| July 31, 1989 | |
| VANCOUVER DISTRICT OFFICE | Small Business and |
| Audit Division | General Division |
| Section 144-24 | Bill Guglich |
| (613) 957-2102 | |
| David K. Wong | File No. 7-3898 |
Re: Acquisition of Fishing License Requirement to Reduce Cost by Amount of Government Assistance
This is in reply to your memorandum dated May 5, 1989, requesting we further consider our previous reply dated August 15, 1988.
The issue is whether the taxpayer must deduct the amount of government assistance received in 1983 and 1984 in determining for purposes of paragraph 14(5)(b) of the Act the amount of his eligible capital expenditures.
We have reviewed the documentation you submitted and have further considered our position. Our position remains as expressed in our previous memorandum to you dated August 15, 1988 except for the reference to the application of paragraph 2 of IT-273R.
Paragraph 2 is inapplicable because the comments made in paragraphs 2 through 7 of the Bulletin are intended to refer to amounts which are "income in nature". Eligible capital expenditures are outlays or expenses on account of capital.
23 Consequently, it is now our view that the amount of the government assistance received by your taxpayer in 1983 and 1984 should not be deducted to determine for purposes of paragraph 14(5)(b) of the Act the amount of the eligible capital expenditures. This represents a change in our previous position which was to follow paragraph 2 of IT-273R.
Any government assistance received after May 22, 1985, is required by paragraph 12(1)(x) of the Act to be included in income. However, there is no similar provision respecting government assistance received before May 23, 1985.
We regret any difficulty caused by our earlier memorandum.
for DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch