Income Tax Severed Letters - 2004-07-23

Principal Issues: Provide comments on 1) when certain items purchased, i.e, computer software and hardware, office equipment and furniture, should be expensed vs capitalized; and 2) Classes 12(o), 10(j) and 8(i)

Position: 1) Use criteria in par. 4 of IT-128R, and on page 12 and 13 of the 2003 Business and Professional Guide- can't provide comments on specific assets purchased; 2) general comments provided

Reasons: only general comments can be provided

Principal Issues: Whether an employee can deduct motor vehicle expenses where an allowance for such expenses is also received.

Position: Question of Fact.

Reasons: Motor vehicle expenses incurred by an employee for travelling in the course of employment may be deducted in computing employment income under paragraph 8(1)(h.1) of the Act, unless the employee receives an allowance for such expenses and the amount is excluded from income under paragraph 6(1)(b). If the employee can show that the employment-related motor vehicle expenses are in excess of the allowance and voluntarily includes the amount of the allowance in income, the CRA will permit the deduction if the requirements in section 8 of the Act are otherwise met, including the employer's certification by signing the T2200.