Income Tax Application Rules — I-3.31 20
llowance for computing income from farming or fishing. Depreciable property of partnership of prescribed class (3) For the purposes of the amended Act, where a partnership had, on December 31, 1971, partnership property that was depreciable property of a prescribed class, (a) the capital cost to the partnership of each property of that class shall be deemed to be an amount determined as follows: (i) determine, for each person who, because of having been a member of the partnership on the later of June 18, 1971 and the day the partnership was created, and thereafter without interruption until December 31, 1971, can reasonably be regarded as having had an interest in the property of that class on December 31, 1971, the persons acquisition cost in respect of property of that class, (ii) determine, for each such person, the amount that is that proportion of the person’s acquisition cost in respect of property of that class that 100% is of the person’s percentage in respect of property of that class, (iii) select the amount determined under subparagraph (ii) for a person described therein that is not greater than any amount so determined for any other such person, and (iv) determine that proportion of the amount selected under subparagraph (iii) (in this subsection referred to as the “capital cost of that class”) that the fair market value on December 31, 1971 of that property is of the fair market value on that day of all property of that class, and the amount determined under subparagraph (iv) is the capital cost to the partnership of that property; (b) for the purposes of sections 13 and 20 of the amended Act and any regulations made under paragraph 20(1)(a) of that Act, the undepreciated capital cost to the partnership of property of that class as of any time after 1971 shall be computed as though the amount, if any, by which the capital cost of that class to the partnership exceeds the undepreciated cost to the partnership of that class had been allowed to the partnership in respect of property of that class under regulations made under paragraph 20(1)(a) of the amended Act in computing income for taxation years before that time; (c) in computing the income for the 1972 and subsequent taxation years of each person who was a member of the partnership on June 18, 1971 and thereafter without interruption until December 31, 1971, there may be deducted such amount as the person claims for the year, not exceeding the amount, if any, by which the total of (i) the lesser of (A) the amount, if any, by which the amount that was the capital cost to the person of all property of that class exceeds the percentage, equal to the person’s percentage in respect of property of that class, of the capital cost of that class to the partnership, and (B) the amount that was the undepreciated capital cost to the person of property of that class as of December 31, 1971, and (ii) the amount, if any, by which (A) the undepreciated capital cost to the person of property of that class as of December 31, 1971, less the amount, if any, determined under subparagraph (i) in respect of property of that class, exceeds (B) the percentage, equal to the person’s percentage in respect of property of that class, of the undepreciated cost to the partnership of that class, exceeds the total of all amounts deducted under this paragraph in computing the persons income for preceding taxation years, and, for the purposes of section 3 of the amended Act, the amount so claimed shall be deemed to be a deduction permitted by subdivision e of Division B of Part I of that Act; and (d) notwithstanding paragraph (c), a person who became a member of the partnership after June 18, 1971 and who was a member of the partnership thereafter without interruption until December 31, 1971 shall be deemed to be a person described in paragraph (c) and the amount that may be claimed thereunder as a deduction in computing the person’s income for any taxation year shall not exceed 10% of the tot