,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,l& ,develop]s--,subdivi.n &
  ,develop;t ,co/s & ,c>ry+ ,*>ges on
  ,l&
,numb]3 ,,it-#aec;,r#c
,date3 ,octob] #g1 #aiia
,ref];e3 ,subsec;ns #ah7#b71 7#b.b71
  7#b.c71 7#b.d71 7#b.e71 7#c71 7al
  subsec;ns #aj7#a71 7#a.a7 &! def9i;n (
  8specifi$ %>ehold]0 & 8busi;s0 9
  subsec;n #bdh7#a71 p>agraphs
  #ah7#a77a71 #bj7#a77c71 #ec7#a77d4#c7
  & subp>agraph #ec7#a77e77;xi7 (!
  ,9come ,tax ,act1 & sec;n #dcja (!
  ,9come ,tax ,regul,ns7

               ,applic,n
    
  ,? bullet9 replaces & c.els ,9t]pret,n
,bullet9 ,,it-#aec;,r#b dat$ ,july    #a
             ,,it-#aec;,r#c          a#a
#bj1 #aiha4 ,! -;ts "h9 4cuss ! law z x
applies af ,novemb] #af1 #aigh4 ,": x is
nec 6det]m9e ! applic,n ( subsec;ns
#ah7#b71 7#b.a7 & 7#c7 2f ,novemb] #ag1
#aigh1 pl1se ref] 6! law4

                ,summ>y
    
  ,? bullet9 d1ls )! special tr1t;t
a3ord$ 69t]e/ & prop]ty taxes on vacant
l& held z 9v5tory4 ,emphasis is giv5
6taxpay]s ^: ord9>y busi;s is hold+ l&
prim>ily =! purpose ( resale or
develop;t4 ,= _m tax,n ye>s prior
6#aihh1 s* 9t]e/ & prop]ty taxes cd 2
deduct$ 9 ! ye> 9curr$ or1 at !
taxpay]'s op;n1 a4$ 6! co/ ( 9v5tory4
,s* co/s >is+ 9 #aihh & subsequ5t tax,n
ye>s >e subject 6c]ta9 deduc;n limit,ns
9 ! ye> 9curr$1 & any por;n d5i$ z a
deduc;n 9 ! ye> m/ 2 a4$ 6! co/ (! l&
held z 9v5tory4
  ,! bullet9 al 4cusses subdivi.n &
develop;t co/s ( l& develop]s z       #b
             ,,it-#aec;,r#c          b#a
well z transac;ns describ$ z an adv5ture
or 3c]n 9 ! nature ( trade4

          ,4cus.n & ,9t]pret,n
    
       ,9t]e/ & ,prop]ty ,taxes--
      ,9curr$ af ! #aihg tax,n ye>
    
#a4 ,= #aihh & subsequ5t tax,n ye>s1
  subsec;n #ah7#b7 applies 6a taxpay] ^:
  ord9>y busi;s is hold+ l& 7see #g & #h
  2l7 z 9v5tory =! purpose ( resale or
  develop;t4 ,9 ? bullet91 s*
--------------------------------------#b
  a taxpay] is al ref]r$ 6z a 8l&
  develop]04 ,subsec;n #ah7#b7 d1ls )!
  limit,n on ! deduc;n 9 -put+ s* a
  taxpay]'s 9come =a "picul> tax,n ye>
  (! foll[+ exp5ses 7al ref]r$ 6z 8c>ry+
  *>ges0 9 ? bullet973
  7a7 9t]e/ on debt relat+ 6! acquisi;n
    (! l& 7see #i 2l71 &
  7b7 prop]ty taxes pd or paya# 9
    respect (! l&1 9clud+ assess;ts   #c
             ,,it-#aec;,r#c          a#b
    = s*ool taxes & local improve;ts b n
    9clud+ any 9come or pr(its taxes or
    l& transf] taxes4
  ,g5],y1 a taxpay]'s deduc;n = s* c>ry+
  *>ges 9curr$ 9 a tax,n ye> is limit$
  6! ext5t (! net 9come f ! l& =! ye>
  72+ ! gross 9come f ! l& =! ye> less
  o!r deduc;ns exclusive (! c>ry+ *>ges7
  0virtue ( p>agraph #ah7#b77e74 ,h["e1
  =a corpor,n ^: pr9cipal busi;s is !
  l1s+1 r5tal or sale or ! develop;t =
  l1se1 r5tal or sale 7or any -b9,n
  "!(71 ( r1l prop]ty [n$ 0x1 6or =a
  p]son ) :om ! corpor,n is d1l+ at >m's
  l5g?1 ! deduc;n = s* c>ry+ *>ges
  9curr$ 9 a tax,n ye> is limit$ 6!
  ext5t (! a7regate (! net 9come f ! l&
  =! ye> &! corpor,n's base level
  deduc;n 7see #c 2l7 =! ye> 0virtue (
  p>agraph #ah7#b77f74 ,! g5]al crit]ia
  3sid]$ 9 det]m9+ a corpor,n's
  8pr9cipal busi;s0 >e describ$ 9 !
  curr5t v].n ( ,,it-#bij4 ,! am.t (
  c>ry+ *>ges d5i$ z a deduc;n 9 !    #d
             ,,it-#aec;,r#c          b#b
  ye> "u subsec;n #ah7#b7 7see #b 2l
  reg>d+ transi;nal relief7 is a4$ 6!
  co/ ( 9v5tory ( l& 0virtue ( subsec;n
  #aj7#a.a7 7see #d 2l74

  ,! abv limit,ns on ! deduc;n ( c>ry+
  *>ges d n apply 9 3nec;n ) l& t c
  r1sonably 2 3sid]$ 6h be5 us$ 9 !
  c\rse (a busi;s o!r ?an a l& develop;t
  busi;s c>ri$ on 9 ! ye> 0! taxpay]1
  0virtue ( p>agraph #ah7#b77c71 or held
  prim>ily =! purpose ( ga9+ or produc+
  9come (! taxpay] f ! l& =! ye>1
  0virtue ( p>agraph #ah7#b77d74
#b4 ,transi;nal relief 6subsec;n #ah7#b7
  provides t ! am.t t wd o!rwise 2 d5i$
  z a deduc;n "u t subsec;n is phas$-in
  ov] ! ye>s #aihh 6#aiib4 ,= #aihh1 !
  por;n (! c>ry+ *>ges d5i$ z a deduc;n
  is ! am.t t wd o!rwise 2 d5i$ z a
  deduc;n "u subsec;n
--------------------------------------#c
  #ah7#b7 multipli$ 0#bj p]c5t4 ,= ea*
  cal5d> ye> af #aihh1 ? p]c5tage     #e
             ,,it-#aec;,r#c          a#c
  rises 0#bj p]c5tage po9ts ov] a five-
  ye> p]iod r1*+ #ajj p]c5t 9 #aiib4 ,":
  a taxpay]'s fiscal p]iod /ra4les a
  cal5d> ye>1 ! "picul> p]c5tages >e
  prorat$ bas$ ^u ! numb] ( "ds 9 ea*
  cal5d> ye>4 ,? transi;nal relief1
  "!=e1 all[s a taxpay] 6claim z a
  curr5t deduc;n a por;n (! c>ry+ *>ges
  t wd o!rwise 2 a4$ 6! co/ ( 9v5tory "u
  subsec;n #aj7#a.a74

  ,! foll[+ example illu/rates !
  applic,n (! transi;nal relief provi.n
  6a taxpay] ^: tax,n ye> does n co9cide
  )! cal5d> ye>3

,assume
7;i7 ,developco is a corpor,n ^:
  pr9cipal busi;s is ! sale1 or
  develop;t = sale1 ( l&1 is n associat$
  ) any o!r corpor,n & has a tax,n ye> :
  cov]s ! fiscal p]iod ,july #a1 #aihi
  6,june #cj1 #aiij4
                                      #f
             ,,it-#aec;,r#c          b#c
7;ii7 ,developco has 9curr$ ! foll[+
  exp5ses 9 ! fiscal p]iod 9 respect (a
  p>cel ( vacant l& held = resale or
  develop;t3
  7a7 9t]e/ on debt relat+ 6!
    acquisi;n (! l&
    4#c1jjj1jjj ( debt at
    #aj@3p """"""""""""""""""" 4#cjj1jjj
  7b7 prop]ty taxes on ! l& """ 4#be1jjj
7;iii7 ,net 9come deriv$ f !
  l& 9 ! fiscal p]iod """"""""" 4#aj1jjj

,ref];e    ,applic,n (
           subsec;n #ah7#b7
#ah7#b77a7 9t]e/ on debt
           relat+ 6! acquisi;n
           (! l& """"""""""""" 4#cjj1jjj
#ah7#b77b7 prop]ty taxes on !
           l& """"""""""""""""" 4#be1jjj
7,a7 ,total c>ry+ *>ges """""" 4#cbe1jjj



                                      #g
             ,,it-#aec;,r#c          c#c
           ,a7regate (! am.ts
           det]m9$ "u
           p>agraphs
           #ah7#b77e7 & 7f7
           7am.t n o!rwise
           re/rict$ 0subsec;n
           #ah7#b77 plus
           transi;nal relief
           "u p>agraph
           #ah7#b77g7

#ah7#b77e7 net 9come deriv$ f
           ! l& """"""""""""""" 4#aj1jjj
#ah7#b77f7 base level deduc;n
           7see #c 2l7
           4#a1jjj1jjj
           ,77#ac@3p multipli$
           0#ib divid$ 0#cfe7
           plus 7#ae@3p
           multipli$ 0#bgc
           divid$ 0#cfe77'
           7,note #a7 """""""" 4#add1iei

                                      #h
             ,,it-#aec;,r#c          d#c
           ,total n re/rict$
           2f transi;nal
           relief """""""""""" 4#aed1iei
#ah7#b77g7 transi;nal relief3
           74#cbe1jjj m9us
           #aed1iei7 ,77#fj@3p
           multipli$ 0#ahd
           divi$ 0#cfe7 plus
           7#dj@3p multipli$
           0#aha divid$
           0#cfe77' 7,note #b7  4#he1aeg
7,b7 ,a7regate 9come deduc;n 9
           ! fiscal p]iod n
           re/rict$ 0subsec;n
           #ah7#b7 """"""""""" 4#bdj1aaf

           ,am.t d5i$ "u
           subsec;n #ah7#b7 &
           a4$ 6! co/ (
           9v5tory (! p>cel (
           vacant l& "u
           subsec;n #aj7#a.a7
           7,note #c7 ,77,a7
           m9us 7,b77 or              #i
             ,,it-#aec;,r#c          e#c
           74#cbe1jjj m9us
           4#bdj1aaf7 equals "" 4#hd1hhd

,note #a
  ,pursuant 6sec;n #dcja (! ,regul,ns1 !
  prescrib$ rate ( 9t]e/ =! qu>t] -m5c+
  ,july #a1 #aihi 0 #ac@3p4 ,=! ?ree
  qu>t]s -m5c+ ,octob] #a1 #aihi1
  ,janu>y #a1 #aiij1 & ,april #a1 #aiij
  ! prescrib$ rate 0 #ae@3p4

,note #b
  ,pursuant 6p>agraph #ah7#b77j7 & 7k7 !
  specifi$ p]c5tage = #aihi is #fj@3p &=
  #aiij is #dj@3p4

,note #c
  ,9 ! abv example1 ! am.t d5i$ z a
  deduc;n "u subsec;n #ah7#b7 0 a4$ 6!
  co/ ( 9v5tory (! "picul> p>cel = : !
  debt 0 9curr$4 ,": funds borr[$
  6acquire l& _c 2 relat$ 6a "picul>
  p>cel or p>cels1 ! am.t d5i$ "u
  subsec;n #ah7#b7 %d g5],y 2        #aj
             ,,it-#aec;,r#c          f#c
  allocat$ 6all l& held dur+ ! ye> 9
  propor;n 6! co/ ( ea* p>cel4
--------------------------------------#d
         ,base ,level ,deduc;n
    
#c4 ,subsec;ns #ah7#b.b7 to 7#b.e7
  provide ! rules t det]m9e a corpor,n's
  base level deduc;n =! purposes (
  subsec;n #ah7#b74 ,"u subsec;n
  #ah7#b.b71 ! base level deduc;n (a
  corpor,n =a tax,n ye> is ! am.t t wd 2
  ! am.t ( 9t]e/1 -put$ at ! prescrib$
  rate1 =! ye> 9 respect ( 4#a1jjj1jjj (
  debt \t/&+ "?\t ! ye>1 if ! corpor,n
  is n associat$ ) any
--------------------------------------#e
  o!r corpor,n 9 ! ye>4 ,sec;n #dcja (!
  ,regul,ns provides =! det]m9,n (!
  prescrib$ rate ( 9t]e/ on a qu>t]ly
  basis4 ,! ,de"p;t publi%es a ,news
  ,rel1se : ann\nces ! prescrib$ rate 9
  ! mon? prec$+ ea* qu>t]4

                                     #aa
             ,,it-#aec;,r#c          a#e
  ,": a corpor,n is a memb] ( an
  associat$ gr\p ( corpor,ns1 subsec;n
  #ah7#b.c7 p]mits all (! corpor,ns t >e
  associat$ ) ea* o!r 9 a tax,n ye>
  6allocate am;g !mvs 9 any propor;n !y
  *oose ! am.t ( 4#a1jjj1jjj 6: !
  prescrib$ rate is appli$ "u subsec;n
  #ah7#b.b7 if !y h1 9 ! ye>1 fil$ )!
  ,m9i/] an agree;t 9 prescrib$ =m
  7,t#bjje74 ,?us1 ! base level deduc;n
  (a corpor,n t is a memb] ( an
  associat$ gr\p is ! am.t allocat$ 6x
  "u ! agree;t multipli$ 0! prescrib$
  rate ( 9t]e/ =! ye>4 ,": s* an agree;t
  is n fil$ 9 a "picul> ye> 0any
  corpor,n 9 ! gr\p1 ! ,m9i/] is requir$
  6make ! alloc,n 6"o or m (! associat$
  corpor,ns = t ye> "u subsec;n
  #ah7#b.d74 ,h["e1 2f an alloc,n is
  made "!"u1 any (! corpor,ns t has
  fail$ 6file )! ,m9i/] ! requir$
  agree;t w 2 giv5 an opportun;y
  6provide x )9 #cj "ds af notice 9
  writ+ 0! ,m9i/]4                   #ab
             ,,it-#aec;,r#c          b#e
  ,": a corpor,n has two or m tax,n ye>s
  5d+ 9 ! same cal5d> ye> & is associat$
  9 two or m ( ^? tax,n ye>s ) ano!r
  corpor,n1 p>agraph #ah7#b.e77a7
  provides t ! corpor,n's base level
  deduc;n = ea* tax,n ye> is det]m9$
  0apply+ two /eps4 ,! f/ /ep is
  6det]m9e ! am.t allocat$ 6! corpor,n
  72f ! adju/;t = %ort tax,n ye>s "u
  p>agraph #ah7#b.e77b7 z 4cuss$ 2l7 =
  xs f/ tax,n ye> 5d+ 9 t cal5d> ye>4 ,!
  second /ep 9 calculat+ ! base level
  deduc;n is 6apply ! requir$ pror,n
  pursuant 6p>agraph #ah7#b.e77b74

  ,9 any case ": a corpor,n has a tax,n
  ye> t is less ?an #ea weeks1 ! base
  level deduc;n =! ye> is adju/$1
  pursuant 6p>agraph #ah7#b.e77b71 0!
  propor;n t ! numb] ( "ds 9 ! ye> is (
  #cfe4

  ,a base level deduc;n is n availa# 6a
  "pn]%ip ev5 ": all ! memb]s >e     #ac
             ,,it-#aec;,r#c          c#e
  corpor,ns &! busi;s (! "pn]%ip &!
  busi;s ( all ! memb]s (! "pn]%ip is !
  sale1 or ! develop;t = sale1 ( r1l
  prop]ty4
--------------------------------------#f
         ,9v5tory ,co/ ,adju/;t
    
#d4 ,subsec;n #aj7#a.a7 provides = an
  a4i;n 6a taxpay]'s co/ ( 9v5tory ( l&
  (! am.t ( c>ry+ *>ges = : no deduc;n
  is p]mitt$ "u subsec;n #ah7#b74
  ,subsec;n #aj7#a.a7 al provides t !
  am.t ( 9t]e/ = : no deduc;n is p]mitt$
  "u subsec;n #ah7#b7 0r1son ( subsec;n
  #ah7#c7 6ano!r taxpay] 7z describ$ 9
  #i7a71 7b7 & 7c7 2l7 3nect$ 6!
  taxpay]1 may 2 a4$ 6! taxpay]'s co/ (
  9v5tory ( l&4 7,see #aj & #aa 2l =
  fur!r details on subsec;n #ah7#c747
  ,no a4i;n may1 h["e1 2 made 6a
  taxpay]'s co/ ( 9v5tory 9 circum/.es
  ": t o!r taxpay] a4s ! am.t d5i$
  0r1son ( subsec;n #ah7#c7 6! co/ ( any
  prop]ty4 7,note7 ,g5],y1 ! c>ry+   #ad
             ,,it-#aec;,r#c          a#f
  *>ges t relate 6a "picul> "p or p>cel
  ( l& m/ 2 deduct$ f ! net 9come f t l&
  & n ag/ ! net 9come ( any o!r l& !
  taxpay] may h 9 9v5tory1 & 6! ext5t t
  "! is 9su6ici5t 9come f t "picul> "p
  or p>cel ! rema9d] m/ 2 a4$ 6! co/ (
  9v5tory ( l&4 ,h["e1 ": a corpor,n
  meets ! 8pr9cipal busi;s0 te/ not$ 9
  #a abv1 x m/ al (fset ? rema9d] ) xs
  base level deduc;n 2f mak+ an a4i;n 6!
  co/ ( 9v5tory ( l&4 ,"!=e 79sof> z !
  base level deduc;n is 3c]n$71 :5 t "p
  or p>cel ( l& is 4pos$ (1 any result+
  ga9 or loss = f9ancial /ate;t
  purposes1 may1 = 9come tax purposes1 h
  6be adju/$ 6reflect ! por;n (! base
  level deduc;n t 0 deduct$ 9 prior
  ye>s4

,example
  ,developco pur*as$ l& = 4#b1jjj1jjj 9
  #aiia & sold x = 4#c1jjj1jjj 9 #aiid4
  ,9t]e/ ( 4#aej1jjj 0 pd 9 ea* ( #aiia1
  #aiib & #aiic 9 respect (!         #ae
             ,,it-#aec;,r#c          b#f
  pur*ase4 ,developco claim$ a base
  level deduc;n ( 4#ajj1jjj 9 ea* ( ye>s
  #aiia1 #aiib & #aiic 9 -put+ 9come =
  tax purposes4 ,= f9ancial /ate;t
  purposes 4#aej1jjj 0 a4$ 69v5tory 9
  ea* ye>4 ,on ! sale (! l& ,developco
  r1liz$ a ga9 ( 4#eej1jjj = f9ancial
  /ate;t purposes4 ,= 9come tax
  purposes1 4#cjj1jjj %d 2 a4$ 6! 9come
  report$ 9 ! f9ancial /ate;ts 9 respect
  (! previ\sly claim$ base level
  deduc;ns4
--------------------------------------#g
,note
  ,bill ;,c-#ah ta#d 9 ! ,h\se ( ,-mons
  on ,may #cj1 #aiia proposes an am5d;t
  6subsec;n #aj7#a.a74 ,! am5d;t1 if
  5act$ z propos$1 wd 2 e6ective =!
  #aihh & subsequ5t tax,n ye>s 6p]mit an
  a4i;n 6a taxpay]'s co/ ( 9v5tory ": !
  am.t is al a4$ 6ano!r taxpay]'s co/ (
  %>es or 9t]e/ 9 a "pn]%ip1 pursuant
  6p>agraph #ec7#a77d4#c7 or subp>agraph
  #ec7#a77e77;xi74                   #af
             ,,it-#aec;,r#c          a#g
  ,p>agraph #ec7#a77d4#c7 & subp>agraph
  #ec7#a77e77;xi7 >e 4cuss$ 9 #aa 2l4
#e4 ,": ! c>ry+ *>ges on vacant l& held
  z 9v5tory >e n limit$ z a result (!
  applic,n ( subsec;n #ah7#b71 !y n"e!.s
  >e subject 6o!r require;ts (! ,act =
  deductibil;y 7s* z subsec;n #ah7#i7 or
  p>agraph #ah7#a77a7 or #bj7#a77c774
  ,h["e1 ! taxpay] may def] ! deduc;n
  o!rwise p]mitt$ = ^! c>ry+ *>ges 0a4+
  !m 6! co/ ( 9v5tory ( l&1 provid$ ? is
  d"o on a 3si/5t basis4

