8 September 1999 Internal T.I. 9901420 - REPLACEMENT PROPERTY

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: Can fishing business be considered the same a that of providing guide services.

Position: no.

Reasons: Similar only if they fall within the same category ie fishing

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S. J. Tevlin
Attention:  XXXXXXXXXX

September 8, 1999

Dear Sirs:

Re: Replacement Property

We are writing in response to your letter dated January 14, 1999 wherein you requested our confirmation that, for purposes of subsection 14(7) of the Income Tax Act (the "Act"), a guide licence can be considered a replacement property for a fishing licence when the incorporated fishing business is sold and a new guiding business is started with the purchase of the guide license from proceeds of the sale of the fishing licence.

The situation described in your letter appears to involve an actual fact situation involving a specific taxpayer. Written confirmation of the tax implications inherent in proposed transactions is 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. Should your situation involve a specific taxpayer and 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.

It is our view that it will always be a question of fact as to whether a specific eligible capital property will qualify as a replacement property for a former property. Interpretation Bulletins IT-123R6 and .IT-259R3 discuss "Transactions Involving Eligible Capital Property" and "Exchanges of Property" respectively. A particular acquired property will qualify as a replacement property for a former property in those situations where the conditions outlined in paragraph 14 of IT-259R3 are met. The conditions outlined therein include the requirement that the taxpayer must acquire the replacement property for the same or a similar use to which the taxpayer put the former property and must have been acquired for the purpose of gaining or producing income from the same or similar business as the business in which the former property was used. Paragraph 18 of IT-259R3 provides a discussion of the term "similar business". It states that the term is "interpreted in a reasonably broad manner" and that two businesses will be considered to be ''similar" if they both fall within, amongst others, the category of "fishing".

Based on the comments provided in IT-259R3 we would not expect that the business of fishing could be said to be the same or similar to the business of providing guide services.

The foregoing comments are given in accordance with the practice referred to in paragraph 22 of IC-70-6R3 and are not binding on Revenue Canada.

We trust our comments will be of assistance to you.

Yours truly,

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