R.A. Albert (613) 957-2101
FEB 11 1987
Dear Sirs:
Re: Technical Interpretation: Certified Production Your File No. 76,167
This letter is in response to yours of January 21, 1987, wherein you requested a technical interpretation regarding the definition of the term "certified production" for purposes of the Income Tax Act (the "Act") and the Regulations issued thereunder. Your particular concerns are with regard to paragraph (d) of the definition of "certified production" in subsection 1104(2) of the Regulations by which a taxpayer must have paid in cash as of the end of the particular taxation year at least 5% of the capital cost of the film or tape in order for the film or tape to qualify as a "certified production" in respect of a particular taxation year.
We are confirming your views as set out in your letter. If a taxpayer has paid in cash less than 5% of the capital cost of a film or tape, which otherwise qualifies as a "certified production", as at the end of a particular taxation year, then the film or tape will constitute Class 10 property in that particular year. If in a subsequent year, the taxpayer has paid in cash at least 5% of the capital cost of the film or tape, then the film or tape will constitute Class 12 property in that particular year, and the property will be transferred in accordance with the provisions of subsection 13(5) of the Act. It should be noted that this "5% test" must be met for each particular taxation year and that just as the property may be transferred into Class 12 in a subsequent year, it may also be transferred out. The half-year rules apply only in the year of acquisition and not in years of reclassification under provisions of subsection 13(5) of the Act.
We trust that this confirmation will be of assistance to you.
Yours truly,
Original signed by
D.B. MORPHY
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch