30 August 1989 Income Tax Severed Letter 7-4123 - 1989 Fishing Income Tax Guide Chapters 1 and 2

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.

As requested in your memo of July 10, 1989, please find attached our comments on Chapters 1 and 2 of the Guide. Our review was completed before we became aware of the Department of Finance press release #89-83 of August 14 concerning automobile expenses. Significant changes are now proposed in this area.

Other chapters will follow later.

1989 FISHING INCOME TAX GUIDE
CHAPTERS 1 and 2. REVIEWED BY PHIL TANG

• 1. Page 2. Filing requirement for Partnership Information Returns: This appears to be the only reference in the Guide to this new requirement. It seems that readers will wonder what is expected in the way of information when the return can be obtained and its relationship, if any, to form T2121.
• 2. Page 3. Gash Method Section: We suggest adding, as an additional bullet, that under the cash method a taxpayer is also required to include as income amounts computed under subsection 13(1) and subsection 14(1) (paragraph 28(1)(d)) from disposition of depreciable properties and eligible capital properties.
• 3. Page 3. last bullet: Technically, section 1801 of the Regulations also allows a taxpayer to value the entire inventory at the cost to the taxpayer. Hence, there are really three methods to value the inventory.
• 4. Page 4. 3rd line: "each year" should be "each period" for consistency.
• 5. Page 4: The last paragraph on government grants and subsidies sets out the more general statement on these kind of receipts since paragraph 12(1)(x) was introduced. As such, it may be better to make this statement at the beginning of the section in place of present statements which appear to be the Department's views prior to the enactment of 12(1)(x). Fortunately, there is probably very little practical difference, if any, so that consideration of a change could be left to next year.
• 6. Page 5, 3rd last paragraph: The last sentence (Information Circular No 76-4R2) should be deleted since this circular has been withdraw. (See telex dated April 20, 1989 from K.C. McLean).
• 7. Page 5, 2nd line after the last Bullet: "we" should be "the Department".
• 8. Page 7, Form T2038, 2nd sentence: There seems no requirement under the Act that a taxpayer must complete this form whether or not he is claiming an ITC for the year. You may want to tone down this sentence a bit.
• 9. Page 8. "Other related income" section; 1st line: "that" should be deleted (or replace "not" by "have not been".).
• 10. Page 8, "Patronage dividends" paragraph: second sentence is confusing. We prefer the 1988 version of "If you received a patronage dividend that is a share or a certificate of indebtedness, you are considered to have received the patronage dividend at the time you received the share or certificate."
• 11. Page 8, "Other related income" section, 1st paragraph: Some types of income described in this paragraph appear to be "employment income" rather than "income from self employment" or "fishing income". Such income should be reported in T4 slips by the employer, and should not be included in Form T-2121 but simply as employment income on the T-1 return.
• 12. Page 9: We assume that the Fisheries Development Act and the Fisheries Price Support Act are still in force, and the various programs described in this Guide are still operating. (e.g. Groundfish gill net buy-back program, Federal Excise Tax Rebate, Commercial Fishing Vessels Subsidies Program on this page and programs described on page 12, etc.)
• 13. Page 10, 3rd last paragraph, 3rd line: Add "and" between "disposition" and "is", and in last line: "that" should be "the".
• 14. Page 11: "Captains of fishing vessel" paragraph, 7th line: Replace "driving" by "travelling".
• 15. Page 13, 2nd sentence: Premium paid may be considered as a cost of borrowing money under certain situations (see IT-309R.)
• 16. Page 14. The first asterisk sentence can be deleted since the second last paragraph on page 13 already states that generally the costs for nets and traps cannot be claimed as expenses. Further, this sentence refers to "this" method, giving the impression that other method (inventory) may allow expense treatment.
• 17. Page 15, 7th line: "before June 17" should be "before June 18".
• 18. Page 16, 2nd bullet: "$3,040" should be "$3,042".
• 19. Page 17, item (7) and Page 18 (Item 7): Last sentence should be: It is calculated using the prescribed rate of interest for the period in the year during which the refundable amounts were outstanding (see note below)" (sec 67.3(d)(D)(ii)).
• 20. Page 18, Item (11): "$5,808" should be "$5,805".
• 21. Page 18: We wonder if the amount shown on line 3 can be correct. It seems that lease payments deductible in 1988 would have been restricted by section 67.3 so that amount deducted could not have been the gross payments made (i.e. 5 months x $550).
• 22. Page 19, 4th paragraph: Please note that this new IT has just been released. It is IT-521. You may wish to incorporate this information in this paragraph.
• 23. Page 19 "Note" Section: As discussed with your K. Meathrell, it Is our view that this section Is not needed since automobiles are excluded from the new leasing rules (exempt property).
• 24. Page 20, "Non-Allowable expenses" section, 1st paragraph: We suggest that the first sentence be toned down a bit by adding "generally" at the beginning, in view of the adversed decision of Impenco Ltd. case (88 CTC 2339).
• 25. Page 21: A reference to IT-514 Work Space in Home Expenses may be helpful to the readers.
• 26. Page 21, 3rd paragraph after the 6th Bullet: It seems that this paragraph is repeating what is said in the immediately preceding paragraph. It can be deleted.
• 27. Reverse of Form T2121: The calculation of the Business-use-of-home-expenses would produce a carry forward of the undeductible 1988 expenses for 1990 application. Paragraph 18(12)(c) allows only one year carry forward.
• 28. Partnership Schedule, Area II, Last Part: Same problem as Comment No. 27.
• 29. CCA Schedule, 3rd Bullet: "1988" should be "1989".