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 the personal income tax guide entitled Farming Income And Nisa 2002, is correct in stating that a dugout is a Class 6 property for capital cost allowance purposes.
Position: Yes.
Reasons: Included in Class 6 of Schedule II of the Regulations is "property not included in any other class that is ... an oil or water storage tank" [paragraph (e)]. In our view, a "water storage tank" includes a man-made reservoir that is used for the purpose of storing water. In terms of a farming operation, this includes a dugout that is used for storing water.
September 11, 2003
Ms. Rhonda Burfitt HEADQUARTERS
Verification and Enforcement Division Randy Hewlett, B.Comm
Saskatoon Tax Services Office 613-957-8973
2003-003370
Classification Of A Dugout For CCA Purposes
This is in response to your e-mail of August 6, 2003, wherein you requested our opinion on whether the personal income tax guide entitled Farming Income And Nisa 2002, is correct in stating that a dugout is a Class 6 property for CCA purposes.
You described a dugout as "simply a hole in the ground". Your main concern is that you cannot find any reference to a dugout in Class 6 of Schedule II of the Income Tax Regulations.
Included in Class 6 is "property not included in any other class that is ... an oil or water storage tank" [paragraph (e)]. In our view, a "water storage tank" includes a man-made reservoir that is used for the purpose of storing water. In terms of a farming operation, we are of the view that this includes a dugout that is used for storing water.
We trust our comments are of assistance. For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Customs and Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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