28 April 1993 External T.I. 9300225 F - Capital Cost Allowance - Vessel

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.

XXXXXXXXXX 

Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Accelerated Rate of Capital Cost Allowance for Vessels

This is in reply to your Fax of January 6, 1993 outlining your plans to manufacture houseboat barges for resale and lease-back rentals (Plans and other material were not received with your Fax). You ask whether the houseboat barges will qualify for capital cost allowances under subsection 1101(2a) of the Income Tax Regulations. You indicate that although the barges can be powered, their primary purpose is to be moored permanently or towed from one location to another.

It appears that the interpretation you seek relates to a proposed transaction to be undertaken in the near future, therefore, we bring to your attention Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada, Taxation (a copy is enclosed for your information). Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling with respect to specific transactions which are contemplated, a written request for an advance income tax ruling can be submitted in accordance with the enclosed Information Circular.

Nevertheless, we can offer the following general comments.

Our Comments:

Regulation 1101(2a) presently reads as follows:

(2)a)      A separate class is hereby prescribed for each vessel of a taxpayer, including the furniture, fittings, radiocommunication equipment and other equipment attached thereto, in respect of which the Minister of Industry, Trade and Commerce certifies that the vessel

(a)     was constructed in Canada;

(b)     is registered in Canada; and

(c)     had not been used for any purpose whatever before it was acquired by the taxpayer.

For Canadian vessels acquired after July 13, 1990 the draft regulation drops the reference to certification by the Minister of Industry, Trade and Commerce, however, the other conditions apply. Paragraph 1100(1)(v) of the Regulations provides for an accelerated rate of capital cost allowance for vessels as described in subsection 1101(2a) of the Regulations. The definition of vessel in paragraph 13(21)(g) of the Income Tax Act refers to a definition in the Canada Shipping Act which definition describes a vessel as including any ship or boat or any other description of vessel used or designed to be used in navigation.

A barge which will float and will be capable of being relocated by towing, but which will be designed to be primarily moored in one location, would not be used in navigation and therefore would not fit the definition of vessel. Although such a barge may be constructed in Canada, may be registered in Canada and may not have been used previously, it will not be described in Regulation 1101(2a). We refer you to the enclosed copy of Income Tax Ruling ATR-52, which concerns the same point.

We trust our comments will be of assistance to you.

Yours truly,

E. Wheeler for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch