24 March 1992 Income Tax Severed Letter 9206045 - Investment Tax Credit

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.

Subject: INVESTMENT TAX CREDIT Section(s): 13(28), 127(9), 127(11.2)]

XXX 5-920604 A. Payette (613) 957-8953

Attention: XXX

March 24, 1992

Dear Sirs:

Re: Subsections 13(28), 127(9) and 127(11.2) of the Income Tax Act (the "Act")

This is in reply to your letter dated February 26, 1992 wherein you requested our opinion as to whether or not a corporation ("Yco") would qualify for the investment tax credits when it acquires a building, which qualifies as "certified property" within the meaning of the definition contained in subsection 127(9) of the Act, from a corporation ("Xco") before the building has been completed or used by Xco.

The determination of whether a building is considered to have become available for use by a taxpayer is a question of fact that can only be resolved by examining all of the relevant facts of the particular situation. However, we offer the following general comments which may be of assistance to you.

Subsection 13(28) of the Act provides that:

• "... property that is a building or part thereof of a taxpayer shall be considered to have become available for use by the taxpayer at the time that is the earliest of
• (a) the time at which all or substantially all of the building is first used by the taxpayer for the purpose for which it was acquired,
• (b) the time at which the construction of the building is complete,
• (c) the time that is immediately after the commencement of the first taxation year of the taxpayer commencing no more than 357 days after the end of the taxation year of the taxpayer in which the property was acquired by the taxpayer,
• (d) the time that is immediately before the disposition of the property by the taxpayer, and

(...)"

Subsection 127(11.2) of the Act provides that:

• "For the purpose of this section and section 127.1, property described in subparagraph (a)(f) of the definition "investment tax credit" in subsection (9) shall be deemed not to have been acquired, and expenditures made to acquire property described in subparagraph 37(l)(b)(i) shall be deemed not to have been made, by a taxpayer before the property is considered to have become available for use by the taxpayer, determined without reference to paragraphs 13(27)(c) and (28)(d)."

We are of the opinion that if Xco is deemed, by subsection 127(11.2) of the Act, not to have acquired the building because none of the provisions on the available for use rules (read without reference to paragraph 13(28)(d) of the Act) apply to its situation, then Xco cannot be said to have acquired the property and Xco is not entitled to any investment tax credit under subsection 127(9) of the Act. As for Yco, since the property will not be considered to have been acquired for use by Xco, it will be entitled to the investment tax credits to the extent it satisfies all the other requirements and conditions of subsections 127(9) and 127(11.2) of the Act.

The above comments represent our opinion of the law as it applies generally. As indicated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, an opinion is not an advance ruling and accordingly, is not binding on Revenue Canada, Taxation.

We trust that our comments will be of assistance.

Yours truly,

for Director
Merchandising, Manufacturing,
Partnerships, Trusts section
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch