Ezel / IRS Rulings / 201311024

CCA 201311024: CCA distinguishes ocean activity income from transportation income

Number
201311024
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Continental Shelf Areas
Topics
Other topics International
Code sections
§ 638, § 863, § 1213
Ruling dated
October 24, 2012
Publicly released
March 15, 2013
Source
View Official PDF

Apply this to your situation

This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2013, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2013
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel advice addresses the source of income from chartering and moving a vessel. If a day rate covers only moving the vessel from Norway to the Gulf, the income should be characterized as ocean activity income. If the day rate also covers transporting cargo or persons, it should be characterized as transportation income.

Ruling snapshot

  • Question: What did the IRS determine under the cited Code provisions?
  • Outcome: advice.
  • Key authorities: IRC § 638; IRC § 863; IRC § 1213

Full text (IRS public release)

ID: CCA-1024773-12 Number: 201311024
Release Date: 3/15/2013
Office: ------------
UILC: 638.00-00, 863.02-04; 863

From: ------------------
Sent: Wednesday, October 24, 2012 1:09 PM
To: ------------------------------------------------
Cc: -------------------------
Subject: Re: 638/863(c) question

The General Explanation of the Tax Reform Act of 1986 (Pub. Law 99-514, May 4, 1987) explains at page 929, first full paragraph, that "Congress intended that income derived from the lease of a vessel not used to transport cargo or persons for hire be characterized as ocean activity income and be sourced in the country of residence of the person earning the income, as prescribed in section 1213 of the Act, rather than as transportation income." Both bareboat charters and time or voyage charters were treated as "transportation services" under pre-1984 Act rules. While the first sentence of this paragraph refers to "bareboat charter hire," the quoted language refers to the "lease of a vessel" and should apply to both bareboat and time or voyage charters.

If the day rate paid to the vessel operator for moving the vessel from Norway to the Gulf is just for moving the vessel and not for transporting cargo or persons, then under this meaning, it should be characterized as ocean activity income. If the day rate is for transporting cargo or persons as well, it would be transportation income.

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