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CCA & Beneficial Ownership

Subject: Beneficial Ownership Number: 05-27 Date: 10/21/2005

Ownership by a spouse does not preclude CCA and related expenses if paid by the taxpayer

A taxpayer may claim capital cost allowance ("CCA") on an asset from which the taxpayer can earn property or business income.

A common issue in determining when CCA can be claimed is the determination of when an asset becomes "available for use" by the taxpayer.

When a taxpayer's spouse purchases an asset, but the taxpayer uses the asset for business or property purposes, can the taxpayer claim depreciation on the asset which is not in his or her name? Interpretation Bulletin IT 285 R2, paragraph 17, states that a taxpayer will be considered to have acquired a depreciable property at the earlier of:

1. the date on which the title to it is obtained; and
2. the date on which the taxpayer has all the incidents of ownership, such as possession, use, and risk, even though legal title remains with the vendor as security for the purchase price.

The CRA recently commented (in Technical Interpretation 2005-0122211E5) on a situation where a taxpayer's spouse obtained a loan and purchased a vehicle for the taxpayer to use in his business. In this case, the taxpayer will make the loan repayments and all maintenance payments for the vehicle. The CRA confirmed that the taxpayer, the beneficial owner, would be entitled to claim CCA on the vehicle.

There are many situations where an individual does not want to have assets, needed for business use, in his name. The CRA decision permits a spouse to be the purchaser/owner of an asset but the taxpayer can deduct all the related expenses which he pays.

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