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: Specified Leasing Property Rules
This is in reply to your letter of March 19, 1993, in which you requested our opinion concerning the interpretation of subsection 1100(1.11) of the Income Tax Regulations (the "regulations") as it pertains to vessels leased on a time-charter basis.
We cannot provide you with the technical interpretation requested because the particular facts and circumstances referred to in your letter appear to relate to a contemplated transaction. As noted in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, when a requested interpretation relates to a contemplated transaction, a taxpayer should request an advance income tax ruling rather than an opinion.
Although we are unable to respond to your request for a technical interpretation, we have set out below some general comments relevant to your concerns.
The determination of whether rent received by the lessor of a vessel constitutes income from a business or a property, depends on a complete analysis of all relevant facts of the particular case. Further, subsection 1100(17.2) of the regulations expands the concept of rent for the purpose of the specified leasing property rules.
However, where a corporation derives revenue from the leasing of a vessel on a "time-charter" basis (ie: the owner provides all services including fuel, captain, crew, provisions, etc. necessary to operate the vessel), such revenue would not normally be regarded as rent, royalty or leasing revenue. Accordingly, if in a particular taxation year the vessel is used more than 50% of the time on time-charters, the vessel would not be a specified leasing property.
In accordance with paragraph 21 of the Information Circular 70-6R2 the above comments are not advance rulings and are not binding on the Department.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate
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