31 October 1989 Income Tax Severed Letter AC58952 - CCA Class on Telecopier (Fax) Machines

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.

Marc Cuerrier 957-8953

Dr. Stewart McCormick Director, Radio Communications Technologies Department of Communications Bldg. 2A Room 230, 3701 Carling Ave. P.O. Box 11490 Station H Ottawa, Ontario K2H 8S2

October 31, 1989

Dear Sir:

Re: Income tax classification of Telecopier (Fax) machines

We are writing to you following an earlier telephone conversation to determine the proper classification of telecopier (Fax) machines for purposes of capital cost allowances under the Income Tax Act.

As a general rule, the income tax regulations require that telephone systems and equipments be classified under class 17 (at the depreciation rate of 8 per cent):

                           "Class 17
                           (8 percent)

Property that would otherwise be included in another class in this Schedule that is

a) a telephone system, telegraph system, or a part thereof, acquired before May 26, 1976, except

(i) radiocommunication equipment, or

(ii) a property included in Class 10, 13, 14 or 28,

and property not included in any other class, acquired after May 25, 1976, that is

b) telephone, telegraph or data communication switching equipment, except

(i) equipment installed on customers' premises, or

    (ii) property that is principally electronic equipment or    
         systems software therefor; or"

Further, class 8 of schedule II of the income tax regulations applies to:

                           "Class 8
                          (20 percent)

Property not included in Class 2, 7, or 30 that is...

(i) a tangible capital property that is not included in another class in this schedule except...

(j) property not included in any other class that is radiocommunication equipment acquired after May 25, 1976, or..."

As indicated over the phone we have taken the position in the past that a cellular phone was to be included under paragraph (j) of class 8 as radiocommunication equipment acquired after May 25, 1976. We came to this conclusion having regard to the definition of radiocommunication in the Interpretation Act namely "any transmission, emission or reception of signs, signals writing, images, sounds or intelligence of any nature by means of electromagnetic waves of frequencies lower than three thousand gigacycles per second propagated in space without artificial guide." We had, at the time, received telephone confirmation from your Department that a cellular phone was a radiocommunication equipment since it operated on frequencies of 0.08 gigacycles per second. This being the case it did not appear that class 17 should apply to supersede the class 8 classification since the property had been acquired after May 25, 1976 and since the property was otherwise included in class 8 and was covered by neither exception to paragraph (b) of class 17.

With respect to the classification of a telecopier (Fax) machine acquired after May 25, 1976 we are inclined to say that it is property described in paragraph (b) of class 17 i.e. telephone, telegraph or data communication switching equipment and that such property is not excepted under subparagraph (ii) as property that is principally electronic equipment or systems software therefor (principally means more than 50%).

Could you please tell us whether you agree with our conclusion with respect to telecopier (Fax) machines. Furthermore, would you confirm that a cellular phone is indeed radiocommunication equipment within the meaning of the definition quoted above from the Interpretation Act.

Thank you in advance for your kind assistance in this matter.

Toussaint Director Bilingual Services & Resource Industries Division Rulings Directorate