24 December 1999 Internal T.I. 9932567 - COST OF CAPITAL

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.

Principal Issues: Where a leasee elects under ss 16.1(1) is the t\p to include the asset in the cost of capital for purposes of determining the M&P tax credit.

Position: Yes.

Reasons: T\P considered to have acquired and own property for purposes of Reg. 5202.

			December 24, 1999

	Toronto West Tax Services Office	Headquarters
	4th floor, 77 City Centre Drive		Partnerships Section
	Mississauga ON		S. Tevlin

	Attention: Peter Gilkson
			993256

M&P Tax Credit

We are writing in response to your e-mail correspondence dated December 13, 1999 wherein you asked our opinion with respect to the interaction of subsections 16.1(1) and 125.1(3) of the Act.

In particular you have asked whether a taxpayer that has elected to have subsection 16.1(1) apply to a leased property must include the property in the "cost of capital" in that definition in section 5202 of the Income Tax Regulations.

In this regard we offer the following general comments.

It is our opinion that the taxpayer who is the lessee in a leasing arrangement and who makes an election under subsection 16.1(1) of the Act is considered to have acquired the property for the purposes of calculating "adjusted business income" and the determination of the "cost of capital", as those terms are defined in section 5202 of the Regulations.

We trust our comments will be of assistance to you.

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