       ,9t]e/ & ,prop]ty ,taxes--
     ,9curr$ af ,novemb] #af1 #aigh
         & 2f ! #aihh tax,n ye>
    
#f4 ,9t]e/ pd or paya# 2f ! #aihh tax,n
  ye> on borr[$ m"oy us$ 6acquire l&
  7see #g 6#i 2l7 or 6f9.e ! develop;t
  or improve;t (! l& t is held 9 ! c\rse
  ( c>ry+ on a busi;s is n re/rict$
  0subsec;n #ah7#b7 & h;e may 2 deduct$
  9 -put+ 9come =! ye> provid$ !     #ag
             ,,it-#aec;,r#c          b#g
  provi.ns ( p>agraph #bj7#a77c7 >e met4
  ,simil>ly1 r1l;y or prop]ty taxes pd
  or paya# 6a prov9ce or a municipal
  body may1 subject 6subsec;n #ah7#i71 2
  deduct$ 9 ! ye> pd or paya#4 ,h["e1 !
  taxpay] may def] ! deduc;n ( 9t]e/ &
  prop]ty taxes 03sid]+ !m z an a4i;n 6!
  co/ ( 9v5tory provid$ ! taxpay] does s
  on a 3si/5t basis4 ,": ! c>ry+ *>ges
  9curr$ >e 9 3nec;n ) l& acquir$ z an
  adv5ture or 3c]n 9 ! nature ( trade1
  see #ab 2l4

                  ,l&
    
#g4 ,=! purposes ( subsec;n #ah7#b71
  p>agraph #ah7#c77a7 specifies t l&
  excludes a build+ or o!r /ructure
  a6ix$ 6l&1 ! l& 2n x & any 3tigu\s
  p>k+ >ea1 driveway1 y>d1 g>d5 or
  simil> l& t is nec =! use ( t build+
--------------------------------------#h
  or /ructure4 8,l&0 expressly 9cludes
  l& 6! ext5t t x is us$ =!          #ah
             ,,it-#aec;,r#c          a#h
  provi.n ( p>k+ facilities =a fee or
  *>ge4 ,a taxpay] is 3sid]$ 6h acquir$
  a 8build+ or o!r /ructure0 )9
  subp>agraph #ah7#c77a77;i7 at ! "t :5
  site develop;t 2g9s on l& t has be5
  unequivoc,y -mitt$ 6use z a build+
  site & provid+ ! taxpay] proce$s 9 an
  ord]ly & 3t9u\s fa%ion t[>ds -ple;n (
  3/ruc;n4 ,"! m/ 2 no undue delay4
#h4 ,site develop;t is 3sid]$ 62g9 )!
  9/all,n ( s]vices4 ,(t5 an agree;t
  6subdivide is 5t]$ 9to1 )! municipal;y
  sett+ \ ! t]ms ( subdivi.n4 ,:ile !
  agree;t firmly -mits ! l& develop]
  6proce$ )! develop;t (! subdivi.n1 x
  is 3sid]$ t develop;t does n -m;e
  until ! l& develop] />ts 69/all !
  s]vices1 roadways1 & s on4 ,": s]vic$
  lots >e acquir$1 site develop;t is
  3sid]$ 62g9 at ! e>li] (! date !
  taxpay] />ts 69/all fur!r s]vices 6!
  lots or ! -m;e;t (! p\r+ ( foot+s4
  ,h["e1 %d "! 2 an undue delay dur+ !
  9/all,n ( s]vices or 9 ! mid/ (    #ai
             ,,it-#aec;,r#c          b#h
  3/ruc;n1 ! applica# prop]ty w n 2
  reg>d$ z "o describ$ 9 subp>agraph
  #ah7#c77a77;i74 ,site develop;t may1 (
  c\rse1 o3ur ) respect 6only a por;n (a
  "picul> piece ( l& & only ! develop$
  por;n w 2 3sid]$ 6be a prop]ty
  describ$ 9 subp>agraph #ah7#c77a77;i74

       ,9t]e/ on ,debt ,relat+ 6!
            ,acquisi;n ( ,l&
    
#i4 ,! expres.n 89t]e/ on debt relat+ 6!
  acquisi;n ( l&01 z not$ 9 #a abv1 7&!
  =m] expres.n 89t]e/ on borr[$ m"oy us$
  6acquire l&0--z 4cuss$ 9 #f abv7 9
  subsec;n #ah7#b7 9cludes 9t]e/ pd or
  paya# 0a taxpay] 9 a ye> on borr[$
  m"oy t c 2 id5tifi$ )! acquisi;n (
  "picul> l&4 ,! relevant expres.n is
  giv5 an exp&$ m1n+ 9 p>agraph
  #ah7#c77b74 ,subp>agraph
  #ah7#c77b77;i7 9cludes 9t]e/ pd or
  paya# on borr[$ m"oy t _c 2 id5tifi$
  )! acquisi;n ( "picul> l&1 b t     #bj
             ,,it-#aec;,r#c          c#h
  may n"o!.s r1sonably 2 3sid]$ 7hav+
  reg>d 6all ! circum/.es7 z 9t]e/ on
  borr[$ m"oy us$ 9 respect ( or =!
  acquisi;n ( l&4 ,subp>agraph
  #ah7#c77b77;ii7 9cludes 9t]e/ pd or
  paya# 9 ! ye> 0a taxpay] 7! 3nect$
  taxpay]7 on borr[$ m"oy t may
  r1sonably 2
--------------------------------------#i
  3sid]$ 7hav+ reg>d 6all ! circum/.es7
  6h be5 us$ 6assi/1 directly or
  9directly1
  7a7 ano!r p]son ) :om ! taxpay] does n
    d1l at >m's l5g? 7see ! curr5t v].n
    ( ,,it-#dai71
  & a4i;n,y1 = tax,n ye>s -m5c+ af
  ,april1 #aihh1

  7b7 a corpor,n ( : ! taxpay] is a
    8specifi$ %>ehold]0 7z def9$ 9
    subsec;n #bdh7#a771 or
  7c7 a "pn]%ip ( : ! taxpay]'s %>e (
    any 9come or loss is #aj p]c5t or m1
                                     #ba
             ,,it-#aec;,r#c          a#i
  6acquire l& t is us$ or held 0t p]son1
  corpor,n or "pn]%ip prim>ily =!
  purpose ( resale or develop;t1 un.s !
  assi/.e 3si/s (a loan 6t p]son1
  corpor,n or "pn]%ip = : ! taxpay]
  *>ges a r1sona# rate ( 9t]e/4

  ,subp>agraph #ah7#c77b77;ii7 does n
  9clude 9t]e/ pd or paya# 0a l&
  develop] 2f ! #aihh tax,n ye>1 s9ce
  subsec;n #ah7#b7 does n apply 6limit a
  l& develop]'s deduc;n ( c>ry+ *>ges
  "?\t ? p]iod4 ,= purposes ( p>agraph
  #ah7#c77b71 ! rel,n%ip 2t ! borr[+ (
  funds &! acquisi;n ( l& is a "q ( fact
  6be det]m9$ f ! circum/.es ( ea*
  "picul> case4 ,if no s* rel,n%ip
  exi/s1 no "p (! 9t]e/ pd or paya# w 2
  4all[$4
#aj4 ,! borr[$ m"oy ref]r$ 6in
  subp>agraph #ah7#c77b77;ii7 9cludes
  borr[$ m"oy us$ 0a taxpay] :o meets "o
  (! te/s not$ 9 #i7a71 7b71 or 7c7 abv1
  6subscribe = %>es 9 a corpor,n1    #bb
             ,,it-#aec;,r#c          b#i
  63tribute capital 6a "pn]%ip or 6make
  an 9t]e/-free loan 6a corpor,n or a
  "pn]%ip4 ,": x may r1sonably 2 3sid]$
  7hav+ reg>d 6all ! circum/.es7 t !
  corpor,n or "pn]%ip us$ ! m"oy rcvd f
  ! issu.e (! %>es1 ! 3tribu;n ( capital
  or ! 9t]e/-free loan 6acquire l& 6be
  us$ or held prim>ily =! purpose (
  resale or develop;t1 ! taxpay] :o
  subscribes = %>es1 3tributes capital
  or makes ! 9t]e/-free loan w 2 subject
  6subsec;n #ah7#b7 & acly1 w 2 d5i$ any
  deduc;n =! 9t]e/ pd or paya# on !
  borr[$ m"oy4 ,fur!rmore1 ! 9t]e/
  exp5se s d5i$ is n a4$ 6! taxpay]'s
  9v5tory co/ ( l& 2c x is 9 respect (
  l& t ! taxpay] does n [n4
-------------------------------------#aj
#aa4 ,= #aihh & subsequ5t tax,n ye>s1 ":
  a taxpay] holds on capital a3.t %>es
  (a corpor,n or an 9t]e/ 9 a "pn]%ip z
  a result (a transac;n describ$ 9 #aj
  abv1 p>agraph #ec7#a77d4#c7 &
  subp>agraph #ec7#a77e77;xi7        #bc
             ,,it-#aec;,r#c         a#aj
  respectively provide = an a4i;n 6!
  adju/$ co/ base ( s* prop]ties equal
  6! am.t (! 9t]e/ exp5se d5i$ 6!
  taxpay] "u subsec;n #ah7#b7 0r1son (
  subp>agraph #ah7#c77b77;ii74

