28 January 1999 Internal T.I. 9825747 - CLASS 43.1

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: Whether used property qualifies for inclusion in Class 43.1.

Position: Used property may qualify.

Reasons: Class 43.1 allows for used equipment to be included provided they meet the specific requirements contained in subparagraph (b)(iii) of Class 43.1.

		January 28, 1999

	Quebec Tax Services Office	Resource Industries
	Audit Division	   Section
	Andre Gauthier	A. Seidel
(613) 957-8974

		982574

Class 43.1 Depreciable Property

This is in reply to your telephone request concerning proposed paragraph (b) of Class 43.1 of Schedule II (“Class 43.1”) of the Income Tax Regulations (the “Regulations”).

You have described a situation where a taxpayer, a corporation for example, leased certain Class 34 depreciable property from an arm’s length taxpayer, acquired the depreciable property from the lessor within five years of becoming available for use and then included the acquired depreciable property in Class 43.1. You question whether the corporation (the lessee) would be considered to be related to itself in the situation described above

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The February 18, 1997 Federal Budget, Supplementary Information states that “the budget proposes to relax these restrictions to accommodate certain used equipment.” Used equipment will generally qualify for inclusion as Class 43.1 property if the property was Class 34 or Class 43.1 of the vendor, is acquired less than five years after the property became available for use and remains at the same site in Canada as that at which the vendor used the property. The provision as currently worded would apply to used equipment acquired by a taxpayer regardless of whether it was used by the taxpayer under a lease before the acquisition or used by any other person for any purpose before it was acquired. Therefore, in this particular case, the issue of whether or not the corporation/lessee is related to itself would not be relevant.

Proposed subsection 1102(21) of the Income Tax Regulations (the “Regulations”) and subsection 13(5.2) of the Act would apply to the taxpayer’s purchase of the Class 43.1 property. In the situation described, the acquired property would qualify for inclusion in Class 43.1 by virtue of clauses (iii)(A) and (B). Therefore, subsection 1102(21) of the Regulations would apply to determine the portion of the property acquired that can be included in Class 43.1 by the purchaser. Subsection 13(5.2) of the Act would also apply to yield the tax results to the purchaser as specified thereunder.

If you wish to discuss any of the above, please contact the writer.

Manager
Resource Industries Section
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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