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. Whether an audio book rented for a fee is a "book that is part of a lending library" for the purpose of class 12.
Position: No.
Reasons: An audio book is not a book based on the ordinary meaning of the word "book".
2008-026813
XXXXXXXXXX André Gallant
(613) 957-8961
May 9, 2008
Dear XXXXXXXXXX :
Re: Classification of Audio Books
This is in response to your letter of February 12, 2008, and is further to our telephone conversation, regarding the proper class in Schedule II of the Income Tax Regulations ("Regulations") in which an audio book rented for a fee should be included.
Our understanding of the facts is as follows:
1. The Taxpayer acquired a stock of audio books (books on CD) in the taxation year for the purpose of producing income.
2. The Taxpayer's sole activity is renting out the audio books to customers for a rental fee.
3. The Taxpayer does not issue late fees or due dates to its customers, and the customers generally hold the audio books for approximately a one-month period.
You asked whether the audio books should be included in class 12(a) or in class 8(i) of Schedule II of the Regulations.
Our Comments
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. We are, however, prepared to offer the following comments. Property included in class 12(a) consists of property not included in any other class that is "a book that is part of a lending library". In respect of the situation you described, there are two issues to consider, namely whether an "audio book" is a "book" for the purpose of class 12(a) and whether the Taxpayer's stock of audio books can be considered to be a "lending library".
Even if one were to consider that the Taxpayer's stock of audio books, which are rented for a fee, qualified as a lending library, in our view, an audio book does not constitute a "book" within the meaning of this word in class 12(a).
The word "book" is not defined in the Act for the purpose of class 12(a) and therefore it is its ordinary meaning which must prevail. From the dictionaries and encyclopaedias consulted, the common elements in the different definitions of "book" include something that is written, printed on a medium that can usually be touched, such as paper, or that is a blank page.
The New Webster Encyclopedic Dictionary of the English Language, 1980 (New York) defines "book" as "A number of sheets of paper or other material folded, stitched, and bound together on edge, blank, written, or printed."
The American Heritage Dictionary of the English Language, 1970 contains this definition:
"Book: A volume made up of written or printed pages fastened... 2. Any written or printed material. 3. A bound volume of blank or ruled pages."
On the other hand, an "audio book" is defined as the reading or recording of a book on cassette tape or CD: see e.g. Canadian Oxford Dictionary (2004); Encarta World English Dictionary, North America Edition (online); The American Heritage Dictionary of the English Language, 4th ed., 2000 (online).
Considering the above meaning ascribed to the terms "book" and "audio book", in our opinion, an "audio book" is not a "book" within the meaning of this word in class 12(a). Accordingly, an audio book will fall into class 8(i) since it is not described in any other class.
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
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