7 December 1993 Income Tax Severed Letter 9333665 - Available-for-Use

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.

Tax Executive Institute

December 7, 1993

Question No. XXlll

AVAILABLE FOR USE RULES

A.       Subsection 13(27) of the Act establishes the time
         at which property, other than a building, is
         considered to have become available for use by a
         taxpayer.  Will RC outline its position for
         determining when new property is considered to
         become "available for use" in the following
         situation? 

         Computer equipment (mainframe, terminals,
         personal computers, and printers) was
         purchased and received before year end,
         say 1992, to replace the existing
         accounting system of a taxpayer.  Owing to
         programming and data translation problems,
         this new equipment was not utilized until
         some time later, say June 1993.

B.       On acquisition of control of a corporation, is the
         acquired corporation  deemed to have claimed
         additional capital cost allowance (CCA) under
         subsection 111(5.1) of the Act on property which is
         "not available for use," based on the meaning of
         this term as described in subsection 13(27) of the
         Act? 

DEPARTMENT'S POSITION

A.       In order to qualify under paragraph 13(27)(a) of
         the Act, the equipment must in fact have been used
         in accordance with its intended purpose.  It could,
         however, be considered to become "available for
         use" by virtue of paragraph 13(27)(d) if in fact
         the time that it became capable of being used for
         its intended purpose preceded the time when it was
         first used.  With regard to equipment in the
         testing stage, it is our opinion that the testing
         activity would not qualify equipment to be
         considered "available for use".  It would be a
         determination of fact as to the capability of the
         equipment at any particular time.

B.       The simple answer is 'yes'.  Subsection 13(26) of
         the Act captioned "Restriction on deduction before
         available for use" reads, "In applying paragraph
         (21)(f) for purposes of paragraph 20(1)(a) and
         any regulations made under paragraph 20(1)(a), in
         computing a taxpayer's income ...". The
         application of subsection 111(5.1) of the Act is
         not a purpose contained within the underlined
         wording of the restriction so that the
         determination of 'undepreciated capital cost of
         depreciable property in a prescribed class' in
         subsection 111(5.1) of the Act would be as defined
         in paragraph 13(21)(f) of the Act without the
         "available for use" restrictions.  Accordingly,
         subsection 111(5.1) of the Act would apply to all
         depreciable property, notwithstanding the fact that
         the property does not meet the definition of
         "available for use" as contained in subsection
         13(27) of the Act.

Author: A. M. Brake File: 5-932784 Date: November 23, 1993