     ,adv5ture or ,3c]n 9 ! ,nature
                ( ,trade
    
#ab4 ,! def9i;n ( 8busi;s0 9 subsec;n
  #bdh7#a71 = purposes ( p>agraph
  #ah7#b77c71 does n 9clude an adv5ture
  or 3c]n 9 ! nature ( trade4
  ,3sequ5tly1 subsec;n #ah7#b7 w apply
  6d5y a deduc;n = c>ry+ *>ges 9curr$4
  ,h["e1 ! 4all[$ am.t1 subject 6! -;ts
  9 #aa abv1 may 2 a4$ 6! co/ ( 9v5tory
  ( l&4 ,9 all cases ": l& is held z an
  adv5ture or 3c]n 9 ! nature ( trade1 !
  am.ts a4$ 6! co/ ( 9v5tory ( l& may
  only 2 deduct$ :5 ! l& is 4pos$ (4 ,=a
  4cus.n ( an adv5ture or 3c]n 9 !
  nature ( trade1 see ! curr5t v].n (
  ,,it-#dei4                         #bd
        ,subdivi.n & ,develop;t     b#aj
                 ,co/s
    
#ac4 ,! co/s 9 respect ( 9/all,ns )9 !
  subdivi.n >ea 4cuss$ 9 ? p>agraph
  9clude1 b >e n necess>ily re/rict$ to1
  co/s ( roads1 sew]s1 wat]ma9s1 /reet
  li<t+1 sidewalks1 l&scap+ & recre,nal
  facilities4 ,^! co/s >e 3sid]$
  63/itute a -pon5t (! co/ (! 9v5tory (
  l& =! purposes ( subsec;n #aj7#a74 ,?
  tr1t;t is 9 a3ord.e ) g5],y a3ept$
  a3.t+ & -m]cial report+ practices
  design$ 6a*ieve a r1sona# & prop]
  mat*+ ( co/s ) rev5ue4 ,": a por;n (!
  prop]ty 9 ! subdivi.n >ea is transf]r$
  f ! l& develop] 6a municipal;y or o!r
  gov]n;t body "u ! require;ts (!
  subdivi.n au?oriz,n1 ! co/ ( s* l&1
  9clud+ ! applica# por;n (! abv-m5;n$
  9/all,n co/s1 %d 2 reallocat$ on a
  r1sona# basis 6! rema9+ p>cels ( l& =!
  purposes ( subsec;n #aj7#a74 7,util;y
  s]vice 3nec;n co/s >e cov]$ 9 ! curr5t
  v].n ( ,,it-#deb47                 #be
             ,,it-#aec;,r#c         c#aj
#ad4 ,co/s directly attributa# 6!
  develop;t ( l&1 = example1 legal1
  3sult+1 mortgage1 & survey fees1 %d 2
  a4$ 6! co/ ( l& 9 ! tax,n ye> 9curr$4
  ,on ! o!r h&1 co/s t >e 9 ! nature (
  recurr+ op]at+ ov]h1ds & >e
-------------------------------------#aa
  n specific,y id5tifia# )a giv5 project
  ( subdivi.n or develop;t may 2 claim$1
  = tax purposes1 9 ! ye> 9curr$ )9 !
  g5]al limit,ns ( p>agraph #ah7#a77a74












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