Principal Issues: Does a vehicle acquired for personal use still qualify as a "passenger vehicle" when, at a later time, it begins to be used primarily as a taxi?
Position: No
Reasons: Application of the Act.
XXXXXXXXXX 2019-079622 I. Landry, M. Fisc. June 10, 2019
Dear Ms. XXXXXXXXXX,
Subject: Qualification as a "passenger vehicle" within the meaning of subsection 248(1) of the Income Tax Act
This letter is in response to your e-mail of February 13, 2019 asking for our comments on the qualification of a vehicle as a "passenger vehicle” within the meaning of subsection 248(1) of the Income Tax Act (the "Act") where the vehicle was acquired for personal use and, at a later date, began to be used primarily as a taxi.
Unless otherwise indicated, all statutory references in this letter are to the provisions of the Act.
General Comments
Passenger vehicle
The definition of "passenger vehicle" is dependent on the definition of "automobile", both defined in subsection 248(1). A "passenger vehicle" is defined as being, inter alia, an automobile acquired after June 17, 1987; and an "automobile" as a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and eight passengers, excluding, in particular, a motor vehicle acquired primarily for use as a taxi. Finally, a "motor vehicle" is also defined in subsection 248(1) as an automotive vehicle designed or adapted to be used on highways and streets but excluding inter alia a trolley bus, or a vehicle designed or adapted to be operated exclusively on rails.
A motor vehicle acquired primarily for use as a taxi therefore does not qualify as a "passenger vehicle" within the meaning of subsection 248(1).
Deemed acquisition on a change of use
The change of use rules in subsection 13(7) provide inter alia that property that has undergone a change of use is deemed to have been acquired by the taxpayer at that time.
The definition of "automobile" in subsection 248(1) does not specify the time when the condition that a property is “acquired primarily for use as a taxi” must be satisfied. In cases where there has been a change of use, we are of the view that that condition is satisfied at the time of that change.
In the situation submitted, the motor vehicle would therefore be acquired primarily for use as a taxi on the change in use. Consequently, from that time on, that vehicle would no longer qualify as a "passenger vehicle" within the meaning of subsection 248 (1).
Best regards,
Michel Lambert, CPA, CA, M. Fisc.
Manager
Employment Income Section
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch