| 19(1) | File No. 5-7743 |
| J.D. Jones | |
| (613) 957-2104 |
June 19, 1989
Dear Sirs:
Re: Paragraph 8(1)(f) of the Income Tax Act (the "Act")
This is in reply to your letter of March 17, 1989 and further to our telephone conversation of April 4, 1989, wherein you requested our opinion on the deductibility of various expenses by an employee who meets all of the conditions under paragraph 8(1)(f) of the Act. We apologize for the delay in replying.
Specifically, you have asked whether an employee who meets all of the conditions of paragraph 8(1)(f) of the Act may deduct capital cost allowance, insurance and service contract fees and interest on money borrowed to purchase computers acquired for use in the performance of their duties of an office or employment.
It is our view that a taxpayer's claim for capital cost allowance and interest expense on computers acquired for use in the performance of duties of an office or employment are not eligible for a deduction due to the restriction in subparagraph 8(1)(f)(v) of the Act.
Where the taxpayer incurs expenses in connection with costs of leasing a computer rather than purchasing the computer, it is our view that the portion of the total leasing costs that can be reasonably attributed to the earning of commission income would be deductible in computing that income if the requirements of paragraph 8(1)(f) of the Act are otherwise met.
It is the Department's practice to allow the deduction of insurance and service contract fees under paragraph 8(1)(f) of the Act in the year of actual payment even though part of that payment may relate to another taxation year provided the taxpayer otherwise meets the requirements of that paragraph. The portion of such fees so deductible would be on the same basis as the total leasing costs of the computer as explained previously.
We trust our comments will be of assistance.
Yours truly,
for Director Small Business and General DivisionSpecialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
c.c. Enquiries and TaxpayerAssistance Division