,canada ,rev5ue ,ag5cy                #a

          ,9t]pret,n ,bullet9
    
,numb]3 ,,it-#dbf;,r
,date3 ,septemb] #bh1 #bjjd
,subject3 ,9come ,tax ,act--,%>es ,sold
  ,subject 6an ,e>n\t ,agree;t
,ref];e3 ,subsec;n #ci7#a7 7al p>agraph
  #ab7#a77g71 subp>agraph
  #dj7#a77a77;iii71 subsec;ns #aaj.f7#b7
  & #aaj.f7#b.a7 (! ,9come ,tax ,act 7!
  8,act077

  ,at ! ,canada ,rev5ue ,ag5cy 7,,cra71
we issue 9come tax 9t]pret,n bullet9s
7,,it's7 9 ord] 6provide te*nical
9t]pret,ns & posi;ns reg>d+ c]ta9
provi.ns 3ta9$ 9 9come tax law4 ,due 6_!
te*nical nature1 ,,it's >e us$ prim>ily
0\r /aff1 tax speciali/s1 & o!r
9dividuals :o h an 9t]e/ 9 tax matt]s4
,= ^? r1d]s :o pref] a less te*nical
explan,n (! law1 we (f] o!r public,ns1
s* z tax guides & pamphlets4          #a
              ,,it-#dbf;,r           a#a
  ,:ile ! -;ts 9 a "picul> p>agraph 9 an
,,it may relate 6provi.ns (! law 9 =ce
at ! "t !y 7 made1 s* -;ts >e n a
sub/itute =! law4 ,! r1d] %d1 "!=e1
3sid] s* -;ts 9 li<t (! relevant
provi.ns (! law 9 =ce =! "picul> tax,n
ye> 2+ 3sid]$1 tak+ 96a3.t ! e6ect ( any
relevant am5d;ts 6^? provi.ns or
relevant c\rt deci.ns o3urr+ af ! date
on : ! -;ts 7 made4
  ,subject 6! abv1 an 9t]pret,n or
posi;n 3ta9$ 9 an ,,it g5],y applies z
(! date on : x 0 publi%$1 un.s o!rwise
specifi$4 ,if "! is a subsequ5t *ange 9
t 9t]pret,n or posi;n &! *ange is
b5eficial 6taxpay]s1 x is usu,y e6ective
= future assess;ts & reassess;ts4 ,if1
on ! o!r h&1 ! *ange is n fav\ra#
6taxpay]s1 x w norm,y 2 e6ective =!
curr5t & subsequ5t tax,n ye>s or =
transac;ns 5t]$ 96af ! date on : ! *ange
is publi%$4
  ,mo/ ( \r public,ns >e availa# on \r
,web site at3 _+www.cra.gc.ca_:       #b
              ,,it-#dbf;,r           b#a
  ,if y h any -;ts reg>d+ matt]s 4cuss$
9 an ,,it1 pl1se s5d !m to3

  ,9come ,tax ,rul+s ,directorate
  ,policy & ,plann+ ,bran*
  ,canada ,rev5ue ,ag5cy
  ,ottawa ,,on ,k#a;,a #j;,l#e
  
  or 0email at ! foll[+ a4ress3
    _+bulletins@cra.gc.ca_:
  
  ,? v].n is only availa# electronic,y4
  
                 ,3t5ts
    
,applic,n
,summ>y
,4cus.n & ,9t]pret,n
  ,9troduc;n 7p>agraph #a7
  ,3di;ns =! ,applic,n (! ,co/ ,recov]y
    ,me?od 7p>agraph #b7
  ,descrip;n (! ,co/ ,recov]y ,me?od
    7p>agraphs #c-g7
                                      #c
              ,,it-#dbf;,r           c#a
  ,o!r ,-;ts 7p>agraphs #h-i7
,explan,n ( ,*anges

               ,applic,n
    
  ,? bullet9 c.els & replaces ,9t]pret,n
,bullet9 ,,it-#dbf dat$ ,febru>y #ai1
#aigi4 ,un.s o!rwise /at$1 all /atutory
ref];es "?\t ! bullet9 >e 6! ,act4

                ,summ>y
    
  ,? bullet9 describes ! co/ recov]y
me?od ( report+ capital ga9 or capital
losses on ! sale ( %>es subject 6an
e>n\t agree;t4 ,taxpay]s may use ! co/
recov]y me?od ": c]ta9 3di;ns >e
satisfi$4





                                      #d
          ,4cus.n & ,9t]pret,n       d#a
    
        ,9troduc;n 7p>agraph #a7
    
#a4 ,": %>es (a corpor,n >e sold "u an
  agree;t ":by ! proce$s ( 4posi;n >e at
  l1/ "pi,y det]m9$ pursuant 6an e>n\t
  clause 9 an agree;t i4e41 ! quantum (
  proce$s is det]m9$ 0ref];e 6future
  e>n+s g5]at$ 0! "uly+ assets (!
  corpor,n1 x is usu,y impossi# 6det]m9e
  a3urately1 )9 a r1sona# "t af ! sale1
  ! am.t (! ga9 or loss r1liz$ on !
  sale4 ,f a legal po9t ( view1 x is
  possi# t p>agraph #ab7#a77g7 wd apply
  6all pay;ts made "u ! e>n\t clause1 or
  t ! total proce$s ( 4posi;n z at !
  date (! sale m/ 9clude ! value (!
  e>n\t "rs4 ,^! approa*es c produce
  unsatisfactory results = bo? ! taxpay]
  &! ,,cra4 ,3sequ5tly1 ! ,,cra w a3ept
  ! use (! co/ recov]y me?od ( report+ !
  ga9 or

                                      #e
              ,,it-#dbf;,r            #b
  loss on ! sale ( %>es "u an e>n\t
  agree;t ": ! 3di;ns describ$ 9
  p>agraph #b >e met4

      ,3di;ns =! ,applic,n (! ,co/
     ,recov]y ,me?od 7p>agraph #b7
    
#b4 ,taxpay]s may use ! co/ recov]y
  me?od if ! foll[+ 3di;ns >e met3
  7a7 ,! v5dor & pur*as] >e d1l+ ) ea*
    o!r at >m's l5g?4
  7b7 ,! ga9 or loss on ! sale ( %>es (!
    capital /ock (a corpor,n is cle>ly
    (a capital nature4
  7c7 ,x is r1sona# 6assume t ! e>n\t
    f1ture relates 6"uly+ gdwill ! value
    ( : _c r1sonably 2 expect$ 6be agre$
    ^u 0! v5dor & pur*as] at ! date (!
    sale4
  7d7 ,! e>n\t f1ture 9 ! sale agree;t
    m/ 5d no lat] ?an #e ye>s af ! 5d (!
    f/ tax,n ye> (! corpor,n ^: %>es >e
    sold1 foll[+ ! sale ( %>es4 ,=!
    purposes ( ? 3di;n1 ! ,,cra       #f
              ,,it-#dbf;,r           a#b
    3sid]s t an e>n\t f1ture 9 a sale
    agree;t 5ds at ! "t ! la/ 3t+5t am.t
    may 2come paya# pursuant 6! sale
    agree;t4
  7e7 ,! v5dor submits1 ) 8 return (
    9come =! ye> 9 : ! %>es 7 4pos$ (1 a
    copy (! sale agree;t4 ,he al submits
    ) t return a lr reque/+ ! applic,n
    (! co/ recov]y me?od 6! sale1 & an
    "utak+ 6foll[ ! proc$ure ( report+ !
    ga9 or loss on ! sale "u ! co/
    recov]y me?od z \tl9$ 2l4
  7f7 ,! v5dor is a p]son resid5t 9
    ,canada =! purpose on ! ,act4

      ,descrip;n (! ,co/ ,recov]y
        ,me?od 7p>agraphs #c-g7
    
#c4 ,"u ! co/ recov]y me?od1 ! v5dor
  reduces 8 adju/$ co/ base (! %>es z
  am.ts on a3.t (! sale price 2come
  det]m9a#4 ,once s* an am.t on a3.t (!
  sale price exce$s ! adju/$ co/ base (!
  %>es 7z reduc$ 0any previ\s s*      #g
              ,,it-#dbf;,r           b#b
  am.ts71 ! excess is 3sid]$ 6be a
  capital ga9 t is r1liz$ at ! "t t t
  am.t 2came det]m9a#1 &! adju/$ co/
  base 2comes nil4 ,all s* am.ts t
  subsequ5tly 2come det]m9a# >e tr1t$ z
  capital ga9s at ! subsequ5t "t4
#d4 ,if subsec;n #bf7#c7 (! ,9come ,tax
  ,applic,n ,rules1 #aiga is relevant 9
  det]m9+ ! adju/$ co/ base ( %>es sold
  6: ! co/ recov]y me?od is applica#1 !
  v5dor does n report any ga9 "!on until
  ! a7regate ( det]m9a# am.ts "!=e
  exce$s ! grt] (! hi/oric co/ &! fair
  m>ket value on valu,n "d ( s* %>es4
#e4 ,=! purposes ( ? bullet91 an am.t
  2comes det]m9a# once x is capa# ( 2+
  calculat$ ) c]ta9ty &! taxpay] has an
  absolute b n necess>ily imm "r 6be pd4
  ,": ! sale agree;t /ipulates a m9imum
  am.t paya# 0! pur*as] 9 any ev5t1 t
  am.t is 3sid]$ 62come det]m9a# 0!
  v5dor at ! "t (! sale4
#f4 ,a capital loss is recogniz$ only at
  ! "t ! maximum t may 2 rcvd is      #h
              ,,it-#dbf;,r           c#b
  irrevocably e/abli%$ 6be less ?an !
  v5dor's adju/$ co/ base4 ,= example1
  if ! e>n\t clause sets a maximum t cd
  2come paya# "u ! 3tract & t am.t is
  less ?an ! v5dor's adju/$ co/ base (!
  %>es sold1 a capital loss equal 6!
  defici5cy is recogniz$ at ! "t (!
  sale4 ,if ! sale price is -pris$ (a
  s]ies ( maximum am.ts &! actual am.ts
  "!( >e 6be det]m9$ ^u ! r1liz,n (
  ev5ts subsequ5t 6! date ( sale1
  a4i;nal capital losses >e recogniz$1
  :5 ea* s* am.t 2comes det]m9a#1 6!
  ext5t t ! maximum sale price is fur!r
  reduc$4 ,if "! is no maximum set1 a
  capital loss is n recogniz$ until ! "t
  :5 x c 2 e/abli%$ t ! total (! am.ts
  6be pd _c exce$ ! v5dor's adju/$ co/
  base (! %>es sold4
#g4 ,": 9 a tax,n ye> ! a7regate ( am.ts
  e/abli%$ 6h 2come det]m9a# is 9 excess
  (! adju/$ co/ base (! %>es1 a res]ve
  "u subp>agraph #dj7#a77a77;iii7 may 2
  claim$ = t ye> 9 respect ( t "p (   #i
              ,,it-#dbf;,r           d#b
  s* a7regate t is paya# af ! 5d (! ye>4
  ,x is ! ,,cra's posi;n t a r1sona#
  res]ve "u s* circum/.es is equal 6!
  less] (3
  7a7 ! a7regate ( det]m9$ capital ga9s
    at ! 5d (! a7regate (! tax,n ye>
    divid$ 0! a7regate ( det]m9a# am.ts
    at ! 5d (! tax,n ye> multipli$
    0am.ts paya# af ! 5d (! tax,n ye>
  &
  7b7 ! am.t1 if any1 0: #d exce$s !
    numb] ( prec$+ tax,n ye>s 5d+ af !
    4posi;n (! prop]ty divid$ 0#e
    multipli$ 0a7regate ( det]m9$
    capital ga9s at ! 5d (! tax,n ye>
  
