2 January 2007 Internal T.I. 2006-0217551I7 - Jointly Owned Class 10.1 Vehicle - Permissible CCA

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: 1. Ownership of a vehicle where the purchase and sale documentation differs from the registration. 2. Quantum of CCA permissible in respect of a "passenger vehicle" with cost exceeding the Regulation 7307(1) limitations when jointly owned.

Position: 1. Ownership is always a question of fact. 2. Section 67.4 requires that multiple owners allocate the prescribed limit(s) on the basis of FMV ownership.

Reasons: The Act.

								January 2, 2007

	TORONTO EAST TSO					HEADQUARTERS
	200 Town Centre Court				Income Tax Rulings
	Scarborough ON  M1P 4Y3	 			Directorate
								James Atkinson CGA
	Attention:  Phil James				(519) 457-4832

								2006-021755

Jointly Owned Class 10.1 Vehicle - Permissible CCA

This is in response to your e-mail of December 12, 2006 inquiring about the availability of CCA relevant to the acquisition of a Class 10.1 vehicle.

The facts as you have described them are that:

1. Mr. X owns Company A and Company B.

2. Company A purchases a passenger vehicle with a cost of $100,000. Company A's name is on the purchase agreement.

3. Company B's name in recorded on the license plate registration.

4. Both Company A and Company B record the acquisition of a Class 10.1 asset at a cost of $50,000, each applying paragraph 13(7)(g) of the Income Tax Act ("Act"), limiting the addition to UCC at the maximum amount prescribed by Regulation 7307(1) (currently $30,000 plus PST and GST).

In these circumstances, you question who is entitled to claim a deduction for capital cost allowance (CCA), and to what extent, under paragraph 20(1)(a) of the Act.

Our Comments:

It is our view that the ability to claim CCA is dependent upon ownership. Ownership, whether sole or joint, is a question of fact that can only be determined after a review of all of the related facts, circumstances and documentation. Factors to be considered in making a determination include the purchase agreement, registration, taxpayer representations and identification of the person(s) who paid for the property.

With respect to the discrepancy between the purchase agreement and plate registration, it is our understanding that there are circumstances where vehicle ownership can be different from plate registration (i.e., certain lease arrangements.) The Ontario Ministry of Transportation registers both plates and vehicles. These registrations are separate and distinct. Registrations however, do not always reflect true ownership of property. Further comments on ownership of property can be found in interpretation bulletin IT-437R "Ownership of Property (Principal Residence)".

Regarding the issue of joint ownership of a "passenger vehicle" and the application of paragraph 13(7)(g) of the Act, section 67.4 provides a rule that where an individual owns a "passenger vehicle" jointly with one or more other persons, the prescribed limit must be apportioned among them on the basis of the fair market value of their respective interests in the vehicle. Thus, where two taxpayers each acquire a 50 per cent interest in one passenger vehicle, each would be entitled to add one-half of the prescribed amount to Class 10.1. This matter is discussed in paragraph 22 of interpretation bulletin IT-521R - Motor Vehicle Expenses Claimed by Self-Employed Individuals.

We trust that these comments will be of assistance.

Yours truly,

S. Parnanzone
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch