22 February 1994 External T.I. 9400345 - SELF EMPLOYED NATIVE FISHERMEN

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

									February 22, 1994

	Enquiries & Adjustments				Head Office
	Client Services					Rulings Directorate
	Winnipeg Taxation Centre				L. Holloway
(613) 957-8953

Attention: Lynn Prosak

									940034

Self-Employed Native Fishermen

This is in reply to your memorandum, received in this office January 7, 1994, concerning adjustments to prior year returns requested by self-employed status Indian fishermen. In particular you had stated that if it was determined that the fishing income was exempt, you would then "assume the expenses claimed against this income should be disallowed (ie.- not laid out to earn income ITA s.18)".

The Indian Income Tax Remission Order (P.C. 1993-523 16 March, 1993) grants a remission of taxes, interest and penalties on certain employment income, but does not cover self-employment income. In determining whether self-employment income is exempt, one must look at the permanent establishment of the business as discussed in IT-62.

Paragraph 18(1)(c) prohibits the deduction of outlays or expenses to the extent that they "may reasonably be regarded as having been made or incurred for the purpose of gaining or producing exempt income...". Accordingly, in cases where the fishing income is determined to be exempt, any expenses claimed against this income would be disallowed. Where a loss originally created by the deduction of these expenses is disallowed a debit adjustment would be required. The required adjustment would be subject to any applicable interest charges.

Your memorandum also requested some clarification with respect to fishing income earned by Status Indians. In response to your concerns we have enclosed a copy of our recent response to Gino Nasato of the Victoria District Office, which provides two scenarios as well as some general comments on the taxability of this type of income.

R. Albert
A/Section Chief
Business, Property Income & Exempt Organizations
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch