1 February 1988 Income Tax Severed Letter 7-2425 - [Class 16 Assets]

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.

FEB 1 1988

Head Office Specialty Rulings Directorate R.A. Albert (613) 957-2098

TO: Sudbury District Office
Attention: Mr. Zul Nanji
                  Business Files

RE: Class 16 Assets

This memorandum is in response to your December 16, 1987 request for an opinion as to whether trucks which are leased and/or rented to carry freight by the people who rent them qualify as Class 16 assets eligible for capital cost allowance at 40 per cent.

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Class 16 includes "property acquired after November 12, 1981 that is (e) a passenger automobile acquired for the purpose of renting or leasing and that is not expected to be rented or leased to any one person for more than 30 days in any 12 month period". The question then is whether or not the trucks noted above can be considered to be "passenger automobiles". The Act does not define passenger automobiles for purposes of Class 16. However, as you have noted, regulation 1102(11) does provide a definition for other purposes in the Act but it is of limited use as it relates to purchases made between June 13, 1963 and January 1, 1966. More recently, the December 1987 "Notice of Ways and Means Motion to Amend the Income Tax Act" relating to Tax Reform provided a definition of "passenger vehicle" for purposes of calculating automobile expenses. It states that "passenger vehicle" means an automobile, a station wagon, a passenger van or a similar motor vehicle designed to carry not more than nine persons but does not include an ambulance, a vehicle acquired primarily for use as a taxi or in connection with funerals, a vehicle acquired for hire in the course of a car rental or leasing business or a specially equipped van or pickup truck acquired primarily for the transportation of goods and equipment. Though both these definitions exclude vehicles used in a car rental business they provide some guidance as to an interpretation of the words "passenger automobile".

As a result, it is our opinion that the trucks listed in i, ii, iii, iv and vi would not qualify as Class 16 assets nor would the passenger vans in v which carry 12 or more persons. It is our opinion that these vehicles qualify as Class 10 assets.

We trust that this will be sufficient for your purposes.

Original signed by T. HARRIS

Chief Merchandising, Manufacturing & Construction Section Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch