Purchase Price Allocation Between Land And Building

Friday, January 25, 2013

Case Citation

Sunrise Realty Investments Limited v. The Queen (2013 TCC 5 [TCC] [CanLII]

Summary

The taxpayer purchased commercial property for one price and allocated $150,000 to land and the remaining amount to various depreciable property. There’s no one amount for the value of the land, but the taxpayer’s allocation wasn’t reasonable in the circumstances and hence the reassessment and court case. The judge put a value of $731,081 to the land. Quite a change.

Issue

[1] Sunrise Realty Investments Limited ("Sunrise") appeals its assessments for 2005, 2006, 2007, 2008, 2009 and 2010. The issue in each of the assessments is the allocation of the purchase price of real property acquired in 2004 as to the cost of the land and capital cost of assets, specifically a building on the land.

ITA / ETA

None.

Cases Cited

None.

Analysis

A comparative analysis of sales of similar properties.

Decision

[27] The appeal will therefore be allowed and the matter referred back to Minister of National Revenue for reconsideration and reassessment on the basis that the value of the vacant land at time of acquisition was $25.05 per square foot, or $731,081, and the building value was $948,916.

Note

A paragraph beginning with a number in square brackets is a direct quote from the case.