Split or merged depreciating assets



This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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If a depreciating asset you hold is split into 2 or more assets, or if a depreciating asset or assets you hold is or are merged into another depreciating asset, you are taken to have stopped holding the original depreciating asset(s) and to have started holding the split or merged asset(s). However, a balancing adjustment event does not occur just because depreciating assets are split or merged.

An example of splitting a depreciating asset is the removal of a CB radio from a truck and its installation in a residence.

After depreciating assets are split or merged, each new asset must satisfy the definition of a depreciating asset if the UCA rules are to apply to it. For each depreciating asset you have started to hold, you need to establish the effective life and cost.

The first element of cost for each of the split or merged depreciating assets is a reasonable proportion of the adjustable values of the original asset( s) just before the split or merger and the same proportion of any costs of the split or merger.

If a balancing adjustment event occurs to merged or split depreciating asset (s)-for example, on sale-the balancing adjustment amount is reduced:

  • to the extent the asset has been used for a non-taxable purpose
  • by any amount that is reasonably attributable to use for a non-taxable purpose of the original depreciating asset(s) before the split or merger.

This reduction is not required if the depreciating asset is mining, quarrying or prospecting information.

Last modified: 01 Jun 2005QC 27399