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: What is the proper CCA class for water and air ozone treatment equipment?
Position: Class 1 for water ozone equipment and class 8 for air ozone equipment.
Reasons: Water ozone equipment is permanently attached to a building while the air equipment is portable.
2006-020109
XXXXXXXXXX Charles Rafuse
613-957-8967
November 6, 2006
Dear XXXXXXXXXX:
Re: Capital Cost Allowance Classes
This is in reply to your letter of August 15, 2006, concerning the proper classification under Schedule II of the Income Tax Regulations ("Regulations") of ozone air and water purification equipment used in the business of farming.
As we understand it, ozone equipment to treat chicken barn water ("ozone water equipment") is a system that is permanently installed and attached to the building and consists of an ozone generator, a water storage tank and plumbing pipes. On the other hand, ozone equipment to treat chicken barn air ("ozone air equipment") is equipment that is not permanently attached to the building but that is on wheels with vent pipes that are hung from the ceiling with small chains.
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 income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Based on your description, the ozone water equipment is a component part of the building to which it is permanently attached. A component part that ordinarily goes with the building when it is sold or that relates to the use and function of the building such as electric wiring, sprinkler system, air-conditioning equipment, lighting fixtures is included in the building class. In our opinion, ozone water equipment owned by the taxpayer that owns the building is included in the same class as the building to which it is attached, generally Class 1, 3 or 6, depending on the type of the building and the date of acquisition. We would mention that, generally, a building of frame, log, stucco on frame, galvanized iron, or corrugated metal construction (including component parts) is included in class 6 if the building is used for the purpose of gaining or producing income from farming or fishing. For more information on the classification of buildings, please refer to Interpretation Bulletin IT-79R3, Capital Cost Allowance - Building or Other Structures.
The ozone air equipment you described is included in Class 8 by virtue of paragraph (i) thereof, which generally is the default class for property not falling into any other class of Schedule II. More details concerning property that is included in Class 8 can be found in Interpretation Bulletin IT-472, Capital Cost Allowance - Class 8 Property, as amended by Special Release dated September 6, 1991.
We trust this information is helpful.
Yours truly,
S. Parnanzone
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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