Dear Sirs:
Re: CCA classification - Ski Rental Equipment
This is in reply to your letter dated October 21, 1991, concerning the proper classification under Schedule II of the Income Tax Act of ski clothing, equipment and ice skates acquired for rental purposes. You were of the opinion that these items may belong in Class 12(k) as "apparel or costume, including accessories used therewith, used for the purpose of earning rental income". We offer the following comments concerning this CCA classification.
Our Comments
In the absence of a definition of "apparel" in the Income Tax Act or jurisprudence on the subject, the ordinary meaning (usually the dictionary definition) should be used. In this regard we agree that generally the term means "clothing" or "dress" which would include boots, whether or not they are for skiing or skating. Accordingly, ice skates, ski boots and clothing should be included in paragraph (k) of class 12 for capital cost allowances ("CCA") purposes.
The ordinary meaning of the word "accessory" should also be used when determining what belongs in Class 12(k). The Webster's Ninth New Collegiate Dictionary defines the word as "an object or device not essential in itself but adding to the beauty, convenience or effectiveness of something else, (such as) auto accessories, clothing accessories". In this regard the skis, poles or bindings could not be said to add to the beauty or effectiveness of the ski boots. We are more apt to think that the ski boots, poles and bindings are accessories used with the skis rather than the skis, poles and bindings being accessories used with the ski boots. Accordingly, it is our view that the skis, poles or bindings should not be included in item (k) of class 12 for CCA purposes.
The Department is of the opinion that skis, ski poles, and bindings should be included in class 8 of Schedule II to the Regulations as "(i) tangible capital property that is not included in another class".
We trust our comments will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch