16 October 1981 Income Tax Severed Letter ACC8558 - Fishing Vessels — Investment Tax Rate

October 16, 1981

VANCOUVER DISTRICT OFFICE            HEAD OFFICE
Chief of Audit                       Non-Corporate rulings
                                       Division

Bob Brand - Field Audit 144-32 & David Lee, Audit Review 148-12 c-8558

           19(1)

This is in reply to your undated memorandum concerning the investment tax credit rates as applied to fishing vessels.

As we understand, your central question is the rate of investment tax credit to be granted to the owner of a vessel who "fishes" in waters adjacent to a land mass that is a designated region but the fishing vessel has a home port in another area (not designated).

We first wish to comment that the "primary use" test may not have the same weighting when dealing with fishing vessels versus other items that are designed for use on land and could be readily moved between designated and undesignated areas.

We are of the opinion that the location of the location of the "business" of the taxpayer would be one of the major considerations in determining the rate of investment tax credit for the owner of a vessel.

A number of elements would have to be examined to determine this "business location" such as;

1) location of business office (for example, where business contracts are signed.)

2) warehouse facilities for supplies used in the business

3) the location of the residence of the vessel owner

4) the home port of the vessel

5) the location from which the fishermen are hired and paid

6) the location from which the provisions for the vessel are regularly acquired for the trip.

We also refer you to the portion of the Fisherman's Guide dealing with Business Investment Tax Credit (Chapter 10 ) where the example for a fisherman claiming an I.T.C. is based upon the area in which he resides.

It is our view that the place of business in your situation is probably Vancouver if Vancouver is the response to the questions mentioned above. The I.T.C. is for economic stimulus in selected areas and it is obvious that the economic benefits would accrue to the place form which the boat is outfitted and the crew is engaged and where the business affairs of the vessel are carried out.

In summary, we are staying away from using "waters" as a criteria for I.T.C. purposes because of the difficulty of arriving at an appropriate split up of "water" in an area bounded by land with varying rates for I.T.C. purposes. For examples, areas around the mouth of the St. Lawrence River have three rates of I.T. C. It is also our view that it was the land mass and its inhabitants (i.e. designated region) that the Government wished to stimulate and not a body of water.

We note also that your case involves going from a port in an undesignated area to "waters" adjacent to a designated area. It would appear that the taxpayer's position would be different if he had a port in the designated area and fished adjacent to an undesignated area.

for Director Non-Corporate Rulings Division