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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Modified by Correction Sheet CS 24 dated April 20, 2001.
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