Prepared by: Tim Kuss
Date: May 13, 1992
Canadian Tax Foundation
Management Conference
Paragraph 81(1)(c)
Question
Does the exemption in paragraph 81(1)(c) extend to capital gains realized by a corporation from the disposition of a ship used in its international shipping business carried on in Canada, or is this gain subject to tax under Part I pursuant to subparagraphs 115(1)(a)(iii) and 115(1)(b)(ii)?
Department's Position
Paragraph 81(1)(c) exempts from tax, income from the operation of a ship in international traffic. It is our view that "income from the operation of a ship" would not include a capital gain from the disposition of that ship. Whether a particular asset is capital property used by a person in carrying on a business (other than an insurance business) in Canada such that the asset is "taxable Canadian property" by virtue of subparagraph 115(1)(b)(ii) is essentially a question of fact that can only be answered after determination of all relevant facts pertaining to the particular case under consideration.