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.
Principal Issues: Whether a newly constructed building used primarily for the storage of fishing gear, such as lobster traps or a fishing vessel, qualifies as being for the purpose of fishing for purposes of the definition of qualified property in subsection 127(9) of the Income Tax Act.
Position: Yes.
Reasons: The law.
2007-023890
XXXXXXXXXX Joy Bertram, CGA, CPA (vt)
(613) 957-8954
August 9, 2007
Dear XXXXXXXXXX,
Re: Investment Tax Credit - Building Acquired to Store Fishing Gear or Vessel
This is in response to your letter of May 30, 2007 inquiring about whether a newly constructed building used primarily for the storage of fishing gear or a fishing vessel qualifies for the investment tax credit (ITC) under section 127 of the Income Tax Act (Act).
As a result of our July 30, 2007 telephone conversation (Bertram/XXXXXXXXXX), our understanding is that:
- The building is newly constructed and has not been used previously,
- The building is located on land which the taxpayer owns or leases,
- The building is located and used in an Atlantic Province of Canada,
- The building is prescribed property per section 4600 of the Income Tax Regulations,
- The building is used primarily for storage of property, such as fishing gear or vessel, that is used by the taxpayer in Canada for the purposed of fishing, and
- The building is not used for any activities described in subsection 127(11) of the Act.
Your question concerns whether the fact that the building was built for the purpose of, and in fact, is used to store property, such as fishing gear and fishing vessel, that is used in Canada for the purpose of fishing would satisfy the condition inherent in the wording "to be used by the taxpayer in Canada primarily for the purpose of ...fishing" that is found in paragraph (c) of the definition of "qualified property" in subsection 127(9) of the Act.
Written confirmation of the tax implications inherent in particular transactions is given by the Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out Information Circular 70- 6R5, Advance Income Tax Rulings, dated May 17, 2002. However, based on the information provided to us, we are prepared to offer the following general comments, which may be of assistance.
Subsection 127(9) of the Act defines "investment tax credit" to mean the specified percentage of certain amounts. These amounts include the capital cost to the taxpayer for property that meets the definition of "qualified property" in subsection 127(9). According to the definition, "qualified property" includes a property that is a prescribed building to the extent that it is acquired after June 23, 1975 to be used in Canada primarily for certain eligible activities, one of which is the purpose of fishing. In addition, the property must not have been used or acquired for use or lease for any purpose whatever prior to its acquisition by the taxpayer. Furthermore, subsection 127(11) provides that, for the purposes of the definition of "qualified property", certain listed uses (e.g., purchase and resale operations, data processing; storing - other than storing grain - shipping, selling or leasing finished goods) are ineligible activities. In this regard, we have no reason to disagree with your view that the building is not used to undertake any of the ineligible activities described in subsection 127(11).
In our view, based on facts in this particular case, the building would meet the condition in the wording "to be used by the taxpayer in Canada primarily for the purpose of ...fishing" that is found in paragraph (c) of the definition of "qualified property" in subsection 127(9) of the Act. Accordingly, the building would be eligible for the Federal ITC provided it otherwise meets all the other conditions for the eligibility for the investment tax credit as defined in subsection 127(9).
We trust that the above will be of assistance to you.
Yours truly,
Sandy Parnanzone,
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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