7-910617
24(1)
Subject: Proposed subsection 13(29) of the Income Tax Act
This is to reply to your memorandum of February 26, 1991 in which you requested our comments on the statement by 19(1) 19(1) that the rule in proposed subsection 13(29) of the Income Tax Act is ineffective.
We have examined 19(1) re-working of the example Finance had included in the technical notes accompanying the draft law, and are unable to agree with his conclusions. Consequently, we see no need for the revisions in the draft law which he had considered necessary.
The essence of 19(1) difficulty with the mater seems to be in his misreading of proposed paragraph 13(29)(d) although we note he has used the same approach in attempting to interpret paragraph 13(29)(c), but there the erroneous assumptions he made cancelled each other out.
Proposed paragraph 13(29)(d) reads:
"the aggregate of all amounts each of which is the capital cost to the taxpayer of a depreciable property, other than the particular portion of the property, that is part of the project to the extent that the property is considered, by reason of this subsection, to have become available for use before the end of the inclusion year.:"
19(1) suggests the provision in effect deals separately with "the total of all amounts each of which is the capital cost to the taxpayer of a depreciable property" and whatever is encompassed by the balance of the provision.
In our view, this is not the case. Proposed paragraph 13(29)(d) deals with but one item, the capital cost of project depreciable property which has under proposed subsection 13(29) previously become available for use before the end of the year in question. The "particular property" is excluded from the paragraph 13(29)(d) amount to avoid the circularity which would obviously result, the number produced by proposed subsection 13(29) being deemed by the have spoken to Shirley about this line is awaiting doc. 000271 question
19(1) erroneously divides proposed paragraph 13(29)(c) into three categories as well. Again, that provision generates only one number, rather than the three 19(1) obtains in his computation. That one number is the capital cost of depreciable property which meets three tests, i.e:
1) it is not a rental building:
2) it was acquired after 1989 and before the end of the taxation year ending more than 357 days before the commencement of the "inclusion year" (assuming "normal" taxation years, those taxation years ending two or more years prior to the inclusion year);and
3) it has not become available for use at or before the end of the inclusion year, other than under the "rolling start" rule in proposed paragraph 13(27)(b) or 13(28)(c) or under paragraph subsection 13(29).
19(1) has provided an example of how his redraft of the proposed law produces the correct result. As the proposed law seems not to require the changes suggested, and as his example produces an available for-use amount of $25 million in excess of the actual costs incurred, we saw no reason to examine it in any detail.
For your information we enclose a copy of a memo to file setting out our understanding of the matter.
DirectorBilingual Services & ResourceIndustries DivisionRulings Directorate