31 March 1992 Income Tax Severed Letter 9108295 - Leasing

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Subject: LEASING Section(s): REG 1100(16)]

XXX 5-910829 J. Kutkevicius (613) 957-2093 Attention: XXX

March 31, 1992

Dear Sirs:

Re: Subsection 1100(16) of the Income Tax Regulations

This letter is in response to your letter of March 19, 1991 in which you requested a technical interpretation of subsection 1100(16) of the Income Tax Regulations (the "Regulations") in the following hypothetical situation:

XXX

Question

You have requested our comments on whether the manufacturing operations of Corporation ABC will prevent the principal business of Corporation ABC from being considered to be as described by subparagraph 1100(16)(a)(ii) of the Regulations.

Comments

The situation outlined in your letter appears to relate to specific proposed transactions with identifiable taxpayers. Confirmation of the tax consequences relating to specific proposed transactions will only be provided in response to a request for an advance income tax ruling. The procedures for requesting an advance income tax ruling are set out in Information Circular 70-8R2 dated September 28, 1990. In particular, paragraph 7 of Information Circular 70-8R2 provides that advance income tax rulings will only be issued on questions of fact where it is possible to determine all the material facts and those facts can reasonably be expected to prevail. The determination of whether the principal business of Corporation ABC is as described in subparagraph 1100(16)(a)(ii) may be considered a question of fact. We can, however, offer the following general comments.

The determination of whether a business of a corporation may be considered the principal business of the corporation as described in subparagraph 1100(16)(a)(ii) generally will involve an examination of the criteria described in Interpretation Bulletin IT-371. It appears, however, that the policy intention of subparagraph 1100(16)(a)(ii) is to exempt both persons such as dealers who acquire property and manufacturers of property from the capital cost allowance restrictions in subsection 1100(15) of the Regulations where the dealer or manufacturer leases and sells property for use by its customers. On this basis, the fact that Corporation ABC manufactures property that it subsequently sells and leases to its customers should not prevent its business from qualifying as a principal business as described in subparagraph 1100(16)(a)(ii).

The comments contained in this letter are only expressions of opinion and are not binding on Revenue Canada, Taxation in accordance with the procedures set out in paragraph 21 of Information Circular 70-8R2.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch