Marginal note:Successor of Canadian exploration and development expenses
66.7 (1) Subject to subsections 66.7(6) and 66.7(7), where after 1971 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of
(a) the Canadian exploration and development expenses incurred by the original owner before the original owner disposed of the particular property to the extent that those expenses were not otherwise deducted in computing the income of the successor for the year, were not deducted in computing the income of the successor for a preceding taxation year and were not deductible under subsection 66(1) or deducted under subsection 66(2) or 66(3) by the original owner, or deducted by any predecessor owner of the particular property, in computing income for any taxation year, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that may reasonably be regarded as attributable to
(A) the amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to — or, for civil law, any right in or to — the particular property to the extent that the proceeds of the disposition have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (3)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,
(B) its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property, or
(C) production from the particular property,
computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5,
exceeds the total of
(ii) all other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(3), 66.7(4) and 66.7(5) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(1)(b)(i) in respect of the particular property, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(1)(b)(i).
Marginal note:Successor of foreign exploration and development expenses
(2) Subject to subsections 66.7(6) and 66.7(8), where after 1971 a corporation (in this subsection referred to as the “successor”) acquired a particular foreign resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of
(a) the amount, if any, by which
(i) the foreign exploration and development expenses incurred by the original owner before the original owner disposed of the particular property to the extent that those expenses were incurred when the original owner was resident in Canada, were not otherwise deducted in computing the successor’s income for the year, were not deducted in computing the successor’s income for a preceding taxation year and were not deductible by the original owner, nor deducted by any predecessor owner of the particular property, in computing income for any taxation year
exceeds
(ii) the total of all amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, and
(b) the amount, if any, by which the total of
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to
(A) the amount included under subsection 59(1) in computing its income for the year that can reasonably be regarded as attributable to the disposition by it of any interest in or right to — or, for civil law, any right in or to — the particular property, or
(B) production from the particular property,
computed as if no deduction were allowed under sections 65 to 66.5 and this section, and
(ii) the lesser of
(A) the total of all amounts each of which is the amount designated by the successor for the year in respect of a Canadian resource property owned by the original owner immediately before being acquired with the particular property by the successor or a predecessor owner of the particular property, not exceeding the amount included in the successor’s income for the year, computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, that can reasonably be regarded as being attributable to the production after 1988 from the Canadian resource property, and
(B) the amount, if any, by which 10% of the amount described in paragraph 66.7(2)(a) for the year in respect of the original owner exceeds the total of all amounts each of which would, but for this subparagraph, clause 66.7(2)(b)(iii)(B) and subparagraph 66.7(10)(h)(vi), be determined under this paragraph for the year in respect of the particular property or other foreign resource property owned by the original owner immediately before being acquired with the particular property by the successor or a predecessor owner of the particular property
exceeds the total of
(iii) all other amounts deducted under this subsection for the year that can reasonably be regarded as attributable to
(A) the part of its income for the year described in subparagraph 66.7(2)(b)(i) in respect of the particular property, or
(B) a part of its income for the year described in clause 66.7(2)(b)(ii)(A) in respect of which an amount is designated by the successor under clause 66.7(2)(b)(ii)(A), and
(iv) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(2)(b)(i),
and income in respect of which an amount is designated under clause 66.7(2)(b)(ii)(A) shall, for the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses 66.7(1)(b)(i)(C), 66.7(3)(b)(i)(C), 66.7(4)(b)(i)(B) and 66.7(5)(b)(i)(B) and subparagraph 66.7(10)(g)(iii), be deemed not to be attributable to production from a Canadian resource property.
Marginal note:Country-by-country successor FEDE allocations
(2.1) For greater certainty, the portion of an amount deducted under subsection (2) in computing a taxpayer’s income for a taxation year that can reasonably be considered to be in respect of specified foreign exploration and development expenses of the taxpayer in respect of a country is considered to apply to a source in that country.
Marginal note:Method of allocation
(2.2) For the purpose of subsection (2.1), where a taxpayer has incurred specified foreign exploration and development expenses in respect of two or more countries, an allocation to each of those countries for a taxation year shall be determined in a manner that is
(a) reasonable having regard to all the circumstances, including the level and timing of
(i) the taxpayer’s specified foreign exploration and development expenses in respect of the country, and
(ii) the profits or gains to which those expenses relate; and
(b) not inconsistent with the allocation made under subsection (2.1) for the preceding taxation year.
Marginal note:Successor of foreign resource expenses
(2.3) Subject to subsections (6) and (8), where a corporation (in this subsection referred to as the “successor”) acquired a particular foreign resource property in respect of a country (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of
(a) 30% of the amount, if any, by which
(i) the cumulative foreign resource expense, in respect of the country, of the original owner determined immediately after the disposition of the particular property by the original owner to the extent that it has not been
(A) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,
(B) otherwise deducted in computing the income of the successor for the year, or
(C) deducted by the successor in computing its income for any preceding taxation year
exceeds the total of
(ii) all amounts each of which is an amount (other than any portion of the amount that can reasonably be considered to result in a reduction of the amount otherwise determined under this paragraph in respect of another original owner of a relevant resource property who is not a predecessor owner of a relevant resource property or who became a predecessor owner of a relevant resource property before the original owner became a predecessor owner of a relevant resource property) that became receivable by a predecessor owner of the particular property, or by the successor in the year or a preceding taxation year, and that
(A) was included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative foreign resource expense in subsection 66.21(1) at the end of the year, and
(B) can reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant resource property”) that is
(I) the particular property, or
(II) another foreign resource property in respect of the country that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property, and
(iii) all amounts each of which is an amount by which the amount described in this paragraph is required by reason of subsection 80(8) to be reduced at or before the end of the year, and
(b) the amount, if any, by which the total of
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to production from the particular property, computed as if no deduction were permitted under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, except that, where the successor acquired the particular property from the original owner at any time in the year (otherwise than by way of an amalgamation or merger or solely by reason of the application of paragraph (10)(c)) and did not deal with the original owner at arm’s length at that time, the amount determined under this subparagraph is deemed to be nil, and
(ii) unless the amount determined under subparagraph (i) is nil by reason of the exception provided under that subparagraph, the lesser of
(A) the total of all amounts each of which is the amount designated by the successor for the year in respect of a Canadian resource property owned by the original owner immediately before being acquired with the particular property by the successor or a predecessor owner of the particular property, not exceeding the amount included in the successor’s income for the year, computed as if no deduction were permitted under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, that can reasonably be regarded as being attributable to the production from the Canadian resource property, and
(B) the amount, if any, by which 10% of the amount described in paragraph (a) for the year, in respect of the original owner, exceeds the total of all amounts each of which would, but for this subparagraph, clause (2)(b)(iii)(B) and subparagraph (10)(h)(vi), be determined under this paragraph for the year in respect of the particular property or other foreign resource property, in respect of the country, owned by the original owner immediately before being acquired with the particular property by the successor or by a predecessor owner of the particular property
exceeds the total of
(iii) all other amounts each of which is an amount deducted for the year under this subsection or subsection (2) that can reasonably be regarded as attributable to
(A) the part of its income for the year described in subparagraph (i) in respect of the particular property, or
(B) a part of its income for the year described in clause (ii)(A) in respect of which an amount is designated by the successor under clause (ii)(A), and
(iv) all amounts added by reason of subsection 80(13) in computing the amount determined under subparagraph (i),
and income in respect of which an amount is designated under clause (b)(ii)(A) is, for the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses (1)(b)(i)(C), (3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) and subparagraph (10)(g)(iii), deemed not to be attributable to production from a Canadian resource property.
Marginal note:Successor of Canadian exploration expense
(3) Subject to subsections 66.7(6) and 66.7(7), where after May 6, 1974 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of
(a) the amount, if any, by which
(i) the total of
(A) the cumulative Canadian exploration expense of the original owner determined immediately after the disposition of the particular property by the original owner, and
(B) all amounts required to be added under paragraph 66.7(9)(f) to the cumulative Canadian exploration expense of the original owner in respect of a predecessor owner of the particular property, or the successor, as the case may be, at any time after the disposition of the particular property by the original owner and before the end of the year,
to the extent that an amount in respect of that total was not
(C) deducted or required to be deducted under subsection 66.1(2) or 66.1(3) by the original owner or deducted by any predecessor owner of the particular property in computing income for any taxation year,
(D) otherwise deducted in computing the successor’s income for the year,
(E) deducted in computing the successor’s income for a preceding taxation year, or
(F) designated by the original owner pursuant to subsection 66(14.1) for any taxation year,
exceeds
(ii) the total of all amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that may reasonably be regarded as attributable to
(A) the amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as being attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to — or, for civil law, any right in or to — the particular property to the extent that the proceeds have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (1)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,
(B) its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property, or
(C) production from the particular property,
computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5,
exceeds the total of
(ii) all other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(1), 66.7(4) and 66.7(5) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(3)(b)(i) in respect of the particular property, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(3)(b)(i).
Marginal note:Successor of Canadian development expense
(4) Subject to subsections 66.7(6) and 66.7(7), where after May 6, 1974 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of
(a) 30% of the amount, if any, by which
(i) the amount, if any, by which
(A) the cumulative Canadian development expense of the original owner determined immediately after the disposition of the particular property by the original owner to the extent that it has not been
(I) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,
(I.1) otherwise deducted in computing the income of the successor for the year,
(II) deducted by the successor in computing its income for any preceding taxation year, or
(III) designated by the original owner pursuant to subsection 66(14.2) for any taxation year,
(B) any amount required to be deducted under paragraph (9)(e) from the cumulative Canadian development expense of the original owner in respect of a predecessor owner of the particular property or the successor, as the case may be, at any time after the disposition of the particular property by the original owner and before the end of the year,
exceeds the total of
(ii) all amounts each of which is an amount (other than any portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under this paragraph in respect of another original owner of a relevant mining property who is not a predecessor owner of a relevant mining property or who became a predecessor owner of a relevant mining property before the original owner became a predecessor owner of a relevant mining property) that became receivable by a predecessor owner of the particular property or the successor in the year or a preceding taxation year and that
(A) was included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative Canadian development expense in subsection 66.2(5) at the end of the year, and
(B) can reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant mining property”) that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property,
(iii) all amounts each of which is an amount (other than any portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under paragraph 66.7(5)(a) in respect of the original owner or under this paragraph or paragraph 66.7(5)(a) in respect of another original owner of a relevant oil and gas property who is not a predecessor owner of a relevant oil and gas property or who became a predecessor owner of a relevant oil and gas property before the original owner became a predecessor owner of a relevant oil and gas property) that became receivable by a predecessor owner of the particular property or the successor after 1992 and in the year or a preceding taxation year and that
(A) is designated in respect of the original owner by the predecessor owner or the successor, as the case may be, in prescribed form filed with the Minister within 6 months after the end of the taxation year in which the amount became receivable,
(B) was included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) at the end of the year, and
(C) can reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant oil and gas property”) that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property, and
(iv) all amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to
(A) its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or
(B) production from the particular property,
computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, except that, where the successor acquired the particular property from the original owner at any time in the year (otherwise than by way of an amalgamation or merger or solely because of the application of paragraph 66.7(10)(c)) and did not deal with the original owner at arm’s length at that time, the amount determined under this subparagraph shall be deemed to be nil,
exceeds the total of
(ii) all other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(1), 66.7(3) and 66.7(5) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(4)(b)(i) in respect of the particular property, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(4)(b)(i).
Marginal note:Successor of Canadian oil and gas property expense
(5) Subject to subsections 66.7(6) and 66.7(7), where after December 11, 1979 a corporation (in this subsection referred to as the “successor”) acquired a particular Canadian resource property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of
(a) 10% of the amount, if any, by which
(i) the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition of the particular property by the original owner to the extent it has not been
(A) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,
(A.1) otherwise deducted in computing the income of the successor for the year, or
(B) deducted by the successor in computing its income for any preceding taxation year
exceeds the total of
(ii) the total of all amounts each of which is an amount (other than any portion thereof that can reasonably be considered to result in a reduction of the amount otherwise determined under this paragraph or paragraph 66.7(4)(a) in respect of another original owner of a relevant oil and gas property who is not a predecessor owner of a relevant oil and gas property or who became a predecessor owner of a relevant oil and gas property before the original owner became a predecessor owner of a relevant oil and gas property) that became receivable by a predecessor owner of the particular property or the successor in the year or a preceding taxation year and that
(A) was included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) at the end of the year, and
(B) can reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant oil and gas property”) that is the particular property or another Canadian resource property that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property, and
(iii) the total of all amounts each of which is an amount by which the amount described in this paragraph is required because of subsection 80(8) to be reduced at or before the end of the year, and
(b) the amount, if any, by which
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to
(A) its reserve amount for the year in respect of the original owner and each predecessor owner of the particular property, or
(B) production from the particular property,
computed as if no deduction were allowed under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, except that, where the successor acquired the particular property from the original owner at any time in the year (otherwise than by way of an amalgamation or merger or solely because of the application of paragraph 66.7(10)(c)) and did not deal with the original owner at arm’s length at that time, the amount determined under this subparagraph shall be deemed to be nil,
exceeds the total of
(ii) all other amounts deducted under subsection 29(25) of the Income Tax Application Rules, this subsection and subsections 66.7(1), 66.7(3) and 66.7(4) for the year that can reasonably be regarded as attributable to the part of its income for the year described in subparagraph 66.7(5)(b)(i) in respect of the particular property, and
(iii) all amounts added because of subsection 80(13) in computing the amount determined under subparagraph 66.7(5)(b)(i).
