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: Whether multi-use communication cable is included in Class 3 of Schedule II of the Regulations or whether it can qualify for inclusion in Class 10 of Schedule II of the Regulations.
Position: Question of fact.
Reasons: A review of each specific situation would determine which class is most appropriate.
2002-012784
XXXXXXXXXX A. Seidel
(613) 957-2058
April 22, 2002
Dear Sir:
Re: Capital Cost Allowance - Communication Cable
We are writing in response to your letter dated March 4, 2002, wherein you requested our comments regarding the proper classification of dual usage communication cable in Schedule II of the Income Tax Regulations (the "Regulations").
The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. To the extent that you require confirmation of the tax consequences of proposed transactions involving this specific type of cable, we bring to your attention Information Circular 70-6R4, Advance Income Tax Rulings ("IC 70-6R4"). As explained in IC 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific facts other than in the form of an advance income tax ruling. If you wish to obtain an advance income tax ruling for particular taxpayers with respect to specific contemplated transactions, a written request for an advance income tax ruling should be submitted in accordance with IC 70-6R4.
Although we cannot provide any specific comments with respect to the communication cable described in your letter, the following general comments may be of assistance.
Generally, the appropriate classification of depreciable property for purposes of Schedule II of the Regulations is determined by reference to the particular property and all of the relevant facts applicable to a specific situation. Interpretation Bulletin IT-285R2 provides an overview and general comments relating to capital cost allowance.
Paragraph (j) of Class 3 of Schedule II of the Regulations includes "property not included in any other class that is telephone, telegraph or data communications equipment (emphasis added) ... that is a wire or cable", provided the property was acquired after May 25, 1976.
Paragraph (f) of Class 10 of Schedule II of the Regulations includes "property not included in any other class that is general-purpose electronic data processing equipment, systems software therefore" and also specifically includes "ancillary data processing equipment", provided the property was acquired after May 25, 1976. "General-purpose electronic data processing equipment" is defined in subsection 1104(2) of the Regulations. "Ancillary data processing equipment" is not defined in the Act.
Class 3 of Schedule II of the Regulations deals with "data communications equipment" while Class 10 of Schedule II of the Regulations deals with "data processing equipment". Whether or not dual usage "communication cable comprised of numerous color-coded internal pairs of wires all enclosed within a polyvinyl casing or housing, sold and purchased as communication cable" could be included in Class 10 pursuant to paragraph (f) thereof is a question of fact. To the extent that your situation involves communication cable that is already in use, the appropriate classification of such cable could only be determined by a review of the taxpayer's actual use of the communication cable in the specific business operations. This review of the taxpayer's use of communication cable is the responsibility of the Audit Division of the local tax services office. The local tax services office would need you to supply them with the complete details of all of the relevant facts and documentation related to the use of specific communication cable before they could proceed with such a review.
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
Policy and Legislation Branch
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