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 CCA class for moveable/removable walls?
Position: Class 3 or 6.
Reasons: The fact that the demountable partition can be removed is not by itself sufficient to exclude them as component parts of the building hence, this type of system should be included in either Class 3 or 6 of Schedule II for CCA purposes.
XXXXXXXXXX
2012-044199
Charles Rafuse
613-247-9237
April 30, 2012
Dear XXXXXXXXXX :
Re: Capital Cost Allowance
This is in response to your email of April 2, 2012 and our telephone conversation (XXXXXXXXXX /Rafuse), regarding the proper class in Schedule II of the Income Tax Regulations (“Regulations”) in which a moveable/removable wall system should be included.
You have indicated that your corporation (XXXXXXXXXX ) provides movable/reusable demountable wall system for commercial office use. The partitions are transportable and can be reused/altered to meet multiple applications.
Our Comments
Schedule II of the Regulations sets out the various classes for depreciable capital property and the applicable rates of capital cost allowance (“CCA”). In particular, paragraph (i) in class 8 includes all tangible capital property that is not found in any other class.
Interpretation Bulletin IT-79R, Capital Cost Allowance - Buildings or Other Structures, states, in paragraph 14, that the buildings (or other structures) that fall within either Class 3 or 6 would also include other component parts of such buildings. Some of these component parts, though purchased separately from the building, would relate to the functioning of a building and would therefore be included in Class 3 or 6 for capital cost allowance purposes on the type of the building.
It is our understanding that some of the different types of walls within a building are generally described as follows:
Conventional Walls
This type of wall may or may not support weight and may be constructed out of a variety of substances. Although the walls may be removed, they are first erected as permanent structures and any subsequent removal may cause damage to ceiling, floor carpeting or connecting walls. This type of wall should form an integral part of the building and accordingly would be placed in Class 3 or Class 6, depending on the type of the building concerned for CCA purposes.
Free Standing Partitions
These partitions are generally supported on their own legs and do not reach to the ceiling. They might be constructed out of a variety of substances and can be moved from one area of the building to another freely without causing any damage to other structures of the building so that the size of the office can be varied easily. It appears to us that these partitions are separate and distinct from the usual functioning of a building as they are free-standing and are not attached in any way to the building. It is our view that such partitions could be considered as office furniture or equipment and included in Class 8 for CCA purposes.
Demountable Partition System
A demountable partition system is not bolted, screwed or otherwise permanently affixed to a building. Generally, such a system has an upper and lower track into which metal studs or a welded stud frame structure are fixed. Face panels of various types can then be clipped to these metal stud/track frame structures. This particular partition system can be partially or completely “demounted” such that it may be moved either to a completely new location or just a few feet in order to adjust the office space. Once the partition system is demounted, there is no evidence that a partition had been at the particular location. This is generally accomplished by using some form of a clip or tape at the bottom of the partition with a number of short nail-like projections.
It is our view that the fact that a demountable partition wall system can be moved or removed would not, by itself, be sufficient to exclude them as integral component parts of a building. Although the demountable partitions are not permanently attached to the building they are nevertheless secured to it and, once installed, are not removable without professional assistance.
In our view, such a demountable partition system, which appears to be similar to your company’s system, should be considered as an integral part of the building contributing to its effective functioning and, as such, would be included in either Class 3 or 6 of Schedule II, as the case may be, for CCA purposes.
The above mentioned publication is available on the CRA website at www.cra-arc.gc.ca.
We trust that these comments will be of assistance.
Yours truly
Michael Cooke
Manager
Capital Transactions Section
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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