Principal Issues: Whether MRI equipment is included in Class 50
Position: No
Reasons: While it is a question of fact such property is special purpose equipment that is not included in any other class. Such property would generally fall into class 8.
XXXXXXXXXX 2012-043482 S. D'Angelo
March 8, 2012
Dear XXXXXXXXXX :
Re: Capital Cost Allowance ("CCA") - MRI Equipment
This is in response to your correspondence of January 27, 2012 concerning the proper CCA classification of a magnetic resonance imaging ("MRI") machine under Schedule II of the Income Tax Regulations (the "Regulations") that has been acquired for the purpose of earning income from a business carried on by a taxpayer.
In your correspondence you have provided the following description of an MRI machine:
- The machine contains a computer and requires an internally stored computer program to operate.
- The program is executed by the equipment.
- The user of the equipment sets the parameters for the application of the program to determine the image to be created by the equipment.
- The program reads data supplied to it by the equipment in the form of radio frequency signals generated by the equipment.
- The program responds to the data in generating the images.
You are of the view that an MRI machine constitutes "general-purpose electronic data processing equipment" described in Class 50 of Schedule II of the Regulations and are requesting our views.
Our Comments
The determination of the proper CCA classification of a particular device is a question of fact. Factors to be considered will include not only the specific functions that the device is designed to perform but also, amongst other things, the actual use to which the device has been put by the particular taxpayer. This determination would generally be made by the local Tax Services Office having regard to all the relevant facts relating to the specific taxpayer. However, we offer the following comments as they may relate to the above situation.
Class 50 property (55% rate) is property acquired after March 18, 2007 that is "general-purpose electronic data processing equipment" ("GPEDPE") and systems software for that equipment, including ancillary data processing equipment, but does not include property that is included in class 52 or that is principally or is used principally as:
(a) electronic process control or monitor equipment
(b) electronic communications control equipment
(c) systems software for equipment referred to in (a) and (b) or
(d) data handling equipment (other than data handling equipment that is ancillary to GPEDPE).
GPEDPE is defined in subsection 1104(2) of the Regulations as electronic equipment that, in its operation, requires an internally stored computer program that:
(a) is executed by the equipment;
(b) can be altered by the user of the equipment;
(c) instructs the equipment to read and select, alter or store data from an external medium such as a card, disk or tape; and
(d) depends upon the characteristics of the data being processed to determine the sequence of its execution.
An example of GPEDPE would be a desktop PC or laptop computer.
While a question of fact, an MRI machine appears to be a special-purpose device and not GPEDPE. While an MRI machine has an internally stored computer program that is executed by the equipment, it appears that the computer program cannot be altered by the user. As such, an MRI machine is not property described in class 50 (or class 52) of Schedule II of the Regulations. Moreover, since an MRI machine does not appear to be property that is specifically described in any other class, it is our view that such property is tangible capital property that should be included in Class 8(i), which has a CCA rate of 20%.
We trust our comments will be of assistance.
Yours truly
Michael Cooke
Manager
Capital Transactions Section
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch