Principal Issues: [TaxInterpretations translation] In a particular situation, in what capital cost allowance class for purposes of the deduction under paragraph 20(1)(a) would a boat that was converted to carry on a XXXXXXXX business be included?
Position: Class 7
Reasons: In this situation, the boat would fall within the definition of vessel in 13(21).
XXXXXXXXXX 2010-037784 I. Landry, M. Fisc November 25, 2010
Dear Sir,
Subject: Depreciation class for a vessel
This is in response to your letter of August 12, 2010, in which you asked us in which capital cost allowance class for purposes of the deduction under paragraph 20(1)(a) of the Income Tax Act (the "Act") a boat, that was converted to carry on a XXXXXXXXXXXX business, would be included.
In your letter, you indicated, among other things, that the boat's engine would be removed and that the boat would be designated to remain in a port for the carrying on of a XXXXXXXXXXXX business. The boat would not be permanently attached to a foundation, but rather would be anchored and tied to a dock in the harbour. Since the boat would no longer have a motor, it would not be able to move on its own, but it could still be moved if necessary by towing it.
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5, Advance Income Tax Rulings, it is the practice of the Canada Revenue Agency not to issue written opinions on proposed transactions otherwise than by way of advance income tax rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, the determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you.
A boat that qualifies as a "vessel" as defined in subsection 13(21) will generally be included in Class 7 of Schedule II of the Income Tax Regulations (the "Regulations").
Subsection 13(21) defines a vessel to be as defined in the Canada Shipping Act. However, the Canada Shipping Act was repealed in 2001 and replaced by the Canada Shipping Act, 2001. Paragraph 44(h) of the Interpretation Act provides that any reference in an unrepealed enactment to the former enactment shall, with respect to a subsequent transaction, matter or thing, be read and construed as a reference to the provisions of the new enactment relating to the same subject-matter as the former enactment.
The Canada Shipping Act, 2001 now defines a vessel as a boat, ship or craft designed, used or capable of being used solely or partly for navigation in, on, through or immediately above water, without regard to method or lack of propulsion, and includes such a vessel that is under construction. However, that definition excludes a floating object of a prescribed class. To date, no Regulations to that effect have been promulgated.
We are of the view that a boat as described in this request would fall within such definition of vessel and, consequently, would generally be included in Class 7 of Schedule II of the Regulations.
We hope that our comments are of assistance.
Best regards,
Guy Goulet CA, M. Fisc.
for the Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch