What the "Archived Content" notice means for interpretation bulletins

NO.: IT-51R2

DATE: May 11, 1982

SUBJECT: INCOME TAX ACT
Supplies on Hand at the End of a Fiscal Period

REFERENCE: Subsections 10(4) and (5) (also subsections 10(1) and 248(1))

Notice—Bulletins do not have the force of law

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This bulletin cancels and replaces IT-51R dated April 4, 1977

¶ 1. The term "inventory" is defined in subsection 248(1) of the Act as a description of property, the cost or value of which is relevant in computing a taxpayer's income from a business for a taxation year. The enactment of paragraph 10(5)(a) of the Act was for greater certainty only and it is the Department's view that, because the definition of "inventory" is so comprehensive, the legislation predating the introduction of that paragraph was and continues to be adequate te require the inclusion in a taxpayer's inventory not only of those assets which are now described in paragraph 10(5)(a) but also of significant amounts in respect of any asset which good financial reporting would dictate be referred and not written off until the year in which it is used or consumed.

¶ 2. Subsection 10(1) of the Act requires any property that is described in an inventory to be valued at its cost to the taxpayer or its fair market value, whichever is lower, or in such other manner as may be permitted by regulation. Any property described in a taxpayer's inventory that is advertising or packaging material, parts, supplies or other property is thus required to be valued in accordance with subsection 10(1), but if such property has been acquired after December 11, 1979, subsection 10(4) of the Act provides that its fair market value means its replacement cost. ¹ Excluded from the application of subsection 10(4) is any property that is obsolete, damaged or defective or that is held for sale or lease or for the purpose of being processed, fabricated, manufactured, incorporated into, attached to or otherwise converted into property for sale or lease.

¶ 3. Anything that is used primarily for the purpose of advertising or packaging the property that is included in the inventory of a taxpayer is deemed by paragraph 10(5)(b) not to be property held for sale or lease or for the purpose of being processed, fabricated, manufactured, incorporated into, attached to, or otherwise converted into property for sale or lease. This deeming provision ensures that such property is valued at its replacement cost for the purpose of subsection 10(1).

¶ 4. As in the case of the new legislation dealing with prepaid expenses (see the current version of IT-417 ² ), the Department anticipates no change in its practice of ignoring adjustments for insignificant amounts.

Notice—Bulletins do not have the force of law

At the Canada Customs and Revenue Agency (CCRA), we issue income tax interpretation bulletins (ITs) in order to provide technical interpretations and positions regarding certain provisions contained in income tax law. Due to their technical nature, ITs are used primarily by our staff, tax specialists, and other individuals who have an interest in tax matters. For those readers who prefer a less technical explanation of the law, we offer other publications, such as tax guides and pamphlets.

While the comments in a particular paragraph in an IT may relate to provisions of the law in force at the time they were made, such comments are not a substitute for the law. The reader should, therefore, consider such comments in light of the relevant provisions of the law in force for the particular taxation year being considered, taking into account the effect of any relevant amendments to those provisions or relevant court decisions occurring after the date on which the comments were made.

Subject to the above, an interpretation or position contained in an IT generally applies as of the date on which it was published, unless otherwise specified. If there is a subsequent change in that interpretation or position and the change is beneficial to taxpayers, it is usually effective for future assessments and reassessments. If, on the other hand, the change is not favourable to taxpayers, it will normally be effective for the current and subsequent taxation years or for transactions entered into after the date on which the change is published.

Most of our publications are available on our Web site.

If you have any comments regarding matters discussed in an IT, please send them to:

Manager, Technical Publications and Projects Section
Income Tax Rulings Directorate
Policy and Legislation Branch
Canada Customs and Revenue Agency
Ottawa ON K1A 0L5

or by email at the following address: bulletins@ccra.gc.ca

1
Modified by Correction Sheet CS 24 dated April 20, 2001
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2
Modified on June 9, 2003.
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