28 May 1991 Income Tax Severed Letter

Language

English

Document number

Severed letter type

Miscellaneous

d7 import status

Drupal 7 entity type

Node

Drupal 7 entity ID

658290

Extra import data

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Main text

May 28, 1991

Special Audits Division                 Resource Industries
E.H. Gauthier                             Section
Director                                John Chan
                                        957-9795
Merv Scott (Penticton)
Forestry Specialist                     7-910640

          24(1)Tax Treatment of Wood-chip Bins

We are writing in reply to your memorandum dated March 4, 1991 pertaining to the treatment of the above taxpayer's wood-chip bin for purposes of claiming capital cost allowance ("CCA"),the manufacturing and processing ("M&P") credit and investment tax credit ("ITC") under the relevant provisions of the Income Tax Act (the Act") and the Income Tax Regulations (the "Regulations").

FACTS

The facts are few and were garnered from your memorandum and telephone conversations with Mr. Merv Scott, Forestry Specialist and Mr. John Sargent of the Saint John District Office from which the adult of the taxpayer was conducted.

                    24(1)

24(1)

In Bunge of Canada Ltd. v. The Queen, 84 DTC 6276 (FCA), it was held that equipment used for discharging grain from grain storage elevators and silos were an integral and necessary part of storing grain. Since the grain storage assets were eligible for ITC under specific provisions of the Act, the court held that the equipment used for discharging the grain would also earn ITC.

                                                   24(1)

24(1)

Paragraph 16, IT-331R states that a property is used for a particular purpose when its capabilities or attributes have a necessary role in carrying out that purpose. Where these capabilities or attributes are to be applied in carrying out more than one purpose, it is then necessary to determine the use for which it was "primarily" acquired. It is also stated that an asset would be considered to have been acquired primarily for a specified purpose where it is to be used more than 50% of the time for that purpose.

               24(1)CCA Classification

Class 3 provided for property not included in any other class that is, inter alia, a building or other structure, or part thereof acquired by the taxpayer before 1988.

               24(1)

24(1)

Class 29 generally includes, inter alia, property acquired by a taxpayer after May 8, 1972 and before 1988 to be used directly or indirectly by him in Canada primarily in the manufacturing or processing of goods for sale and that is property that would be included in Class 8.

               24(1)Cost of Manufacturing and Processing Capital

The cost of M&P capital must be determined in order to calculate a taxpayer's M&P credit under section 125.1 of the Act.

The cost of M&P capital as defined in Regulation 5202 refers to the portion of the cost of capital of the corporation that reflects the extent to which property included in the calculation thereof was used directly in qualified activities of the corporation during the year.

"Qualified activities" is also defined at Regulation 5202 and it specifically states at paragraph (d) that qualified activities do not include storing, shipping, selling and leasing of finished goods.

In this regard,                    24(1)

24(1)Other24(1)                    21(1)(b)

21(1)(b)                 24(1)

Please contact the writer if you have any questions or comments.

Director Bilingual Services and Resource Industries Division Rulings Directorate

28 May 1991 Income Tax Severed Letter

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