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.
Principal Issues: A self-employed individual (the "Individual"), who was an insurance agent, was involved two accidents in XXXXXXXXXX . The respective costs of repairing the vehicle to its original condition in XXXXXXXXXX were $XXXXXXXXXX and $XXXXXXXXXX . The Individual did not claim any amount from his insurer. Can the individual deduct these costs?
Position: Yes
Reasons It is the Agency's general position that the costs are deductible (paragraph 7 of
IT-521R).
March 28, 2000
Toronto West Tax Services Office HEADQUARTERS Peter Gilkinson M. Eisner (613) 957-2138
2000-000942
Vehicle Accidents - Repair Costs
This is in reply to your e-mail received on February 22, 2000 in which you asked us for our comments on whether a self-employed insurance agent (the "Individual") is entitled to deduct the costs of repairing his vehicle as a result of two separate accidents.
The Individual is an insurance agent. The Individual, while driving his vehicle for business purposes, was involved in two single vehicle accidents in XXXXXXXXXX. The respective costs of repairing the Individual's vehicle to its original condition in XXXXXXXXXX were $XXXXXXXXXX and $XXXXXXXXXX. These amounts were deducted by the Individual in determining business income. While the Individual also deducted the cost of vehicle insurance for those years, the Individual opted to pay for the repair costs without making a claim through the insurance company.
Tax Services Position
The auditor is of the view that since there is a doubling of expenses (i.e., the cost of vehicle insurance and the repair costs), the repair costs are not allowable. On the other hand, it is your view that since the accidents occurred while the Agent was in the course of carrying out his business activities and that the payment of the repairs can be considered to be beneficial in respect of future insurance costs, the repair costs are deductible under paragraph 18(1)(a) of the Income Tax Act (the "Act").
Our Comments
It is the Agency's general position, as set out in paragraph 7 of IT-521R "Motor Vehicle Expenses Claimed by Self-Employed Individuals," that accident repair costs to a motor vehicle are deductible in full if the vehicle was being used for business purposes at the time of the accident.
As a result of the above comments, it is our view that the Agency should not deny the deduction of the Individual's repair costs.
If you require further technical assistance, we would be pleased to provide our views.
For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the legislation Access Database (LAD) on the Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.
John Oulton
Manager
Business, Property &
Employment Section III
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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