6 June 1996 External T.I. 9618455 - RESEARCH GRANT AND PURCHASE OF COMPUTER

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principales Questions:

Whether the cost of a notebook computer can be applied against the research grant or if it could be treated as a depreciable asset

Position Adoptée:

By virtue of paragraph 56(1)(o) the entire cost of the computer is deductible against the research grant if it is bought in the same year in which the research grant is received and it is used for the perform the research work. An employee can not claim any capital cost allowance in respect of a computer.

Raisons POUR POSITION ADOPTED:

IT-75R3, 9430840

5-961845
XXXXXXXXXX (613) 957-8953

June 6, 1996

Dear Sirs:

Re: Research Grant - Purchase of a Notebook Computer

We are replying to your letter of January 18, 1996, addressed to the Toronto Tax Services Office wherein you requested our opinion whether the cost of a notebook computer can be applied against the research grant you received in 1995 or if it could be treated as a depreciable asset. Your request was transferred to our Directorate on May 24, 1996. We apologize for the delay in responding to your inquiry.

Generally, grants received in a taxation year to enable a taxpayer to carry on research or any similar work are included in income under paragraph 56(1)(o) of the Income Tax Act (the "Act"). Interpretation Bulletin IT-75R3 (copy enclosed) provides some comments on research grants. Paragraph 56(1)(o) of the Act provides that research grants are required to be included in income to the extent that the grants exceed allowable expenses incurred by the taxpayer in the year for the purpose of carrying on the work. In addition, paragraph 56(1)(o) provides that, in order for research expenses to be deductible from the grant, the research expenses must be incurred in the same year in which the research grant is received. Paragraph 34 of IT-75R3 states that "the term expenses as used in paragraph 56(1)(o) is interpreted to include not only current expenses but also expenditures of a capital nature." Therefore, it is our opinion that the entire cost of a notebook computer is deductible from a research grant included in income under paragraph 56(1)(o), provided that the notebook computer was bought in the same year in which the research grant was received and provided it was bought for purpose of carrying on the taxpayer's research.

Furthermore, it is our opinion that an employee can not claim any capital cost allowance in respect of a computer. In fact, in computing an individual's income from employment the expenses that may be deducted are limited to those described in section 8 of the Act. Paragraph 8(1)(f) governs the expenses of individuals employed in connection with the selling of property or negotiating of contracts. Subparagraph 8(1)(f)(v) provides that outlays on account of capital, except as specifically provided in paragraph 8(1)(j) (motor vehicles and aircraft), can not be deducted. Thus, capital expenditures and capital cost allowances in respect of computers are not deductible from employment income.

The above comments are an expression of opinion only and, as explained in paragraph 21 of Information Circular 70-6R2, are not binding on the Department.

We trust that these comments will be of assistance to you.

Yours truly,
for Director
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch