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.
ISSUE SHEET
SALMON FISHING LICENSE BUY-BACK PROGRAM
Issue
Payments for the buy-back of Salmon Fishing Licenses are included in taxable income as eligible capital to the recipients. By reason of the capital gains deduction, there is generally no income tax consequence. However, the income inclusion of the eligible capital amount reduces or eliminates the recipient's entitlement to the GIS.
Response
COMPENSATION PAID TO CANADIAN FISHERMEN FOR THE SURRENDER OF A GOVERNMENT ISSUED SALMON FISHING LICENCE IS TREATED AS A DISPOSITION OF ELIGIBLE CAPITAL PROPERTY. ANY GAIN FROM SUCH DISPOSITION IS ELIGIBLE FOR THE CAPITAL GAINS DEDUCTION.
Background
A draft memorandum from the Deputy Minister, Health and Welfare Canada to the Minister of Health and Welfare was received in the Rulings Directorate on December 4, 1992. The author answers the question as to whether there were any precedents for the Minister of Health and Welfare issuing a "directive" to exclude compensation for the buy-back of Salmon Fishing Licences from the fishermen's income for purposes of calculating the GIS. This was being considered because, although the capital gains deduction eliminates any income tax with respect to the license buy-back in most cases, it does not reduce the income inclusion's impact on eligibility for the GIS.
This is consistent with other license buy-back programs, including that proposed as part of the Northern Cod Moratorium. An exception did occur in the late 1970's, when grants received to cancel lobster fishing licenses were considered to have no tax consequences. This was in error and it was corrected in 1983 by deleting any reference to the lobster license cancellation program from that year's Fisherman's Income Tax Guide.
The author of the draft memorandum noted that payments to lobster fishermen for the surrender of their lobster licences in the late 1970's were apparently excluded from income reporting. This exclusion resulted from a decision by Revenue Canada, Taxation not to include such payments in income and not from any Ministerial directive from Health and Welfare Canada. For Further Information: Approved by ADM
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