22 February 2005 Internal T.I. 2004-0103311I7 - Extended cab used for hauling 5th wheel trailers

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: A one-ton extended cab truck is used in a business of hauling 5th wheel trailers from factories in the United States to recreational vehicle (RV) dealerships in Canada. Where the truck does not haul a trailer to the factory (herein referred to as the "dead head trips"), how does the use test (herein referred to as the "use test") in subparagraph (e)(ii) of the definition of automobile in subsection 248(1) apply to the dead head trips?

Position: The total distance of the dead head trips should be added to the distance travelled in delivering the RVs from the factories to the dealerships in determining to what extent the truck was used, in the taxation year it was acquired, in transporting goods or equipment.

Reasons: As explained in paragraph 1 of IT-521R, Motor Vehicle Expenses Claimed By Self-Employed Individuals, generally, the "use test" is based on the distance travelled by a vehicle for its stated purpose. The distance the truck travels for the dead head trips, from a business location in Canada to a factory in the United States in order to deliver an RV from that factory to the Canadian dealerships, would form part of the use test in subparagraph (e)(ii) of the definition of automobile for the purpose of determining whether the truck was used all or substantially all for the transportation of goods or equipment.

 		February 22, 2005

	Mary Lou Saccary, CMA	HEADQUARTERS
	Technical Advisor	Patricia Taylor
	Regina Tax Services Office	952-8806

		2004-010331

Extended cab truck used for the purpose of hauling 5th wheel trailers

We are writing in reply of your e-mail of November 16, 2004, concerning the above noted subject.

You state that a taxpayer purchases a one-ton extended cab to be used all or substantially all of the time in his business of hauling 5th wheel trailers from factories in the United States to Canadian Recreational Vehicle (RV) dealerships. The driver travels to the factory and does not haul a trailer (referred to herein as "dead head trips"). For the purposes of the definition of "automobile" in paragraph 248(1) of the Income Tax Act (the Act), you have asked how the use test (herein referred to as the "use test") in subparagraph (e)(ii) would apply to the dead head trips.

Our Comments

"Automobile" is defined in subsection 248(1) of the Act to mean "a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers..." Certain vans, pick-up trucks or similar vehicles are excluded from the definition of automobile, depending on their use in transporting goods, equipment or passengers in the course of gaining or producing income. The use test in subparagraph (e)(ii) excludes a van, pick-up truck, or similar vehicle "the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income".

In the situation you described, the extended cab truck would fall into the exception found in subparagraph (e)(ii) of the definition, if in the taxation year it was acquired, its use was all or substantially all for the transportation of goods or equipment in the course of gaining or producing income. Whether the truck was acquired for this use will be decided on the facts. As explained in paragraph 1 of IT-521R, Motor Vehicle Expenses Claimed By Self-Employed Individuals, generally, the "use test" is based on the distance travelled by a vehicle for its stated purpose.

It is our opinion that the distance the truck travels for the dead head trips, from a business location in Canada to a factory in the United States in order to deliver an RV from that factory to the Canadian dealerships, would form part of the use test in subparagraph (e)(ii) of the definition for the purpose of determining whether the truck was used all or substantially all for the transportation of goods or equipment. In other words, the total distance of the dead head trips should be added to the distance travelled in delivering the RVs from the factories to the dealerships in determining to what extent the truck was used, in the taxation year it was acquired, in transporting goods or equipment.

We trust these comments are of assistance to you.

John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch