18 February 2003 External T.I. 2003-0183935 - CCA FOR COMMUNICATION CABLE

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 communication cable, including "riser cable" is included in Class 8 of Schedule II of the Regulations by virtue of subparagraph (b)(i) thereof.

Position: Question of fact.

Reasons: A review of each specific situation would determine which class is most appropriate for the cable.

A. Seidel
XXXXXXXXXX (613) 957-2058
2003-018393
February 18, 2003

Dear Sir:

Re: Capital Cost Allowance - Communication Cable

We are writing in response to your letter dated January 14, 2003, wherein you requested our comments regarding the inclusion of communication cable, including "riser cable", in Class 8 of Schedule II of the Income Tax Regulations (the "Regulations").

You describe "riser cable" as being communication cable that rises vertically through a high-rise office or residential building. The cable transmits data, through electronic means, from a terminal in the basement of the building to terminals on each floor of the building. The electronic data is used by certain equipment on each floor. The details of the equipment were not described in your letter.

The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on transactions involving specific taxpayers other than in the form of an advance income tax ruling. To the extent that you require confirmation of the tax consequences of proposed transactions involving this specific type of cable, you should be requesting an advance income tax ruling. However, we would point out that advance income tax rulings are not provided in respect of transactions that are substantially completed. Completed transactions are reviewed by the local tax services office.

Although we cannot provide any specific comments with respect to the 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 (q) of Class 1 of Schedule II of the Regulations includes, among other things, "property not included in any other class that is a building or other structure ... including component parts such as electric wiring (emphasis added)".

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.

Subparagraph (b)(i) of Class 8 of Schedule II of the Regulations includes, among other things, "property not included in Class 1 ... that is tangible property attached to a building and acquired solely for the purpose of servicing, (emphasis added) ... machinery or equipment".

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 (emphasis added), systems software therefore" and also specifically includes "ancillary data processing equipment" (emphasis added), 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 1 of Schedule II of the Regulations deals with electric wiring that is a component part of a building, Class 3 of Schedule II of the Regulations deals with "data communications equipment", Class 8 of Schedule II of the Regulations deals with tangible property acquired solely for the purpose of servicing machinery or equipment and Class 10 of Schedule II of the Regulations deals with "data processing equipment". Whether "communication cable, including riser cable" is included in Class 1, Class 3, Class 8 or Class 10 " is a question of fact and can only be determined by reviewing an actual usage of such cable.

To the extent that your situation involves 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 cable in the specific business operations. This review of the taxpayer's use of cable is the responsibility of the Verification and Enforcement 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 cable before they could proceed with such a review.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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