Principal Issues: What is the CCA class for a self-propelled sprayer?
Position: Class 10.
Reasons: The phrase "automotive equipment" is interpreted broadly. Given the ordinary meaning of the word "automotive", it is reasonable to conclude that a self-propelled sprayer is "automotive equipment" that is described in paragraph (a) of class 10 of Schedule II of the Regulations.
XXXXXXXXXX 2011-040250 Charles Rafuse 613-247-9237 May 19, 2011
Dear XXXXXXXXXX :
Re: Capital Cost Allowance
This is in response to your email of April 11,2011, regarding the proper class in Schedule II of the Income Tax Regulations ("Regulations") in which a self-propelled sprayer should be included.
You have indicated that you realize that sprayers are class 8 assets, but you consider that a self-propelled sprayer would be included in class 10. You have based this opinion on the fact that all other farm equipment (combines, swathers, stookers, balers, etc) are included in class 8 if drawn, and included in class 10 if self-propelled.
You have indicated that a description of the sprayer could be found on the website canadasprayerguide.com. The website has an article under latest news about Apache sprayers. A review of the Apache website, www.etsprayers.com, indicates for example that the AS720 model features a smooth ride suspension along with a 750 gallon tank and a powerful 160 hp Cummins Tier III engine.
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office (the "TSO"). We are, however, prepared to make the general comments set out below, which may be of assistance.
Paragraph (a) of class 10 of Schedule II of the Regulations includes "property not included in any other class that is ... automotive equipment, including a trolley bus, but not including (i) an automotive railway car acquired after May 25, 1976, (ii) a railway locomotive, or (iii) a tramcar".
The word "automotive" should be given its ordinary meaning since this term is not defined in the Income Tax Act. In this regard, the Merriam Webster dictionary defines "automotive" as "moving by itself; self-propelling or self-propelled". In addition, as indicated in paragraph 4 of Interpretation Bulletin IT-285R2, "Capital Cost Allowance - General Comments", the Canada Revenue Agency ("CRA") accepts that certain words used in the Regulations to describe properties may have wider meanings than those ordinarily attributed to them. For example, that paragraph also indicates that "automotive equipment" in class 10 of Schedule II includes outboard motors and air cushion vehicles popularly known as "hovercraft". Accordingly, the CRA has interpreted the phrase "automotive equipment" broadly.
Based on the above, it is our view that a self-propelled sprayer would appear to meet the definition of "automotive equipment" and thus should be included in class 10.
We trust that these comments will be of assistance.
Yours sincerely,
Michael Cooke
Acting Manager
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch