Income Tax Regulations — 1102
er for the purposes of subdivision i of Division B of Part I of the Act, be deemed not to include property that is situated outside Canada. Improvements or Alterations to Leased Properties (4) Subject to subsection (5), capital cost for the purposes of paragraph 1100(1)(b) includes any amount expended by a taxpayer for or in respect of an improvement or alteration to a leased property. Buildings on Leased Properties (5) Where the taxpayer has a leasehold interest in a property, a reference in Schedule II to a property that is a building or other structure shall include a reference to that leasehold interest to the extent that that interest (a) was acquired by reason of the fact that the taxpayer (i) erected a building or structure on leased land, (ii) made an addition to a leased building or structure, or (iii) made alterations to a leased building or structure that substantially changed the nature of the property; or (b) was acquired after 1975 or, in the case of any property of Class 31 or 32, after November 18, 1974, from a former lessee who had acquired it by reason of the fact that he or a lessee before him (i) erected a building or structure on leased land, (ii) made an addition to a leased building or structure, or (iii) made alterations to a leased building or structure that substantially changed the nature of the property. (5.1) Where a taxpayer has acquired a property that would, if the property had been acquired by a person with whom the taxpayer was not dealing at arm’s length at the time the property was acquired by the taxpayer, be described in paragraph (5)(a) or (b) in respect of that person, a reference in Schedule II to a property that is a building or other structure shall, in respect of the taxpayer, include a reference to that property. Leasehold Interests Acquired Before 1949 (6) For the purposes of paragraphs 2(a) and (b) of Schedule III, where an item of capital cost has been incurred before the commencement of the taxpayer’s 1949 taxation year, there shall be added to the capital cost of each item the amount that has been allowed in respect thereof as depreciation under the Income War Tax Act and has been deducted from the original cost to arrive at the capital cost of the item. River Improvements (7) For the purposes of paragraph 1100(1)(f), capital cost includes an amount expended on river improvements by the taxpayer for the purpose of facilitating the removal of timber from a timber limit. Electrical Plant Used for Mining (8) Where the generating or distributing equipment and plant (including structures) of a producer or distributor of electrical energy were acquired for the purpose of providing power to a consumer for use by the consumer in the operation in Canada of a mine, ore mill, smelter, metal refinery or any combination thereof and at least 80 per cent of the producer’s or distributor’s output of electrical energy (a) for his 1948 and 1949 taxation years, or (b) for his first two taxation years in which he sold power, whichever period is later, was sold to the consumer for that purpose, the property shall be included in (c) Class 10 in Schedule II if it is property acquired (i) before 1988, or (ii) before 1990 (A) pursuant to an obligation in writing entered into by the taxpayer before June 18, 1987, (B) that was under construction by or on behalf of the taxpayer on June 18, 1987, or (C) that is machinery or equipment that is a fixed and integral part of a building, structure, plant facility or other property that was under construction by or on behalf of the taxpayer on June 18, 1987, or (d) Class 41, 41.1 or 41.2 in Schedule II in any other case, unless the property would otherwise be included in Class 43.1 or 43.2 in Schedule II and the taxpayer has, by a letter filed with the taxpayer’s return of income filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property was acquired, elected to include the property in Class 43.1 or 43.2, as the