913301
Marc Vanasse
(613) 952-0243
24(1)
Attention: 19(1)
January 24, 1992
Dear Sirs:
Re: Paragraph 13(7)(g) of the Income Tax Act (the "Act") and Class 10.1
This is in reply to your letter dated November 28, 1991 wherein you requested that we clarify the capital cost allowance ("CCA") calculation on automobiles used by individuals for employment related purposes and by self-employed individuals as well as for corporations which are eligible to claim an input tax credit for the goods and services tax ("GST") on the purchase of an automobile.
The Income Tax Regulations ("Regulations") were recently amended by an Order in Council dated November 21, 1991 to include new section 7307 which sets out revised limits for passenger vehicles acquired or leased after August 1989 and after 1990.
More specifically, subsection 7307(1) provides that, for purposes of subsection 13(2), paragraph 13(7)(g), subparagraph 13(7)(h)(iii), subsection 20(16.1) and the description of B in paragraph 67.3(d) of the Act, the $20,000 limit relating to the cost of such a vehicle acquired, or leased under a lease entered into, after August 1989 is raised to $24,000. Furthermore, the capital cost of passenger vehicles acquired or leased after 1990, will include, in addition to the $24,000 limit, the applicable GST and provincial sales tax ("PST") that would have been paid if the passenger vehicle had been acquired at a pre-tax cost of $24,000.
Therefore, for purposes of determining the CCA deduction under either paragraph 8(1)(j) or 20(1)(a) of the Act, passenger vehicles purchased after 1990 and costing less than $24,000 (before GST and PST), will be placed in Class 10. The amount added to this class includes the cost of the passenger vehicle (including GST and PST) less any applicable GST input tax credit or rebate. Passenger vehicles acquired after 1990 at a cost exceeding $24,000 (before GST and PST), will be placed in Class 10.1 pursuant to Schedule II of the Regulations. The amount added to this class includes the aggregate of $24,000 plus the applicable GST and PST that would have been paid if the passenger vehicle had been purchased for $24,000. Of course, any GST input tax credit or rebate will reduce the capital cost of the passenger vehicle pursuant to subsection 13(7.1) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
J.A. Szeszyckifor DirectorPersonal and General SectionBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch