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.
Principal Issues: Is an underground conduit, which carries wire or cable referred to in paragraph (j) of Class 3, a class 3 or a class 8 asset for CCA purposes?
Position: Class 3
Reasons: Wording of paragraph (l) of Class 3.
XXXXXXXXXX T. Young, CA
2004-006478
April 28, 2004
Dear XXXXXXXXXX:
Re: Capital Cost Allowance - Underground Conduit
We are writing in response to your letter dated February 26, 2004, wherein you requested our comments regarding the inclusion of an underground "conduit" in Class 8 of Schedule II of the Income Tax Regulations (the "Regulations").
You described a conduit as property buried in the ground that carries wire or cable described in paragraph (j) of Class 3 of Schedule II of the Regulations. In your view, the conduit is merely ancillary to the wire or cable because it protects the wire or cable from decay, rot and damage. As such, you believe that the conduit does not "support" the wire or cable, as required for inclusion in Class 3 by virtue of paragraph (l). It is your view that the conduit would be included in Class 8 by virtue of paragraph (i) since it is not property described in any other class.
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 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following general comments, which may be of assistance to you.
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. Paragraph (l) of Class 3 of Schedule II of the Regulations includes property that is "ancillary to a wire or cable referred to in paragraph (j) or Class 42 and that is supporting equipment such as a pole, mast, tower, conduit, brace, cross-arm, guy or insulator." Paragraph (j) of Class 3 of Schedule II of the Regulations includes property that is "telephone, telegraph or data communication equipment, acquired after May 25, 1976, that is a wire or cable." In our view, an underground conduit that carries wire or cable described in paragraph (j) of Class 3 of Schedule II of the Regulations is property described in paragraph (l) of that same class.
We trust our comments will be of assistance to you.
Yours truly,
Randy Hewlett, B. Comm.
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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