12 October 2006 External T.I. 2006-0175501E5 - Apprentice Mechanics' Tool Costs Deduction

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 apprentice program established in accordance with the laws of Canada qualify for the apprentice mechanics' tool costs deduction.

Position: Yes.

Reasons: Pursuant to proposed amendments to subparagraph 8(6)(a)(i), the Department of Finance clarified that federally-established programs, as well as provincial ones, qualify for this purpose.

XXXXXXXXXX 	 						2006-017550
J. Gibbons, CGA
October 12, 2006

Dear XXXXXXXXXX:

Re: Deduction for the Cost of Tools of an Apprentice Mechanic

This is in response to your letter dated March 10, 2006, concerning the apprentice mechanics' tool costs deduction under paragraph 8(1)(r) of the Income Tax Act (the "Act"). In your letter, you expressed the opinion that Transport Canada's apprenticeship program for a license to practice as an Aircraft Maintenance Engineer does not qualify for purposes of the paragraph 8(1)(r) deduction since the particular apprenticeship program is not established under the laws of a province as required by subparagraph 8(6)(a) of the Act.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Nonetheless, we have provided the following general comments.

By virtue of paragraph 8(1)(r) of the Act, the cost of "eligible tools" acquired by an "eligible apprentice mechanic" in a taxation year may be deducted in determining the apprentice mechanic's income for the year to the extent that the cost of such tools exceeds the greater of $1,000 and 5% of the total of his or her employment income earned as an eligible apprentice mechanic in the year. The terms "eligible apprentice mechanic" and "eligible tools" are defined in paragraphs 8(6)(a) and (b) of the Act respectively. Pursuant to subparagraph 8(6)(a)(i) of the Act, as read in conjunction with the proposed amendments thereto, an eligible apprentice mechanic must be registered in a program established in accordance with the laws of Canada or of a province that leads to a designation under those laws as a mechanic licensed to repair self-propelled motorized vehicles and must be employed as an apprentice mechanic. The proposed amendment to subparagraph 8(6)(a)(i) of the Act will add "laws of Canada" to the provision to clarify that federally-established apprenticeship programs also qualify for the deduction under paragraph 8(1)(r) of the Act.

We trust that the above information is helpful.

Yours truly,

Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch