21 December 1999 External T.I. 9912215 - VEHICLE EXPENSES - RENTAL PROPERTIES

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: There are no income tax issues set out in this letter. We have provided information to an individual who may purchase several rental properties. The information was obtained from the guides entitled “Rental Income” and “Business and Professional Income”.

Position: See principal issues

Reasons: See principal issues.

XXXXXXXXXX 991221
M. Eisner
May 29, 1999

Dear Sir:

Re: Vehicle Expenses - Rental Properties

This is in reply to your letter of April 1, 1999 concerning the above-noted subject.

You have indicated in your letter that while you currently do not own any rental properties, you are considering the purchase of several rental properties in the future. In this regard, you have referred to the 1998 version of the guide entitled “Rental Income,” which includes comments on the circumstances in which vehicle expenses can be claimed in respect of rental properties and makes reference to the guide entitled “Business and Professional Income,” in connection with the calculation of vehicle expenses.

One of your concerns is whether an individual can claim capital cost allowance (CCA) in respect of his or her vehicle if the individual owns two rental properties at two different sites away from the individual’s residence. A second concern is whether CCA in respect of the vehicle should be included with CCA claimed in respect of the buildings, assuming that CCA regarding the vehicle can be claimed. Your third concern is whether an individual can claim leasing costs, if the individual were to lease a vehicle rather than purchasing it.

Our Comments

As indicated in the “Rental Income” guide on page 11 under the heading “Motor vehicle expenses,” an individual, who owns two or more rental properties in the circumstances set out above, may deduct reasonable motor vehicle expenses incurred to collect rent, supervise repairs and generally manage the properties.Motor vehicle expenses incurred with respect to these activities may include CCA in respect of the vehicle or vehicle leasing costs. However, there are some limitations in connection with vehicle expenses which may relate to the cost of a vehicle, interest and leasing costs. Comments on these limitations are set out in the 1998 guide entitled “Business and Professional Income” under the headings “interest” on page 16, “leasing costs” on page 17 and “Passenger vehicles - Class 10.1 (30%)” on page 30. In addition, comments on the allocation of vehicle costs (the allocation should include leasing costs or CCA) between those related to the earning of income and personal costs, are set out on page 15 of that guide under the heading “Business use of a motor vehicle”.

As there are limitations on the amount of CCA that can be claimed on rental properties (see the heading “Limits on CCA” on page 14 of the 1998 “Rental Income” guide), CCA in respect of a vehicle should be set out separately on a rental income statement.

If you need further assistance, you should contact your local tax services office.

We trust that you will find the foregoing satisfactory.

Yours truly,

J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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