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.
Mr. D.S. Puccini Director General Economic Development Fisheries and Oceans 240 Sparks Street Ottawa, Ontario
M. Evans 593-7295 A-6634
May 19, 1982
Dear Mr. Puccini:
This is in reply to your letter of May 7, 1982, regarding the taxation, as eligible capital amounts, of the grants paid by your Department in 1981 to fishermen under the salmon licence buy-back program.
It is your view that paragraph 6 of Interpretation Bulletin IT-273R dated January 19, 1981, should apply to make the payments under your program tax exempt since, in your opinion, they are similar to those under the Federal Small Farm Development program which is explained in Interpretation Bulletin IT-235 .
We enclose a copy of Special Release to Interpretation Bulletin IT-273R dated December 31, 1981, which on page 2 advises that although cancellation of the interpretation bulletins mentioned on page 1 is not immediately contemplated, taxpayers should apply the principles set out in Interpretation Bulletin IT-273R to determine the tax consequences of a particular government assistance program. In the event of any conflict, Interpretation Bulletin IT-273R will prevail.
Most government assistance programs promote an event or activity desired by the government. We shall therefore confine our comments to the income earning relatedness of the two grants in question. The word "income" refers to income from business or property.
Under the Federal Small Farm Development program, the farmers were required to sell substantially all of their farmland and discontinue the operation of the business. The cessation of the whole profit-making structure was the consideration given for entitlement to these grants. These amounts are therefore in the nature of damages for the destruction of a business and are thus not related to an income deficiency.
Under the salmon licence buy-back program, the fisherman had a choice of resuming salmon fishing which would have generated business income or disposing of their licence. It is our understanding that salmon fishing (average yearly income $2,000) forms only a part of the fishermen's business operations, therefore, the loss of income on disposition of the licence would not materially affect their overall income-earning process. In the circumstances, these grants are related to an income deficiency and are subject to the normal tax and accounting treatment under the Income Tax Act and generally accepted accounting principles with respect to proceeds of disposition of a capital property in the course of carrying on a business.
We trust that the above comments will clarify the view we expressed in our letter of April 13, 1982.
Yours truly,
Original signed by signé par E.W. HOOD
for Director Non-Corporate Rulings Division
s. 14(l) 14(5)(a)(iv)(A)
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