16 July 1998 External T.I. 9814325 - VIDEOTAPE CASSETTES-CCA

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.

Principal Issues: 1. rules for cca re: videotape cassettes

Position: Class 12 or class 8 depending on rental arrangements.

Reasons: regulations

XXXXXXXXXX 					981432
S. Tevlin

Attention:  XXXXXXXXXX 

July 16, 1998

Dear XXXXXXXXXX:

Re: Videotape Cassettes

We are writing in response to your letter dated May 21, 1998 wherein you asked for our opinion with respect to the classification of videotape cassettes for purposes of paragraph 20(1)(a) of the Income Tax Act.

The situation described in your letter is in respect of an actual fact situation. Written confirmation of the tax implications inherent in proposed transactions are given by this Directorate only where the transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3. Where a completed transaction is involved, the enquiry should be addressed to your local Tax Services Office.

However, we are prepared to offer the following general comments. Class 12 in Schedule II of the Income Tax Regulations (the “Regulations”) allows for a 100% write-off of the cost of certain properties that are not included in any other class. Class 12(r) includes “a videotape cassette acquired after February 15, 1984 for the purpose of renting and that is not expected to be rented to any one person for more than 7 days in any 30 day period”.

Where a videotape cassette is not eligible to be included in class 12 it will be included in class 8, which qualifies for a 20% annual write-off.

We note that any videotape cassette, acquired in a taxation year, that would be included in class 8, would be subject to Regulation 1100(2) (the “half year rule”). This in effect reduces the capital cost allowance in the year of acquisition by 50%.

Where the total cost of a videotape cassette has been written-off in the year in which the cost was incurred, any subsequent recovery of cost (e.g., proceeds received upon sale of the videotape cassette) should be brought into income.

We have included a copy of Interpretation Bulletin IT-283R2 entitled “Capital Cost Allowance - Video tapes, Videotape Cassettes, Films, Computer Software and Master Recording Media” which may be of additional assistance to you.

The foregoing comments are given in accordance with the practice referred to in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996 and are not binding on Revenue Canada, Taxation.

Yours truly,

for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch