2019-0819951E5 AIIP - renovations to property

Principal Issues: Whether alteration or renovation costs incurred after November 20, 2018, to a depreciable property originally acquired in a taxation year ending prior to November 21, 2018 are accelerated investment incentive property.

Position: Renovation and alteration costs incurred after November 20, 2018, may be AIIP.

Reasons: Provided no CCA has been claimed on the particular renovation or alteration, costs incurred after November 20, 2018 should generally meet the conditions of paragraph (a) and paragraph (b), due to subsection 1104(4) or subsection 1104(4.1) of the Regulations

Author: Springate, Sarah
Section: 1104(4), 1104(4.1)

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                                                                                             2019-081995
                                                                                             S. Springate

June 16, 2022

Dear XXXXXXXXXX:

Re: Renovations and Accelerated Investment Incentive Property

This is in response to your enquiry dated August 9, 2019 in which you requested our opinion regarding whether a renovation or alteration to a depreciable property, originally acquired in a taxation year ending prior to November 21, 2018, would be considered accelerated investment incentive property (“AIIP”). The renovation or alteration would not fall under class 54 ,55 or 56 of Schedule II of the Income Tax Regulations (the “Regulations”).

We are assuming that the renovation is capital in nature, that the related costs were incurred after November 20, 2018, and that the renovation will be available for use before 2028. Additionally, we have assumed that capital cost allowance (“CCA”) was deducted under paragraph 20(1)(a) of the Income Tax Act (the “Act”) in a taxation year ending before the renovation or alteration was made to the depreciable property.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

AIIP is defined in subsection 1104(4) of the Regulations for purposes of Part XI and Schedules II to VI of the Regulations. Generally, AIIP means property of a taxpayer (other than property in any of Classes 54 to 56) that:

a) is acquired by the taxpayer after November 20, 2018 and becomes available for use before 2028; and

b) meets either of the following conditions:

i) no CCA or terminal loss in respect of the property has been deducted by any person or partnership for a taxation year ending before the property was acquired by the taxpayer; or

ii) the property was not acquired on a tax deferred rollover basis and it was not previously owned or acquired by the taxpayer or a non-arm's length person or partnership

For purposes of the Act and the Regulations, we generally consider that the acquisition of an alteration or renovation to a depreciable property would represent an addition to the depreciable property, and not a separate property, unless there is an indication to the contrary. For example, subsection 1102(19) of the Regulations may deem, for the purposes of Part XI and Schedule II of the Regulations, additions or alterations to a property to be included in a separate class from the original property.

Notwithstanding the above, the Canada Revenue Agency considers there to have been an acquisition of property when there is an alteration or renovation to a particular depreciable property, even if this alteration or renovation represents an addition to an already existing property.

In a situation where an alteration or renovation has been made to a particular depreciable property after November 20, 2018, we would consider there to have been an acquisition of property. Provided the alteration or renovation becomes available for use prior to 2028, the alteration or renovation would satisfy the requirements of paragraph (a) of the definition of AIIP in subsection 1104(4) of the Regulations.

Where no CCA or terminal loss has been claimed in respect of the particular depreciable property under paragraph 20(1)(a) of the Act or subparagraph 20(16), respectively, by any taxpayer or partnership, the requirements of subparagraph 1104(4)(b)(i) of the Regulations would generally be met. Where CCA or terminal loss amounts have been deducted in respect of the depreciable property in a taxation year prior to the alteration or renovation to the property, subparagraph 1104(4.1) may deem the amounts to have been deducted in respect of a separate property that is not part of the of the particular depreciable property. Subsection 1104(4.1) will apply when the amounts deducted for CCA or a terminal loss can reasonably be considered to have been deducted in respect of amounts for acquisitions incurred either before November 21, 2018, or incurred after November 20, 2018, if any portion of the particular property is considered to have become available for use before the time that the particular property is first used for the purpose of earning income.

As such, we would generally expect amounts for a renovation or alteration to a depreciable property incurred after November 20, 2018 to qualify as AIIP, provided the renovation or alteration would not be class 54, 55 or 56 property and no CCA or terminal loss had been deducted in respect of the alteration or renovation by any person or partnership for a taxpayer year ending before the property was acquired by the taxpayer.

We trust these comments will be of assistance to you.

Yours truly,



Sandro D’Angelo, CPA, CMA
Acting Manager
Business Income and Capital Transactions
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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