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.
We are writing in reply to your memorandum of July S, 1989, wherein you requested our comments on certain issues related to ready-mix concrete trucks ("concrete mixers") used by the above-noted taxpayer.
Background
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Your Questions
You requested our comments on the following questions:
- 1. Does paragraph 2 of Interpretation Bulletin 17-411 represent the Department's current position as to what constitutes construction?
- 2. What types of equipment are considered to be qualified construction equipment.?
- 3. Is any other class 22 property, apart from concrete mixers, that would be movable equipment used for placing concrete?
- 4. Does paragraph 16 of IT-331R represent the Department's current position concerning the word "principally"?
- 5. Is a stone slinger eligible for ITC as qualified construction equipment?
- 6. If concrete mixers spend more than 50% of their time on construction sites, can they be considered to be used principally in the activity of construction?
- 7. What is meant by the phrase "placing of concrete" in paragraph 4 of IT-411? At what point in the placing of concrete does construction commence?
- 8. If the concrete mixers and stone slinger are considered to be qualified construction equipment by the judge, will that property and the related labour costs of the drivers also be considered to be manufacturing and processing capital and labour for the purpose of section 5202 of the Regulations.
Our Comments
Our responses are in the same order as the questions posed.
- 1. We confirm that paragraph 2 of 17-411 represents the Department's current position as to what constitutes construction.
2: As per section 4603 of the Regulations, the definition of qualified construction equipment excludes qualified property and qualified transportation equipment but includes class 22 property, a crane, pile driver, or a dredge. In order to be eligible for ITC, the qualified construction equipment must be used by the taxpayer principally for the purpose of construction in Canada in the course of carrying on a business.
MC - Cost of M & P capital C - Cost of capital
ML - Cost of M & P labour L - Cost of labour
All of these terms are defined in section 5202 of the Regulations.
- The portion of the cost of capital (i.e., for the concrete mixers and stone slinger) that reflects the extent to which the property was used in a construction activity for each year would be excluded from the calculation of the cost M & P capital. Similarly, the portion of the cost of drivers' labour that reflects the extent to which the salaries and wages paid or payable for the portion of their time that they were engaged in a construction activity for each year would be excluded from the calculation of the cost of M & P labour.
We trust these comments will be of assistance.
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