http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/126403/index.do
Thibeault v. The Queen (November 5, 2015 – 2015 TCC 271, D’Auray J.).
Précis: The taxpayer had a number of business interests including vessels and marine permits which he held personally. In 2008 he leased one vessel and offset the rental income with a large capital cost allowance claim which resulted in a loss for tax purposes. In 2010 he sold one of his permits and against claimed capital cost allowance against the sale proceeds. CRA limited his capital cost allowance pursuant to Regulation 1100(15) to the amount of his rental income. The taxpayer argued that he was engaged in a vessel leasing business in both taxation years with the result that Regulation 1100(15) did not operated to limit his capital cost allowance claims in either year. The Tax Court found that the taxpayer was not engaged in a vessel leasing business in either taxation year and dismissed the appeal with costs.
Decision: In 2008 the taxpayer only leased one vessel and the Court concluded that he was not engaged in a vessel leasing business:
[63] In the instant case, beyond that part of promotion provided personally by the Appellant through the supply of promotional material, all the other activities related to leasing a vessel were handled by the Lessee, Croisière Charlevoix inc. It was responsible for supplying the vessel's crew. It was also responsible for operating the vessel and covering the costs inherent in commercial operation of the vessel, specifically the maintenance costs, docking fees, insurance premiums, as well as the piloting and labour costs. Furthermore, Croisière Charlevoix inc. remained liable for any losses or damage that might result from its commercial operation.
[64] In addition, based on Oke, for a source of revenue to constitute revenue from a business, the services provided by the taxpayer must exceed what is usually provided as part of leasing. In the instant case, the basic accessory services, such as the inherent commercial operating expenses that I mentioned in paragraph 63 of these reasons, were not provided by the Appellant. It is therefore difficult, in my view, to find that the services provided by the Appellant exceeded what is normally provided as part of leasing a vessel.
[65] In any event, I believe that the supply of promotional material is not an activity sufficient for the purposes of subsection 1100(17.3) of the ITR.
[66] In reference to the other activities carried out by the Appellant that were not specified in the Contract, including the distribution of pamphlets, construction of a stand for the Croisière Charlevoix inc. ticket office, landscaping around the stand and selection of a caterer, I find after reviewing all the evidence that these activities are not relevant to the analysis of subsection 1100 (17.3) of the ITR. Those activities were carried out by the Appellant in his capacity as shareholder of Croisière Charlevoix inc. Some of these activities are unrelated to a vessel leasing business. Moreover, the Appellant admitted that those activities were aimed at customers of Croisière Charlevoix inc. It is also interesting to note that when Croisière Charlevoix inc. was sold to Mr. Tremblay in 2010, the website and the stand were sold as property of Croisière Charlevoix inc.
[67] The evidence also shows that the Appellant did not attempt to lease out any of his other vessels. In my opinion, the Appellant therefore cannot successfully claim that he operated a vessel leasing business in 2008.
The Court made the same finding for 2010:
[79] I believe that the Appellant is not entitled to depreciation deductions in the amount of $63,444, for the following reasons.
[80] First, the Appellant cannot claim that he operated a vessel leasing business during the 2010 taxation year. No leasing activity took place in 2010 and no leasing revenue was reported by the Appellant. When the Appellant failed to reach agreement with Mr. Tremblay on the price to lease the vessel Cap Éternité, the Appellant did not attempt to lease it, but instead placed the Cap Éternité in storage shortly after buying it in 2010.
[81] The evidence also reveals that the Appellant did not attempt to lease his other vessels during the 2010 taxation year. Thus, the Appellant did not operate a leasing business in 2010. Moreover, the restriction in subsection 1100(15) of the ITR applies and the CCA must be reduced to nil due to the lack of net leasing revenue for 2010.
[82] We also note from subsection 20(1) of the ITA that the deduction under this subsection must be linked to the revenue source. The Appellant admitted that there was no link between both the permit and the vessels he depreciated and the revenue source, that is, the revenue generated by the sale of the Oursin permit and the Zodiac P 28.
As the result the appeal was dismissed with costs.