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Federal Tax - Depreciation. Suncor Energy Inc. v. Canada
In Suncor Energy Inc. v. Canada (Fed CA, 2026) the Federal Court of Appeal allowed an income tax appeal, this brought against a Tax Court ruling respecting ITA s.13(31) ['Recaptured depreciation - Transfers of property'] and arm's-length transfers.
In an opaque 50-paragraph passage [paras 21-71] the court considers these obscure tax issues and provisions:[1] Subsection 13(31) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the Act) deems a transferee who has received depreciable property from a person with whom the transferee was not dealing at arm’s length to have acquired the property at the time it was acquired by the transferor for the purpose of determining when the property will be available for use as provided in paragraph 13(27)(b) of the Act. The issue in this appeal is the interaction of these two provisions when the transferee does not exist as of the time that the transferee is deemed to have acquired the property. Concluding:[72] As a result, in my view, the correct interpretation and application of the deemed acquisition rule in subsection 13(31) as it applies to the available for use rule in paragraph 13(27)(b) of the Act is that, in deeming the time at which the depreciable property is acquired by the transferee, if such time is before the transferee is formed, the necessary implication is that this time occurred in what would have been the taxation year of the transferee if the transferee would have then been in existence. This allows the time period as contemplated by paragraph 13(27)(b) of the Act to start.
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