if you get the property because of someone's death.
You can acquire depreciable property in a non-arm's length transaction from:
- an individual resident in Canada
- a partnership with at least one partner who is an individual resident in Canada
- a partnership with at least one partner that is in another partnership
If you pay more for the property than the seller paid for the same property, calculate the capital cost as follows:
Capital cost calculation – Non-arm's length transaction with a resident of Canada
The seller's cost or capital cost
The seller's proceeds of disposition
Amount from line 1
Line 2 minus line 3 (if negative, enter "0")
Enter any capital gains deductions claimed for the capital gains related to the depreciable property
Line 4 minus line 5 (if negative, enter "0")
Capital cost (line 1 plus line 6)
Enter the amount from line 7 in column 3 of either Area B or C, whichever applies. Do not include the cost of the related land. Include the cost of the related land on line 9923, "Total cost of all land additions in the year," in Area F of your form.
You can also buy depreciable property in a non-arm's length transaction from:
- a corporation
- an individual who is not resident of Canada
- a partnership with no partners who are individuals resident in Canada or with no partners that are other partnerships
If you pay more for a property than the seller paid for it, calculate the capital cost as follows:
Capital cost calculation – Non-arm's length transaction with a non-resident of Canada
The seller's cost or capital cost
The seller's proceeds of disposition
Amount from line 1
Line 2 minus line 3 (if negative, enter "0")
Capital cost (line 1 plus line 4)
Enter the amount from line 5 in column 3 of either Area B or C, whichever applies. Do not include the cost of the related land. Include the cost of the related land on line 9923, "Total cost of all land additions in the year," in Area F of your form.
If you buy depreciable property in a non-arm's length transaction and pay less for it than the seller paid, your capital cost is the same amount as the seller paid. The Canada Revenue Agency (CRA) considers you to have deducted as CCA the difference between what you paid and what the seller paid. Enter the amount you paid in column 3 of Area A. Enter the same amount in Area B or C, whichever applies.
Example
Rachel bought a pickup truck for $4,000 from her father, Marcus, in her 2024 fiscal period. Marcus paid $10,000 for the truck in 2015. Since the amount Rachel paid is less than the amount Marcus paid, the CRA considers Rachel's cost to be $10,000. We also consider Rachel to have deducted CCA of $6,000 in the past ($10,000 − $4,000).
Rachel fills the CAA chart as follows:
- In Area B, she enters $10,000 in column 3, "Total cost"
- In Area A, she enters $4,000 in column 3, "Cost of additions in the year," as the addition for her 2024 fiscal period
There is a limit on the cost of a passenger vehicle you buy in a non-arm's length transaction. The cost is the least of:
- the fair market value (FMV) when you buy it
- $37,000 plus any GST/HST or PST you would pay on $37,000, if you bought it in your 2024 fiscal period
- the seller's cost amount of the vehicle when you buy it
The cost amount can vary depending on what the seller used the vehicle for before you bought it. If the seller used the vehicle to earn income, the cost amount would be the undepreciated capital cost (UCC) of the vehicle when you buy it. If the seller did not use the vehicle to earn income, the cost amount will usually be the original cost of the vehicle.
Forms and publications
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