Is government grant an asset?

Yes. Property that has been acquired by tax and other public revenues will be treated as an asset under section 66(1)(a) and are eligible for the tax-loss carrying capacity .

However, any income from property acquired during the life of the property will be taxed as if it had been paid in full during its life, and will be subject to loss-absorption rules. The property will lose its tax-loss carrying capacity at the time of death.

Note that this means that it will lose its capital cost. That is, the property will be treated as assets that can’t be exchanged for the amount of its cost.

Do any expenses incurred in the life of the property count?

Interest in the debt on the property will count against the capital cost of the property. However, expenses incurred in the life of the property and capital value of the debt are not income or capital.

Are property-tax liabilities deductible?

Yes. But these liabilities aren’t deductible. That is, it doesn’t make sense to deduct an asset from a taxpayer’s gross income even if the taxpayer was the one who acquired the property.

If an asset’s capital cost was paid in full during its life, then its capital cost isn’t a liability, and can’t be deducted in computing taxable income. If an asset’s capital cost was in excess of the capital cost of the property, then its capital cost isn’t a liability, and can’t be deducted in computing taxable income.

Also, to the extent the asset was paid in cash, it isn’t capital, and is treated as a debt or equity.

What is the capital cost of a trust? Does it have a capital cost of its assets?

Yes. Although the terms “capital cost” and “inventive capital cost” are often used interchangeably in the tax world, the difference is very important. In practice, the capital cost usually includes the cost of administering the trust and the value of the trust’s assets.

If you have a corporation in which the shareholders (individuals) all hold stock in the trust, then it means that the corporation itself is not considered a business. In other words, the corporation doesn’t really have a capital cost as it isn’t a capital asset.

However, the trust is treated as a business (for tax purposes) because of the trust’s operations, and the value of the trust assets, including its interest in the trust, and the