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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Investment Tax Credit - Grain Dryer and Legs transporting grain
This is in reply to your letter dated August 3, 1993 wherein you requested our opinion on whether grain dryer and legs transporting the grain to and from the grain dryer are "qualified small-business properties" and meet the definition of "qualified property" under subparagraph 127(9)(c)(xi) of the Income Tax Act (the "Act"). We apologize for the delay in responding to your request.
As explained in Information Circular 70-6R2, it is not the Department's practice to comment on proposed transactions other than in the form of advance income tax rulings. Taxpayers seriously contemplating proposed transactions are best advised to seek a formal ruling, submitting a complete statement of facts and issues as well as copies of all relevant documents.
Should your situation involve completed transactions, you should submit all relevant facts and documentation to the appropriate taxation district office for their views. We are therefore not in a position to give you a definite response as to the application of the provisions of the Act. However, we can offer you the following general comments which may be of assistance although, in certain circumstances, they may not be appropriate to your specific situation.
The proposed 10% investment tax credit in respect of "qualified small-business property" was announced on December 2, 1992 by the Honourable Don Mazankowski, then Finance Minister, in his Economic Statement. Bill C-136, which was tabled in response to the above-mentioned economic statement, proposes an amendment to subsection 127(9) of the Act to add the following definition of the expression "qualified small-business property" for the purpose of the proposed 10% investment tax credit:
""qualified small-business property" means property, acquired by a taxpayer who was an eligible taxpayer at the time the property was acquired, that, if this subsection were read without reference to subsection (11.2), would be
...
(c) qualified property of the taxpayer if the definition "qualified property" were read without reference to paragraphs (a) and (d) of it and if the reference to "after June 23, 1975" were read as a reference to "after December 2, 1992 and before 1994",
..."
In our opinion, grain dryer and legs transporting the grain to and from the grain dryer are "qualified properties" under subparagraph 127(9)(c)(xi) of the Act as long as they are used in Canada primarily for the purpose of storing grain and they are in fact necessary and constitute an integral part of the storing of the grain.
Those grain dryer and legs also need to be "prescribed machinery or equipment" as described in subsection 4600(2) of the Regulations to be eligible to the 10% investment tax credit in respect of "qualified small-business property".
As mentioned in paragraph 8 of Interpretation Bulletin IT-472, grain drier and elevator legs are properties included in class 8(i) of Schedule II of the Regulations. Thus, grain drier and elevator legs are "prescribed machinery or equipment" as described in paragraph 4600(2)(c) of the Regulations.
Therefore, in our opinion, provided that the Bill C-136 is adopted, grain dryer and elevator legs transporting the grain to and from the grain dryer would be eligible to the 10% investment tax credit in respect of "qualified small-business property" if all the other conditions required by this definition are met.
The above comments are an expression of opinion only and, as explained in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.
We trust that these comments will be of assistance to you.
Yours truly,
for DirectorManufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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