13 January 2000 External T.I. 9923675 - CLASSIFICATION OF CARPETING AND RUGS

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: Do carpet squares or modular carpeting qualify as class 8 assets?

Position: yes. appear to fit

Reasons: see comments in IT-472. Could be leasing property.

XXXXXXXXXX 							            992367
S. Tevlin
Attention:  XXXXXXXXXX 

January 13, 2000

Dear Sirs:

Re: Capital Cost Allowance Carpet Tiles

We are writing in response to your letter dated August 31, 1999 wherein you requested our opinion as to the proper classification of a particular property for capital cost allowance purposes under the Income Tax Act (the "Act").

You describe a leased flooring system that is similar to broadloom carpet but can be taken up and relocated to another location (sometimes referred to as carpet squares or modular carpet). It is your opinion that such property should be included in class 8 of Schedule II of the Income Tax Regulations (the "Regulations").

The situation described in your letter involves an actual fact situation of a specific taxpayer. Written confirmation of the tax implications inherent in proposed transactions are given by this Directorate only where the transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3 ("IC-70-6R3"), dated December 30, 1996. For a completed transaction, you should submit all relevant facts and documentation to your local tax services office for their views.

However, we are prepared to offer the following general comments.

Where a property is not included in any other class in Schedule II of the Regulations it will be included in class 8 by the provision of paragraph (i) of that class. Carpeting or rugs is not specifically identified in any class of Schedule II of the Regulations, although carpeting could constitute a leasehold interest for purposes of class 13.

In other instances we refer you to comments in Interpretation Bulletin IT-472 (copy enclosed), entitled Capital Cost Allowance - Class 8 property, which states at subparagraph 8(l) that rugs and carpets initially installed to furnish a new or renovated hotel, movie theatre, store or similar establishment will be considered to be property included in class 8.

It is therefore our general view that the carpet squares or modular carpet could be considered property that would be included in class 8 of Schedule II of the Regulations.

The forgoing comments are given in accordance with the practice referred to in paragraph 21 of IC-70-6R3, and are not binding on the Canada Customs and Revenue Agency.

We trust our comments will be of assistance to you.

Yours truly,

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

Att.

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