20 February 1997 External T.I. 9641065 - LONG TERM DISABILITY PLAN

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:

Does the providing of a van or pick-up truck for the personal use of an employee or shareholder fall within the exclusion of subparagraph (e)(ii) of the definition of automobile in subsection 248(1)?

Position:

No

Reasons:

Such a taxable benefit to an employee or shareholder would not meet the requirement of the vehicle being used "all or substantially all for the transportation of goods, equipment or passenger in the course of gaining or producing income".

	                               	964106
XXXXXXXXXX	                              Jacques E. Grisé
(613) 957-2059
Attention:  XXXXXXXXXX

February 21, 1997

Dear Sirs:

Re: Definition of Automobile

This is in reply to your letter of December 3, 1996 requesting our interpretation of the word "automobile" in subsection 248(1) of the Income Tax Act (the Act).

You indicate that in accordance with paragraph 20 of GST Memorandum 400-3-2-1, the provision of a motor vehicle for the personal use of a shareholder would be considered to be used in a commercial activity. You submit that the provision of a motor vehicle called a van or pick-up truck or similar vehicle to an employee or shareholder for their personal use for which they are assessed a taxable benefit, would be considered to be used in the course of gaining or producing income. You further submit that since the use of such a vehicle would always be at least for the transportation of passengers, it would qualify for the exclusion pursuant to subparagraph (e)(ii) of the definition of "automobile" in subsection 248(1) of the Act.

We understand that paragraphs 20 and 21 of GST Memorandum 400-3-2-1 are based on subsection 173(1) of the Excise Tax Act (the ETA). Subsection 173(1) of the ETA deems the use made by a registrant in providing a motor vehicle to an employee or shareholder to be use in commercial activities of the registrant. There is no similar deeming provision in the Income Tax Act.

In the scenario presented, it is our view that the providing of a van or pick-up truck or similar vehicle for the personal use of an employee or shareholder would not meet the requirement of subparagraph (e)(ii) of the definition of "automobile" in subsection 248(1) of the Act in that the vehicle would not be used all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income. The vehicle would in fact be used to provide a benefit to the employee or shareholder.

As previously mentioned, you indicated that the use of a vehicle would always be at least for the transportation of passengers. This statement seems to imply that the driver of a vehicle should be counted as a passenger. In our view, the driver should not be so counted. In this respect, please note that there is a distinction between "driver" and "passenger" in the definition of "automobile" in subsection 248(1) of the Act.

Yours truly,

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