Marginal note:Where s. 29(25) of ITAR and ss. (1) to (5) do not apply
(6) Subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) to 66.7(5) do not apply
(a) in respect of a Canadian resource property or a foreign resource property acquired by way of an amalgamation to which subsection 87(1.2) applies or a winding-up to which subsection 88(1.5) applies; or
(b) to permit, in respect of the acquisition by a corporation before February 18, 1987 of a Canadian resource property or a foreign resource property, a deduction by the corporation of an amount that the corporation would not have been entitled to deduct under section 29 of the Income Tax Application Rules or section 66, 66.1, 66.2 or 66.4 if those sections, as they read in their application to taxation years ending before February 18, 1987, applied to taxation years ending after February 17, 1987.
Marginal note:Application of s. 29(25) of ITAR and ss. (1), (3), (4) and (5)
(7) Subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1), 66.7(3), 66.7(4) and 66.7(5) apply only to a corporation that has acquired a particular Canadian resource property
(a) where it acquired the particular property in a taxation year commencing before 1985 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the property used by the person from whom it acquired the particular property in carrying on in Canada such of the businesses described in paragraphs (a) to (g) of the definition principal-business corporation in subsection 66(15) as were carried on by the person;
(b) where it acquired the particular property in a taxation year commencing after 1984 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the Canadian resource properties of the person from whom it acquired the particular property;
(c) where it acquired the particular property after June 5, 1987 by way of an amalgamation or winding-up and it has filed an election in prescribed form with the Minister on or before the day on or before which the corporation is required to file a return of income pursuant to section 150 for its taxation year in which it acquired the particular property;
(d) where it acquired the particular property after November 16, 1978 and in a taxation year ending before February 18, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property, have filed with the Minister a joint election under and in accordance with any of subsection 29(25) of the Income Tax Application Rules, subsection 29(29) of the Income Tax Application Rules, 1971, Part III of chapter 63 of the Statutes of Canada, 1970-71-72, and subsections 66(6) and (7), 66.1(4) and (5), 66.2(3) and (4) and 66.4(3) and (4) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as all of those subsections read in their application to that year; and
(e) where it acquired the particular property in a taxation year ending after February 17, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed a joint election in prescribed form with the Minister on or before the earlier of the days on or before which either of them is required to file a return of income pursuant to section 150 for its or the person’s taxation year in which the corporation acquired the particular property.
Marginal note:Application of subsections (2) and (2.3)
(8) Subsections (2) and (2.3) apply only to a corporation that has acquired a particular foreign resource property
(a) where it acquired the particular property in a taxation year commencing before 1985 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the property used by the person from whom it acquired the particular property in carrying on outside Canada such of the businesses described in paragraphs (a) to (g) of the definition principal-business corporation in subsection 66(15) as were carried on by that person;
(b) where it acquired the particular property in a taxation year commencing after 1984 and, at the time it acquired the particular property, the corporation acquired all or substantially all of the foreign resource properties of the person from whom it acquired the particular property;
(c) where it acquired the particular property after June 5, 1987 by way of an amalgamation or winding-up and it has filed an election in prescribed form with the Minister on or before the day on or before which the corporation is required to file a return of income pursuant to section 150 for its taxation year in which it acquired the particular property;
(d) where it acquired the particular property after November 16, 1978 and in a taxation year ending before February 18, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property, have filed with the Minister a joint election under and in accordance with subsection 66(6) or 66(7) (as modified by subsections 66(8) and 66(9), respectively) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as those subsections read in their application to that year; and
(e) where it acquired the particular property in a taxation year ending after February 17, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed a joint election in prescribed form with the Minister on or before the earlier of the days on or before which either of them is required to file a return of income pursuant to section 150 for its or the person’s taxation year in which the corporation acquired the particular property.
Marginal note:Canadian development expense becoming Canadian exploration expense
(9) Where
(a) a corporation acquires a Canadian resource property,
(b) subsection 66.7(4) applies in respect of the acquisition, and
(c) the cumulative Canadian development expense of an original owner of the property determined under clause 66.7(4)(a)(i)(A) in respect of the corporation includes a Canadian development expense incurred by the original owner in respect of an oil or gas well that would, but for this subsection, be deemed by subsection 66.1(9) to be a Canadian exploration expense incurred in respect of the well by the original owner at any particular time after the acquisition by the corporation and before it disposed of the property,
the following rules apply:
(d) subsection 66.1(9) does not apply in respect of the Canadian development expense incurred in respect of the well by the original owner,
(e) an amount equal to the lesser of
(i) the amount that would be deemed by subsection 66.1(9) to be a Canadian exploration expense incurred in respect of the well by the original owner at the particular time if that subsection applied in respect of the expense, and
(ii) the cumulative Canadian development expense of the original owner as determined under clause 66.7(4)(a)(i)(A) in respect of the corporation immediately before the particular time
shall be deducted at the particular time from the cumulative Canadian development expense of the original owner in respect of the corporation for the purposes of subparagraph 66.7(4)(a)(i), and
(f) the amount required by paragraph 66.7(9)(e) to be deducted shall be added at the particular time to the cumulative Canadian exploration expense of the original owner in respect of the corporation for the purpose of paragraph 66.7(3)(a).
