ARCHIVED - Definition of Tools
DATE: August 30, 1978
SUBJECT: INCOME TAX ACT
Definition of Tools
REFERENCE: Paragraph 20(1)(a) (also Schedule B of the Regulations)
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¶ 1. The purpose of this bulletin is to outline the Department's position regarding the definition of the word "tools" for purposes of paragraph (h) of class 12 of the Regulations.
¶ 2. It is the Department's view that a tool is an instrument of manual operation, that is, it is an instrument to be used and managed by hand instead of being moved and controlled by machinery. In order for an asset to be a tool it must be designed to create a physical change in something or to be used as an instrument of measurement or manipulation. Examples are hammers, saws, squares, screwdrivers and hand-held power tools.
¶ 3. The fact that an object can be moved or set up by hand does not, in itself, make it a tool for class 12 purposes. Thus, pallets that are moved by lift trucks when loaded with goods, or scaffolding which is assembled by hand and moved by and but not "manually used" are not class 12 items. However, shopping carts, metal trays used for carrying bread by hand, milk crates and returnable soft drink cases are class 12 assets when they are capitalized.
¶ 4. An asset can be a tool in a general sense but its predominating character may be that of machinery and equipment. Thus, an item such as a typewriter which might be considered a tool, is properly regarded as machinery and is placed in class 8.
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At the Canada Customs and Revenue Agency (CCRA), we issue income tax interpretation bulletins (ITs) in order to provide technical interpretations and positions regarding certain provisions contained in income tax law. Due to their technical nature, ITs are used primarily by our staff, tax specialists, and other individuals who have an interest in tax matters. For those readers who prefer a less technical explanation of the law, we offer other publications, such as tax guides and pamphlets.
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Subject to the above, an interpretation or position contained in an IT generally applies as of the date on which it was published, unless otherwise specified. If there is a subsequent change in that interpretation or position and the change is beneficial to taxpayers, it is usually effective for future assessments and reassessments. If, on the other hand, the change is not favourable to taxpayers, it will normally be effective for the current and subsequent taxation years or for transactions entered into after the date on which the change is published.
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If you have any comments regarding matters discussed in an IT, please send them to:
Manager, Technical Publications and Projects Section
Income Tax Rulings Directorate
Policy and Legislation Branch
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Modified by Correction Sheet CS 24 dated April 20, 2001.
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