Depreciable property

Depreciable property is the tax label for assets whose cost is written off over time instead of deducted at once. Subsection 13(21) of the Income Tax Act defines it by reference to the deduction under paragraph 20(1)(a), and subsection 248(1) points to that definition. It can matter in an asset sale that includes depreciable property among the assets sold.

What it is and is not

The CRA’s capital gains guide describes depreciable property as usually capital property used to earn income from a business or property, with a capital cost that can be written off as capital cost allowance over a number of years. Its page on classes of depreciable property says land is not depreciable property. Under section 54, depreciable property is one kind of capital property.

What to ask

• Which capital cost allowance class each asset belongs to; the CRA lists the classes on its classes page
• How the price is allocated between depreciable property, land and other assets, and who prepared the allocation
• Whether a section 85 election is planned, since paragraph 85(1)(e) sets its own rule for the proceeds of disposition of depreciable property of a prescribed class; see section 85 rollover and asset sales