Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
CCA classification of racing boats. Boats were manufactured in the United States. The taxpayer's representative has asked that the boats be included in Class 16.
Position TAKEN:
Class 7. Not eligible for accelerated CCA under regulation 1100(1)(v).
Reasons:
Class 7 includes, among other things, a vessel and furniture, fittings or other equipment attached to the vessel.
Regulation 1100(1)(v)(i) permits accelerated CCA for vessels described in regulation 1101(2a), the requirements of which neither vessel meets.
XXXXXXXXXX 2001-010145
T. Young, CA
October 23, 2001
Dear XXXXXXXXXX:
Re: Capital Cost Allowance (CCA) Classification of Racing Boats
We are writing to reply to your letter of September 10, 2001, concerning the classification of racing boats for CCA purposes.
In your letter, you state that XXXXXXXXXX (the "taxpayer"), operating as XXXXXXXXXX, operates a business of racing boats. In your view, the 15% CCA allowed on class 7 is not appropriate given the short life span of the boats and equipment. To address this, you have asked that we grant a special ruling that racing boats, helmets and lifejackets be included in CCA class 16, permitting CCA at a rate of 40 percent.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4, Advance Income Tax Rulings, dated January 29, 2001. As well, we cannot provide rulings on matters that are currently in dispute or under assessment or proposed assessment, as is in the taxpayer's situation. However, we are prepared to provide the following general comments, which may be of assistance to you.
Under Part XI of the Income Tax Regulations (the Regulations), depreciable property is grouped into prescribed classes that are described in Schedule II of the Regulations. The maximum rate of CCA allowed is prescribed for each class in subsection 1100(1) of the Regulations. A tangible capital property can only be placed in the class that specifically describes it. It may not be placed in what appears to be the most appropriate class.
As you noted in your letter, class 7 includes, among other things, a vessel and furniture, fittings or other equipment attached to the vessel. Class 16 includes aircraft, including furnishings and parts - acquired before May 26, 1976; taxicabs acquired after May 25, 1976; automobiles for short-term rental acquired after November 12, 1981; coin-operated video games or pinball machines acquired after February 15, 1984; and certain trucks or tractors for hauling freight. In our view, a racing boat would be a vessel and hence a Class 7 asset. It should be noted that
Class 16 does not include vessels.
Subsection 1101(2a) of the Regulations prescribes separate classes for certain vessels. These vessels are subject to a higher rate of CCA. However, based on the information you provided, the taxpayer's boats would not qualify. You can obtain more information about the CCA classification of vessels in Interpretation Bulletin, IT-267R2, Capital Cost Allowance - Vessels.
With respect to helmets and lifejackets, in our view, they would likely be class 8 assets. As described in paragraph (i) of Class 8 in Schedule II of the Regulations,
Class 8 includes "tangible capital property that is not included in another class in this Schedule...".
All future communication with respect to the classification of the taxpayer's specific assets and the impact on the current audit of the taxpayer's income tax returns should be directed to XXXXXXXXXX of the Compliance Programs Branch of the XXXXXXXXXX Tax Services Office.
The publications referred to in this letter may be obtained from your local tax services office or from our Internet web site (www.ccra-adrc.gc.ca/tax/technical/menu-e.html).
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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