We solve serious CRA tax problems

Replacement Property Rules

CRA T1135 Form

The Income Tax Act provides a number of replacement property rules for capital property that are meant to address the business realities of having to replace property due to voluntary disposition and involuntary disposition (fire, natural disasters, theft, expropriation, etc). These rules allow for a deferral of capital gains or recapture on the disposition of property when you meet certain conditions.

This article deals with the replacement property rules related to involuntary dispositions. There are rules that have to be met for the “old property” (the one disposed) as well as those for the “replacement property”. Where the rules are met, you get to defer paying tax on gains or recapture and invest the proceeds of sale into a replacement property.

The “old property” must be a “former business property”, meaning that the property must have been used primarily for the purpose of gaining or producing income from a business. In other words, the property has to be something that your business uses (more than 90% of the use of the property) to earn income from the business. This is usually the easy part.

The “replacement property” must be acquired AND used by the taxpayer to replace the “old property”, and the use must be for the same or similar purpose as the old property. There has to be some sort of a connection between the disposition and the new acquisition. The “replacement property” has to in fact be acquired as a replacement for the “old property”. The “replacement property” has to also serve the same purpose in your business, or a sufficiently similar purpose, as the “old property”. These requirements have to be satisfied within a year from the calendar year end (December 31) of the year that the property was disposed and must actually be used within that time period for the intended purpose. It cannot be purchased and held for some later use.

The CRA sets out the rules in these terms:

  1. The property was purchased to replace the former property.
  2. The property was purchased for a similar purpose as the former property was being used for.
  3. The property was purchased to gain or produce income from the same, or a similar business as the former property.
  4. If the replacement was involuntary, the purchase must occur within two years from the end of the year the insurance proceeds became available (receivable) or other funds related to the disposition became available (receivable).

There are a few exceptions, but the above are the general rules. To get this deferral, you have to file an election with the tax return in the year that the replacement property was purchased.

ACCA-Logo
AICPA-Logo
Chartered professional accountant logo
Chartered Professional Accountant in Canada, U.S. and U.K.

Testimonial

“Need someone who can talk CRA and walk tax law stuff? I did. After an expensive year of trying to resolve a CRA issue on my own – I was very happy to have Sam Faris in the ring with me. I am confident that no lawyer or CA could have prepared a stronger case report to support my appeal. Sam approached my case professionally and skillfully from all angles possible and personally made sure I understood exactly what was going on; every step of the way.”

M Quan
pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

Great experience dealing with Sam Faris and his team. They were transparent, patient with their explanations and they meet all promises. Highly reliable and trustworthy firm. They promise and they meet all their promises. If you are looking for the best tax consultant firm, I highly recommend Faris CPA.
Response from the owner:Many thanks and much appreciated for the kind and positive review.
Sam Faris is a consummate professional whose expertise, clarity, and warmth make him worth every penny. If you need clear answers and effective solutions for complex situations, he’s your go-to.

I only write reviews when they’re truly deserved, and after meeting with Sam, I’m compelled to share my experience. I’m meticulous about researching professionals before reaching out, and Sam exceeded my expectation.

From the moment I arrived for a consultation on a nuanced issue, Sam greeted me with a warm yet focused demeanor that instantly put me at ease. He was fully present, diving into my situation with laser-like attention.  As I explained my case, he listened intently, then walked me through each aspect with clear, concise expertise, pausing to ensure I had no questions before moving forward. His ability to break down complexity into actionable insights was remarkable.

What stood out most was his honesty and confidence. He calmly assured me that my situation, while intricate, was well within his expertise—backed by his extensive track record of handling far more complex cases. His steady presence and thorough understanding left me feeling reassured.

Sam's stellar reputation, reflected in his consistent high reviews, is no fluke. He’s the real deal: an upstanding professional whose integrity and skill are rare in today’s world. If you’re facing a challenging situation and need straightforward answers, reassurance, and results, contact Faris.
Response from the owner:It has been pleasure working with you and feel free to contact us in the future for any further help needed.
Thank you for all your help. Reliable and highly professional firm.
Response from the owner:Thank you for the positive review.
This is an announcement from Aaron Baer, legal counsel to Faris CPA.

I have been working with Faris CPA for more than 10 years.

Faris CPA is being attacked by Kenneth John Weakley (Oct 1969).

I am posting this review because Kenneth John Weakley has been deleting his reviews and has been reposting them, so that Faris CPA's responses don't always show up.

Faris CPA's position is as follows:

Faris CPA is a well-regarded firm that is compliant with CPA Ontario obligations and has a good track record.

Under no circumstances will Faris CPA be paying Kenneth John Weakley any amount.

Kenneth John Weakley's claims do not have any merit.
Response from the owner:Thank you Aaron for your help. Here is my response to Kenneth John Weakley’s fake reviews: “ A warning about fake Google reviews posted by Kenneth John Weakley. He has been posting fake Google reviews under KenW and ShahramK (or variations) about our firm and other professionals. Kenneth John Weakley keeps posting and removing and reposting fake reviews so that his reviews will stay on top and so that our reply will not show up. We searched him and we found out the below information and that he has been posting those reviews from U.K. Kenneth John Weakley DOB October 20, 1969 Address: 821A Fulham Road, London, U.K. SW6 5HG ( Title: NGL449634) Kenneth John Weakley has been attacking the below professionals as well: David Rotfleisch @ Taxpage Marek Tufman Aaron Baer He has been demanding 25k from our firm and from the above professionals to stop posting those reviews. We wish to emphasize that our firm has always complied with our professional obligations, and the interpretation suggested in the fake reviews does not accurately reflect those obligations. We remain committed to serving our clients with professionalism, transparency, and integrity. We are a well-regarded firm and have a good track record. Please see below link to review our record with CPA Ontario. https://www.cpaontario.ca/protecting-the-public/directories/member/faris-6gchzu”