  ,a 8det]m9$ capital ga90 9 ! =mula abv
  m1ns a capital ga9 72f ! res]ve7
  calculat$ pursuant 6! rules 9
  p>agraphs #c 6#e "u ! co/ recov]y
  me?od4 ,?us1 no "p (! capital ga9 may
  2 def]r$ 2y #e ye>s pursuant
  6subp>agraph #dj7#a77a77;iii7 reg>d.s
                                     #aj
              ,,it-#dbf;,r           e#b
  (! fact t proce$s may n all 2 paya# )9
  a #e-ye> p]iod4

       ,o!r ,-;ts 7p>agrahs #h-i7
    
#h4 ,=! purposes ( ? bullet91 an agree;t
  t m]ely det]m9es :5 am.ts >e 6be pd1 z
  oppos$ 6det]m9+ ! quantum ( proce$s1
  is n 3sid]$ 6be an e>n\t agree;t4
#i4 ,": a taxpay] uses ! co/ recov]y
  me?od 6report a capital ga9 z !
  proce$s 2come det]m9a# af ! 4posi;n (a
  %>e t 0 at ! "t (
--------------------------------------#c
  4posi;n a 8qualifi$ f>m prop]ty0 or a
  8qualifi$ small busi;s corpor,n %>e0 z
  def9$ 9 subsec;n #aaj.f7#a71 ! taxpay]
  is 5titl$ 6claim ! capital ga9s
  deduc;n 6! ext5t p]mitt$ 0subsec;ns
  #aaj.f7#b7 or #aaj.f7#b.a7
  respectively4


                                     #aa
          ,explan,n ( ,*anges         #d
    
               ,9troduc;n
    
  ,! purpose (! ,explan,n ( ,*anges is
6give ! r1sons =! revi.ns 6an 9t]pret,n
bullet94 ,x \tl9es revi.ns t we h made z
a result ( *anges 6! law1 z well z
*anges reflect+ new or revis$ 9t]pret,ns
(! ,,cra4

           ,r1sons =! ,revi.n
    
  ,? bullet9 updates ! =m] ,,it-#dbf t
all[s ! taxpay]s 6use ! co/ recov]y
me?od ( report+ capital ga9s or capital
losses on 4posi;n ( %>es subject 6an
e>n\t agree;t ": c]ta9 3di;ns >e met4 ,?
bullet9 has be5 revis$ ma9ly 9 ord]
6cl>ify ! applic,n (! co/ recov]y me?od4

      ,legislative & ,o!r ,*anges
    
  ,p>agraph #a has be5 modifi$ 6cl>ify !
possi# tax tr1t;ts ( e>n\ts4         #ab
              ,,it-#dbf;,r           a#d
  ,new p>agraph #b 0 previ\sly 9clud$ 9
=m] p>agraph #a4
  ,9 new p>agraph #b1 ! f\r? 3di;n has
be5 modifi$ 9 ord] 6cl>ify ! m1n+ (! #e-
ye> p]iod4
  ,9 new p>agraph #b1 a six? 3di;n has
be5 a4$1 : provides t ,,it-#dbf;,r
applies only 6p]sons resid5t 9 ,canada4
  ,9 p>agraph #e1 ! m1n+ (! t]m
8det]m9a#0 has be5 modifi$ 6specify t an
am.t 2 br"\ 96a3.t :5 ! taxpay] has an
absolute b n necess>ily imm "r 6be pd4
  ,p>agraph #g has be5 modifi$ 6cl>ify !
applic,n (! res]ve = capital ga9s
provid$ 9 subp>agraph #dj7#a77a77;iii7
": ! co/ recov]y me?od is appli$ 0a
taxpay]4
  ,p>agraph #h 0 =m] p>agraph #b4
  ,new p>agraph #i has be5 a4$ 6provide
-;ts ) respect 6! applic,n (! capital
ga9s deduc;n :5 a capital ga9 is report$
0a taxpay] af ! 4posi;n (a %>e "u ! co/
recov]y me?od4
                                     #ac