ARCHIVED - Special release: Capital Cost Allowance-Class 8 Property

From: Canada Revenue Agency

What the "Archived Content" notice means for interpretation bulletins

NO.: IT-472

DATE:  September 6, 1991

SUBJECT: INCOME TAX ACT
SPECIAL RELEASE Capital Cost Allowance-Class 8 Property


Notice to the reader:


Application

This Special Release revises IT-472 dated February 16, 1981 to reflect the following amendments made with respect to Class 8 of the Income Tax Regulations:

  • Class 8 has been amended for property acquired after 1987, to include outdoor advertising poster panels or bulletin boards which were formerly included in Class 11.
  • Class 8 has been further amended to exclude from it any property, whether or not it is described in Class 8, if that property is included in Class 11.
  • A new election has been provided that will allow a taxpayer, in certain circumstances, to claim a terminal loss on the disposition of an outdoor advertising poster panel or bulletin board.

The release also incorporates the previous changes made to paragraphs 8 and 9 of the bulletin by Special Release dated September 15, 1981 and cancels that earlier release.

Bulletin Revisions

1. Paragraph 2 of the bulletin is revised as follows:

(i) The reference in 2(a) to "Class 2, 7, 9 or 30" is changed to "Class 2, 7, 9, 11 or 30".

(ii) Immediately after 2(c) the following is added: "(d) Paragraph (k) provides for the inclusion of a rapid transit car that is used for public transportation within a metropolitan area and is not part of a railway system. (e) Paragraph (l) provides for the inclusion of an outdoor advertising poster panel or bulletin board."

(iii) In the commentary after new 2(e), the reference to Class "10(g) to (t)" is changed to "10(g) to (w)" and the reference "or 34" is changed to "34, 37, 39 or 41".

2. Paragraph 5 of the bulletin is revised as follows:

(i) the opening commentary is replaced by: "Class 8 includes under paragraphs (c) to (e) and (l) the following:"

(ii) the following is added immediately after 5(c): "(d) An outdoor advertising poster panel or bulletin board acquired after 1987, other than property acquired before 1990 that was acquired pursuant to a written obligation entered into before June 18, 1987 or was under construction on June 18, 1987. Such property when used to earn rental income was previously included in Class 11. A special election, discussed in 11 below, is available for this property under Regulation 1103(2d)."

3. Replace paragraph 8(c) of the bulletin with the following:

"(c) An advertising sign (e.g., poster panel, bulletin board) or electrical advertising sign (e.g., neon sign) not qualifying for inclusion in Class 11 and not otherwise qualifying for inclusion in Class 8 by virtue of paragraph (l) thereof. A sign attached to the exterior of rented premises otherwise qualifying as Class 8 property will be included in Class 13, when the sign was purchased by a tenant and must be left behind upon the expiration of the lease. This includes a removable store front door, doorway or show window;".

4. In paragraph 8(r) of the bulletin delete the reference to "bread trays" and delete paragraph 8(s) in its entirety. (Bread trays and shopping carts costing less than $200.00 are Class 12 assets as discussed in paragraph 3 of the current version of IT-422, Definition of Tools. Where the property costs $200.00 or more it is generally included in Class 8; see 8(w) of the bulletin.)

5. In paragraph 9 of the bulletin, if there is a reference to paragraph 8(p) it should be changed to paragraph 8(o). (Copies of the bulletin distributed after September 15, 1981 may already include this change.)

6. Add the following paragraph after 9:

"10. For property acquired after 1987 subsection 1101(5l) of the Regulations provides for an election to classify a property described in paragraph (l) of Class 8 into a separate class. The election must be made by letter in the tax return for the taxation year in which the taxpayer acquired the property. Subject to coming into force rules, the election must be made no later than the last day on which the taxpayer may file a tax return for the year in accordance with section 150 of the Act. The separate class election would allow a terminal loss to be claimed if the property in the separate class is disposed of or abandoned for proceeds which are less than the undepreciated capital cost remaining in the separate class. The election is effective from the first day of the taxation year for which the election is made and remains effective for all subsequent years (Regulation 1101(5j))."

7. Add the following paragraph after 10:

"11. Subsection 1103(2d) of the Regulations provides an election which allows taxpayers to transfer property from one class (the old class) to another (the new class). The effect of the election is that the property is transferred to the new class before its disposition. The election can be made when, in the same year,

(a) a property (new property) is acquired in the new class,

(b) a property of the old class is disposed of,

(c) property of the old class would have been in the same class as the new property if it were acquired at the same time and from the same person as the new property, and vice versa for the property of the new class, and

(d) the new class is not a separate class described in Regulation 1101.

This election may allow a taxpayer to defer a recapture of capital cost allowance, or increase the amount of capital cost allowance available in the year where regulation 1100(2) (the 50% rule) would otherwise have restricted the amount claimed. (See the current version of IT-285, Capital Cost Allowance - General Comments for an explanation of the 50% rule).

The election is made by letter in the tax return for the year of disposition. It must be made by the deadline for filing returns under section 150 of the Act."

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