27 August 1999 External T.I. 9833435 - AVAILABLE FOR USE & REG 11OO(1)(ZG)

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: Are the proposed accelerated cca rules for class 10 computers and class 12 software subject to the available for use rules?

Position: yes

Reasons: 13(26)

XXXXXXXXXX						983343
S. Tevlin
Attention:  XXXXXXXXXX

August 27, 1999

Dear Sirs:

Re: Year 2000 Computer Hardware and Software Expenditures

We are writing in reply to your letter dated December 11, 1998 wherein you requested our opinion with regard to draft paragraphs 11OO(1)(zg) and (zh) of the Income Tax Regulations (the "Draft Regulations") in respect of computer software and hardware acquired to replace Systems that are not year 2000 compliant.

In particular you describe the situation where after January 1,1998, year 2000 compliant computer hardware and software is acquired in one year but is not available for use until a subsequent year. As such, in your opinion the application of subsection 13(26) of the Income Tax Act (the "Act") may result in the taxpayer being unable to take advantage of the accelerated capital cost allowance ("CCA") contemplated by the Draft Regulations.

In this regard we offer the following general comments.

Subsection 13(26) of the Act applies for the purpose of paragraph 20(1)(a) of the Act and any regulations made for the purpose of that paragraph. The Draft Regulations provide, for the purpose of paragraph 20(1)(a) of the Act, for additional CCA in respect of the acquisition of year 2000 computer hardware and systems software property. As such, it is our position that the additional CCA described in the Draft Regulations with respect to year 2000 computer hardware and systems software is subject to the application of subsection 13(26) of the Act and therefore no amount will be added to the undepreciated capital cost of the class of such property for the purpose of subparagraphs 1100(1)(zg)(vi) and (zh)(vi) where the property is not available for use in the same year as it is acquired.

We note, however, that the available for use rules do not impact upon the limitation imposed by subparagraphs 1100(1)(zg)(v) and (zh) (v).

Finally, we note that on June 2, 1999 the Department of Finance extended the deadline for the acquisition of year 2000 computer hardware and systems software from June 30, 1999 to October 31, 1999.

We trust our comments will be of assistance to you.

Yours truly,

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