Income Tax Act — I-3.3 13
 life of the former property remaining on its acquisition by the transferee is deemed to be equal to the period that was the life of the former property remaining on its acquisition by the transferor; and (d) any amount that would, if this Act were read without reference to this subsection, be included in the cost of a property of the transferee included in Class 14.1 of Schedule II to the Income Tax Regulations (including a deemed acquisition under subsection (35)) or included in the proceeds of disposition of a property of the transferor included in that Class (including a deemed disposition under subsection (37)) in respect of the disposition or termination of the former property by the transferor is deemed to be (i) neither included in the cost nor the proceeds of disposition of property included in that Class, (ii) an amount required to be included in computing the capital cost to the transferee of the former property, and (iii) an amount required to be included in computing the proceeds of disposition to the transferor in respect of a disposition of the former property. Reclassification of property (5) Where one or more depreciable properties of a taxpayer that were included in a prescribed class (in this subsection referred to as the “old class”) become included at any time (in this subsection referred to as the “transfer time”) in another prescribed class (in this subsection referred to as the “new class”), for the purpose of determining at any subsequent time the undepreciated capital cost to the taxpayer of depreciable property of the old class and the new class (a) the value of A in the definition undepreciated capital cost in subsection 13(21) shall be determined as if each of those depreciable properties were (i) properties of the new class acquired before the subsequent time, and (ii) never included in the old class; and (b) there shall be deducted in computing the total depreciation allowed to the taxpayer for property of the old class before the subsequent time, and added in computing the total depreciation allowed to the taxpayer for property of the new class before the subsequent time, the greater of (i) the amount determined by the formula A - B where A is the total of all amounts each of which is the capital cost to the taxpayer of each of those depreciable properties, and B is the undepreciated capital cost to the taxpayer of depreciable property of the old class at the transfer time, and (ii) the total of all amounts each of which is an amount that would have been deducted under paragraph 20(1)(a) in respect of a depreciable property that is one of those properties in computing the taxpayer’s income for a taxation year that ended before the transfer time and at the end of which the property was included in the old class if (A) the property had been the only property included in a separate prescribed class, and (B) the rate allowed by the regulations made for the purpose of paragraph 20(1)(a) in respect of that separate class had been the effective rate that was used by the taxpayer to calculate a deduction under that paragraph in respect of the old class for the year. Rules applicable (5.1) Where at any time in a taxation year a taxpayer acquires a particular property in respect of which, immediately before that time, the taxpayer had a leasehold interest that was included in a prescribed class, for the purposes of this section, section 20 and any regulations made under paragraph 20(1)(a), the following rules apply: (a) the leasehold interest shall be deemed to have been disposed of by the taxpayer at that time for proceeds of disposition equal to the amount, if any, by which (i) the capital cost immediately before that time of the leasehold interest exceeds (ii) the total of all amounts claimed by the taxpayer in respect of the leasehold interest and deductible under paragraph 20(1)(a) in computing the taxpayer’s income in previous taxation years; (b) the particular property shall be deemed to be depreci