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 time does the "particular time" refer to in paragraph 16.1(1)(b).
Position: The time the lease began.
Reasons: The particular time is described in subsection 16.1(1).
XXXXXXXXXX
J. Gibbons
2013-051625
June 18, 2014
Dear XXXXXXXXXX:
Re: Paragraph 16.1(1)(b)
This is in response to your letter of December 23, 2013, concerning paragraph 16.1(1)(b) of the Income Tax Act (the "Act"). In particular, you ask for our views regarding the meaning of the "particular time."
Paragraph 16.1(1)(b) provides that where an election is filed under subsection 16.1(1) of the Act, the lessee shall be deemed to have acquired leased property from the lessor "at the particular time" at a cost equal to its fair market value at that time. In your view, the particular time as referred to in paragraph 16.1(1)(b) of the Act means the particular time when the lease began as opposed to the particular time when the lease is entered into.
Our comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
In describing the manner by which the lessee and the lessor must file the joint election under subsection 16.1(1) of the Act, this provision states that they must "jointly elect in prescribed form filed with their returns of income for their respective taxation years that include the particular time when the lease began." Since this is the only reference to the "particular time" in subsection 16.1(1), it is our view that this term refers to the time when the lease began.
[Our emphasis.]
We would also note that paragraph 22 of IT-285R2 (Archived), "Capital Cost Allowance General Comments," states that "[w]here by joint election subsection 16.1(1) applies to leased tangible property, the lessee is deemed to have acquired the property, at the particular time the lease commenced, at a cost equal to its fair market value at that time."
We trust these comments will be of assistance.
Yours truly,
G. Moore
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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