CRA indicates that having equipment owned separately from the services business in which its product is used could permit it to qualify as Class 53 property

Equipment was acquired by a corporation (“Aco”), wholly-owned by a dental surgeon, to manufacture dental restorative products for use as part of its dental services. Alternatively, the surgeon could incorporated a second wholly-owned corporation (“Bco”) to acquire the equipment and sell, to Aco, the dental restorative products it manufactured using the equipment.

CRA indicated that the first alternative did not satisfy the requirement, for the equipment to qualify as Class 53 property, that it be used in the manufacturing or processing of goods for sale – as the goods (the dental restorative products) instead were used in providing a dental service.

Under the second alternative, assuming that there indeed was a sale of the manufactured products by Bco to Aco under the governing provincial law, the equipment could qualify as Class 53 property to Bco assuming that the other Class 53 requirements were satisfied.

Neal Armstrong. Summary of 29 May 2024 External T.I. 2019-0819561E5 F under Schedule II - Class 53.