18 November 1986 Income Tax Severed Letter

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.

Revenue Canada Revenu Canada Taxation Impôt

Head Office Bureau principal

Your file Votre reference Our file Notre reference

Fisheries and Oceans 200 Kent Street Station 1106 Ottawa, Ontario K1A 0E6

P.K. Tang (613) 957-2103

Attention: Mr. Bernard Vézina
           Staff Officer
           Anadromous Fisheries
           Resource Allocation Branch
-------------------------------------

November 18, 1986

Dear Sirs:

This is in reply to your letter of September 17, 1986, concerning the tax treatment of amounts received by Maritime salmon fishermen under the "Voluntary Licence Buy-Back Program." (hereinafter referred to as the "Program").

Our answers, in the order of your questions raised, are as follows:

a) & b) As stated in our previous letter to your Department of May 8, 
        1984, it is our view that the license could be considered 
        as an "eligible capital property" and the relinquishment
        of fishing privileges thereunder would constitute a disposition 
        of such a property. The tax implications of transactions 
        involving eligible capital property in various circumstances
        are discussed in Interpretation Bulletin 
IT-123R4
 (copy enclosed). 
        Any gain arising from relinquishing of a fisherman's fishing 
        privileges would not qualify as "capital gain". Under the 
        provisions of the Income Tax Act (the "Act") when an eligible 
        capital property is sold one-half of the proceeds from the 
        sale must be deducted from the balance of the "cummulative 
        eligible capital account". If the proceeds exceed the account 
        balance the excess must be included in computing the income 
        of the taxpayer. Since this amount is not a "capital gain" 
        it will not qualify for the "capital gain exemptions" introduced 
        by the government recently.

c) In the situation of the $4,000 paid to fishermen in 1985 it seems to us that this amount is offered only to a "1985 commercial salmon fishing license holder" as "compensation for closure of commercial salmon fishery in 1985" regardless of whether or not he accepts the "license buy-back program" in 1986. In our view, this amount is paid to augment the fisherman's loss of revenue for his 1985 year. Accordingly, such amount must be included as income of the fishermen in 1985.

We trust the above will be of assistance to you.

Yours truly,

ORIGINAL SIGNED BY ORIGINAL SIGNÉ PAR D. B. MORPHY

for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch