18 November 2009 Internal T.I. 2009-0344551I7 - iPhone Capital Cost Allowance Class

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.

Principal Issues: Whether an iPhone is general-purpose electronic data processing equipment.

Position: Yes.

Reasons: The iPhone appears to fit the definition of general-purpose electronic data processing equipment.

November 18, 2009

iPhone Capital Cost Allowance Class

This is in response to your e-mail of October 16, 2009, concerning whether an iPhone should be considered general-purpose electronic data processing equipment under a particular capital cost allowance ("CCA") class in Schedule II of the Income Tax Regulations ("Regulations").

Schedule II of the Regulations provides various classes for depreciable capital property and the applicable rates of CCA. In particular, general-purpose electronic data processing equipment and systems software for that equipment, including ancillary data processing equipment, is (subject to certain exclusions) included in class 45 with a 45% CCA rate where the property is acquired after March 22, 2004, and before March 19, 2007. If such equipment is acquired after March 18, 2007, it is included in class 50 with a 55% CCA rate. Subject to further requirements, if such equipment is acquired after January 27, 2009, and before February, 2011, it is included in class 52 with a 100% CCA rate.

The expression "general-purpose electronic data processing equipment" is defined in subsection 1104(2) of the Regulations as electronic equipment that, in its operation, requires an internally stored computer program that:

(a) is executed by the equipment;
(b) can be altered by the user of the equipment;
(c) instructs the equipment to read and select, alter or store data from an external medium such as a card, disk or tape; and
(d) depends upon the characteristics of the data being processed to determine the sequence of its execution.

Examples of such equipment include a desktop and laptop computer.

In our view, an iPhone would qualify as general-purpose electronic data processing equipment. However, CCA under paragraph 13(7)(c) of the Income Tax Act may be deducted only in respect of the proportion of the capital cost of the iPhone used for the purpose of gaining or producing income.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

We trust that our comments will be of assistance.

Kathryn McCarthy
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch