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.
April 2, 1993
Business and General
W. P. Guglich
Available for Use
This is in reply to your memorandum received on November 19, 1992 wherein you request our views concerning a taxpayer's CCA claim in respect of a
The cost of construction in progress was included by the taxpayer in class 39.
You specifically request our views as to how this $XXXXXXXXXX expenditure should be treated.
Class 39 refers to property acquired after 1987 that would otherwise be included in class 29 if acquired prior to 1988. To be included in Class 29 the requirements in part include that the property must be acquired or manufactured to be used directly or indirectly by the taxpayer in Canada primarily in the manufacturing or processing of goods for sale, and the property must be property that would otherwise be included in class 8. Paragraph (a) of class 8 reads: "a structure that is manufacturing or processing machinery or equipment".
The word structure is defined in paragraph 1 of IT-79R3 as: "includes anything of substantial size that is built up from component parts and intended to remain permanently on a permanent foundation". As regards an asset under construction paragraph 7 of IT-50R states that a taxpayer is considered to have acquired a building or structure, at any particular time, to the extent of: (a) the construction costs incurred by him to that time, including the cost to him of materials that have been put in place, or (b) progress billings received by him to that time as the case may be.
In our view theXXXXXXXXXX could be considered a structure or building and could be included in class 39. Other tangible property such as machinery and equipment purchased but not put in place and therefore not a structure or building would be included in class 8 (unless specifically described in another class).
Available for use rules contained in subsections 13(26) to (32) apply to property acquired after 1989. Subsection 13(26) provides that in computing the income of a taxpayer, no amount in respect of property is to be included in computing the undepreciated capital cost of depreciable property of a prescribed class until the property has become "available for use" by the taxpayer. Subsection 13(27) establishes for purposes of subsection 13(26) the earliest time that the property (other than a building or part thereof) is considered to have become available for use. Subsection 13(28) establishes the earliest time that a building or part thereof is considered to be available for use by the taxpayer for purposes of subsection 13(26).
In your particular case it would appear that pursuant to paragraphs 13(27)(b) and 13(28)(c) the depreciable property respecting the XXXXXXXXXX would for purposes of subsection 13(26) be considered to have become available for use in the 1992 taxation year of the taxpayer.
Property acquired in 1989 would not be subject to the available for use rules but would be subject to the half-year rule. Property considered to be available for use as a result of the application of paragraph 13(27)(b) or 13(28)(c) would not be subject to the half-year rule in determining the undepreciated capital cost in respect of taxation years ending after April 25, 1989, pursuant to subparagraph 1100(2)(a)(vii) of the draft Regulations released January 12, 1990.
We trust our comments will be of assistance.
Business and General Division
Legislative and Intergovernmental
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