Marginal note:Change of control
(10) Where at any time after November 12, 1981
(a) control of a corporation has been acquired by a person or group of persons, or
(b) a corporation ceased on or before April 26, 1995 to be exempt from tax under this Part on its taxable income,
for the purposes of the provisions of the Income Tax Application Rules and this Act (other than subsections 66(12.6), (12.601), (12.602), (12.62) and (12.71)) relating to deductions in respect of drilling and exploration expenses, prospecting, exploration and development expenses, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) incurred by the corporation before that time, the following rules apply:
(c) the corporation shall be deemed after that time to be a successor (within the meaning assigned by subsection 29(25) of the Income Tax Application Rules or any of subsections 66.7(1) to 66.7(5)) that had, at that time, acquired all the properties owned by the corporation immediately before that time from an original owner thereof,
(c.1) where the corporation did not own a foreign resource property immediately before that time, the corporation is deemed to have owned a foreign resource property immediately before that time,
(d) a joint election shall be deemed to have been filed in accordance with subsections 66.7(7) and 66.7(8) in respect of the acquisition,
(e) the resource expenses incurred by the corporation before that time shall be deemed to have been incurred by an original owner of the properties and not by the corporation,
(f) the original owner is deemed to have been resident in Canada before that time while the corporation was resident in Canada,
(g) where the corporation (in this paragraph referred to as the “transferee”) was, immediately before and at that time,
(i) a parent corporation (within the meaning assigned by subsection 87(1.4)), or
(ii) a subsidiary wholly-owned corporation (within the meaning assigned by subsection 87(1.4))
of a particular corporation (in this paragraph referred to as the “transferor”), if both corporations agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under this Part of the transferor for that year, the transferor may, if throughout that year the transferee was such a parent corporation or subsidiary wholly-owned corporation of the transferor, designate in favour of the transferee, in respect of that year, for the purpose of making a deduction under subsection 29(25) of the Income Tax Application Rules or this section in respect of resource expenses incurred by the transferee before that time and when it was such a parent corporation or subsidiary wholly-owned corporation of the transferor, an amount not exceeding such portion of the amount that would be its income for the year, if no deductions were allowed under any of section 29 of the Income Tax Application Rules, this section and sections 65 to 66.5, that may reasonably be regarded as being attributable to
(iii) the production from Canadian resource properties owned by the transferor immediately before that time, and
(iv) the disposition in the year of any Canadian resource properties owned by the transferor immediately before that time,
to the extent that the portion of the amount so designated is not designated under this paragraph in favour of any other taxpayer, and the amount so designated shall be deemed, for the purposes of determining the amount under paragraph 29(25)(d) of the Income Tax Application Rules and paragraphs 66.7(1)(b), 66.7(3)(b), 66.7(4)(b) and 66.7(5)(b),
(v) to be income from the sources described in subparagraph 66.7(10)(g)(iii) or 66.7(10)(g)(iv), as the case may be, of the transferee for its taxation year in which that taxation year of the transferor ends, and
(vi) not to be income from the sources described in subparagraph 66.7(10)(g)(iii) or 66.7(10)(g)(iv), as the case may be, of the transferor for that year,
(h) where the corporation (in this paragraph referred to as the “transferee”) was, immediately before and at that time,
(i) a parent corporation (within the meaning assigned by subsection 87(1.4)), or
(ii) a subsidiary wholly-owned corporation (within the meaning assigned by subsection 87(1.4))
of a particular corporation (in this paragraph referred to as the “transferor”), if both corporations agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under this Part of the transferor for that year, the transferor may, if throughout that year the transferee was such a parent corporation or subsidiary wholly-owned corporation of the transferor, designate in favour of the transferee, in respect of that year, for the purpose of making a deduction under this section in respect of resource expenses incurred by the transferee before that time and when it was such a parent corporation or subsidiary wholly-owned corporation of the transferor, an amount not exceeding such portion of the amount that would be its income for the year, if no deductions were allowed under this section and sections 65 to 66.5, that may reasonably be regarded as being attributable to
(iii) the production from foreign resource properties owned by the transferor immediately before that time, and
(iv) the disposition of any foreign resource properties owned by the transferor immediately before that time,
to the extent that the portion of the amount so designated is not designated under this paragraph in favour of any other taxpayer, and the amount so designated shall be deemed,
(v) for the purposes of determining the amounts under paragraphs (2)(b) and (2.3)(b), to be income from the sources described in subparagraph (iii) or (iv), as the case may be, of the transferee for its taxation year in which that taxation year of the transferor ends, and
(vi) for the purposes of determining the amounts under paragraphs (2)(b) and (2.3)(b), not to be income from the sources described in subparagraph (iii) or (iv), as the case may be, of the transferor for that year,
(i) where, immediately before and at that time, the corporation (in this paragraph referred to as the “transferee”) and another corporation (in this paragraph referred to as the “transferor”) were both subsidiary wholly-owned corporations (within the meaning assigned by subsection 87(1.4)) of a particular parent corporation (within the meaning assigned by subsection 87(1.4)), if the transferee and the transferor agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under this Part of the transferor for that year, paragraph 66.7(10)(g) or 66.7(10)(h), or both, as the agreement provides, shall apply for that year to the transferee and transferor as though one were the parent corporation (within the meaning of subsection 87(1.4)) of the other, and
(j) where that time is after January 15, 1987 and at that time the corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property at that time
(i) for the purpose of paragraph 66.7(10)(c), the corporation shall be deemed to have owned immediately before that time that portion of the property owned by the partnership at that time that is equal to its percentage share of the total of amounts that would be paid to all members of the partnership if it were wound up at that time, and
(ii) for the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses (1)(b)(i)(C) and (2)(b)(i)(B), subparagraph (2.3)(b)(i) and clauses (3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) for a taxation year ending after that time, the lesser of
(A) its share of the part of the income of the partnership for the fiscal period of the partnership ending in the year that may reasonably be regarded as being attributable to the production from the property, and
(B) an amount that would be determined under clause 66.7(10)(j)(ii)(A) for the year if its share of the income of the partnership for the fiscal period of the partnership ending in the year were determined on the basis of the percentage share referred to in subparagraph 66.7(10)(j)(i),
shall be deemed to be income of the corporation for the year that may reasonably be attributable to production from the property.
Marginal note:Amalgamation — partnership property
(10.1) For the purposes of subsections (1) to (5) and the definition original owner in subsection 66(15), if at any particular time there has been an amalgamation within the meaning assigned by subsection 87(1), other than an amalgamation to which subsection 87(1.2) applies, of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) to form one corporate entity (referred to in this subsection as the “new corporation”) and immediately before the particular time a predecessor corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property,
(a) the predecessor corporation is deemed
(i) to have owned, immediately before the particular time, that portion of each Canadian resource property and of each foreign resource property owned by the partnership at the particular time that is equal to the predecessor corporation’s percentage share of the total of the amounts that would be paid to all members of the partnership if the partnership were wound up immediately before the particular time, and
(ii) to have disposed of those portions to the new corporation at the particular time;
(b) the new corporation is deemed to have, by way of the amalgamation, acquired those portions at the particular time; and
(c) the income of the new corporation for a taxation year that ends after the particular time that can reasonably be attributable to production from those properties is deemed to be the lesser of
(i) the new corporation’s share of the part of the income of the partnership for fiscal periods of the partnership that end in the year that can reasonably be regarded as being attributable to production from those properties, and
(ii) the amount that would be determined under subparagraph (i) for the year if the new corporation’s share of the income of the partnership for the fiscal periods of the partnership that end in the year were determined on the basis of the percentage share referred to in paragraph (a).
Marginal note:Idem
(11) Where, at any time,
(a) control of a taxpayer that is a corporation has been acquired by a person or group of persons, or
(b) a taxpayer has disposed of all or substantially all of the taxpayer’s Canadian resource properties or foreign resource properties,
and, before that time, the taxpayer or a partnership of which the taxpayer was a member acquired a property that is a Canadian resource property, a foreign resource property or an interest in a partnership and it may reasonably be considered that one of the main purposes of the acquisition was to avoid any limitation provided in subsection 29(25) of the Income Tax Application Rules or any of subsections 66.7(1) to 66.7(5) on the deduction in respect of any expenses incurred by the taxpayer or a corporation referred to as a transferee in paragraph 66.7(10)(g) or 66.7(10)(h), the taxpayer or the partnership, as the case may be, shall be deemed, for the purposes of applying those subsections to or in respect of the taxpayer, not to have acquired the property.
Marginal note:Reduction of Canadian resource expenses
(12) Where in a taxation year an owner of Canadian resource properties disposes of all or substantially all of the original owner’s Canadian resource properties to a particular corporation in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), 66.7(3), 66.7(4) or 66.7(5) applies,
(a) the Canadian exploration and development expenses incurred by the original owner before that owner so disposed of the properties shall, for the purposes of this Subdivision, be deemed after the disposition not to have been incurred by the original owner except for the purposes of making a deduction under subsection 66(1) or 66(2) for the year and of determining the amount that may be deducted under subsection 66.7(1) by the particular corporation or by any other corporation that subsequently acquires any of the properties;
(b) in determining the cumulative Canadian exploration expense of the original owner at any time after the time referred to in subparagraph 66.7(3)(a)(i), there shall be deducted the amount thereof determined immediately after the disposition;
(b.1) for the purposes of paragraph 66.7(3)(a), the cumulative Canadian exploration expenses of the original owner determined immediately after the disposition that was deducted or required to be deducted under subsection 66.1(2) or 66.1(3) in computing the original owner’s income for the year shall be deemed to be equal to the lesser of
(i) the amount deducted under paragraph 66.7(12)(b) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under paragraph 66.7(12.1)(a) in respect of the original owner for the year
exceeds
(B) the total of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner before the disposition and in the year;
(b.2) for greater certainty, any amount (other than the amount determined under paragraph 66.7(12)(b.1)) that was deducted or required to be deducted under subsection 66.1(2) or 66.1(3) by the original owner for the year or a subsequent taxation year shall, for the purposes of paragraph 66.7(3)(a), be deemed not to be in respect of the cumulative Canadian exploration expense of the original owner determined immediately after the disposition;
(c) in determining the cumulative Canadian development expense of the original owner at any time after the time referred to in clause 66.7(4)(a)(i)(A), there shall be deducted the amount thereof determined immediately after the disposition;
(c.1) for the purpose of paragraph 66.7(4)(a), the cumulative Canadian development expense of the original owner determined immediately after the disposition that was deducted under subsection 66.2(2) in computing the original owner’s income for the year shall be deemed to be equal to the lesser of
(i) the amount deducted under paragraph 66.7(12)(c) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under paragraph 66.7(12.1)(b) in respect of the original owner for the year
exceeds
(B) the total of all amounts determined under this paragraph in respect of any dispositions made by the original owner before the disposition and in the year;
(c.2) for greater certainty, any amount (other than the amount determined under paragraph 66.7(12)(c.1)) that was deducted under subsection 66.2(2) by the original owner for the year or a subsequent taxation year shall, for the purpose of paragraph 66.7(4)(a), be deemed not to be in respect of the cumulative Canadian development expense of the original owner determined immediately after the disposition;
(d) in determining the cumulative Canadian oil and gas property expense of the original owner at any time after the time referred to in subparagraph 66.7(5)(a)(i), there shall be deducted the amount thereof determined immediately after the disposition;
(d.1) for the purpose of paragraph 66.7(5)(a), the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition that was deducted under subsection 66.4(2) in computing the original owner’s income for the year shall be deemed to be equal to the lesser of
(i) the amount deducted under paragraph 66.7(12)(d) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under paragraph 66.7(12.1)(c) in respect of the original owner for the year
exceeds
(B) the total of all amounts determined under this paragraph in respect of any dispositions made by the original owner before the disposition and in the year;
(d.2) for greater certainty, any amount (other than the amount determined under paragraph 66.7(12)(d.1)) that was deducted under subsection 66.4(2) by the original owner for the year or a subsequent taxation year shall, for the purpose of paragraph 66.7(5)(a), be deemed not to be in respect of the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition; and
(e) the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the original owner before 1972 on or in respect of exploring or drilling for petroleum or natural gas in Canada and the prospecting, exploration and development expenses incurred by the original owner before 1972 in searching for minerals in Canada shall, for the purposes of section 29 of the Income Tax Application Rules, be deemed after the disposition not to have been incurred by the original owner except for the purposes of making a deduction under that section for the year and of determining the amount that may be deducted under subsection 29(25) of that Act by the particular corporation or any other corporation that subsequently acquires any of the properties.
Marginal note:Specified amount
(12.1) Where in a taxation year an original owner of Canadian resource properties disposes of all or substantially all of the original owner’s Canadian resource properties in circumstances in which subsection 66.7(3), 66.7(4) or 66.7(5) applies,
(a) the lesser of
(i) the total of all amounts each of which is the amount, if any, by which
(A) an amount deducted under paragraph 66.7(12)(b) in respect of a disposition in the year by the original owner
exceeds
(B) the amount, if any, designated by the original owner in prescribed form filed with the Minister within 6 months after the end of the year in respect of an amount determined under clause 66.7(12.1)(a)(i)(A), and
(ii) the total of
(A) the amount claimed under subsection 66.1(2) or 66.1(3) by the original owner for the year, and
(B) the amount that would, but for paragraph 66.1(1)(c), be determined under subsection 66.1(1) in respect of the original owner for the year
is the specified amount in respect of the original owner for the year for the purposes of clause 66.7(12)(b.1)(ii)(A) and of determining the value of E.1 in the definition cumulative Canadian exploration expense in subsection 66.1(6);
(b) the lesser of
(i) the total of all amounts each of which is the amount, if any, by which
(A) an amount deducted under paragraph 66.7(12)(c) in respect of a disposition in the year by the original owner
exceeds
(B) the amount, if any, designated by the original owner in prescribed form filed with the Minister within 6 months after the end of the year in respect of an amount determined under clause 66.7(12.1)(b)(i)(A), and
(ii) the total of
(A) the amount claimed under subsection 66.2(2) by the original owner for the year, and
(B) the amount that would, but for paragraph 66.2(1)(d), be determined under subsection 66.2(1) in respect of the original owner for the year
is the specified amount in respect of the original owner for the year for the purposes of clause 66.7(12)(c.1)(ii)(A) and of determining the value of D.1 in the definition cumulative Canadian development expense in subsection 66.2(5); and
(c) the lesser of
(i) the total of all amounts each of which is the amount, if any, by which
(A) an amount deducted under paragraph 66.7(12)(d) in respect of a disposition in the year by the original owner
exceeds
(B) the amount, if any, designated by the original owner in prescribed form filed with the Minister within 6 months after the end of the year in respect of an amount determined under clause 66.7(12.1)(c)(i)(A), and
(ii) the total of
(A) the amount claimed under subsection 66.4(2) by the original owner for the year, and
(B) the amount that would, but for paragraph 66.4(1)(c), be determined under subsection 66.4(1) in respect of the original owner for the year
is the specified amount in respect of the original owner for the year for the purposes of clause 66.7(12)(d.1)(ii)(A) and of determining the value of D.1 in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5).
Marginal note:Reduction of foreign resource expenses
(13) Where after June 5, 1987 an original owner of foreign resource properties disposes of all or substantially all of the original owner’s foreign resource properties to a particular corporation in circumstances in which subsection 66.7(2) applies, the foreign exploration and development expenses incurred by the original owner before that owner so disposed of the properties shall be deemed after the disposition not to have been incurred by the original owner except for the purposes of determining the amounts that may be deducted under that subsection by the particular corporation or any other corporation that subsequently acquires any of the properties.
Marginal note:Reduction of foreign resource expenses
(13.1) Where in a taxation year an original owner of foreign resource properties in respect of a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which subsection (2.3) applies,
(a) in determining the cumulative foreign resource expense of the original owner in respect of the country at any time after the time referred to in subparagraph (2.3)(a)(i), there shall be deducted the amount of that cumulative foreign resource expense determined immediately after the disposition; and
(b) for the purpose of paragraph (2.3)(a), the cumulative foreign resource expense of the original owner in respect of the country determined immediately after the disposition that was deducted under subsection 66.21(4) in computing the original owner’s income for the year is deemed to be equal to the lesser of
(i) the amount deducted under paragraph (a) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under subsection (13.2) in respect of the original owner and the country for the year
exceeds
(B) the total of all amounts determined under this paragraph in respect of another disposition of foreign resource property in respect of the country made by the original owner before the disposition and in the year.
Marginal note:Specified amount — foreign resource expenses
(13.2) Where in a taxation year an original owner of foreign resource properties in respect of a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which subsection (2.3) applies, the specified amount in respect of the country and the original owner for the year for the purposes of clause (13.1)(b)(ii)(A) and of determining the value of D in the definition cumulative foreign resource expense in subsection 66.21(1) is the lesser of
(a) the total of all amounts each of which is the amount, if any, by which
(i) an amount deducted under paragraph (13.1)(a) in respect of a disposition in the year by the original owner of foreign resource property in respect of the country
exceeds
(ii) the amount, if any, designated by the original owner in the prescribed form filed with the Minister within six months after the end of the year in respect of an amount described under subparagraph (i), and
(b) the total of
(i) the amount claimed under subsection 66.21(4) by the original owner in respect of the country for the year, and
(ii) the amount that would, but for paragraph 66.21(3)(c), be determined under subsection 66.21(3) in respect of the country and the original owner for the year.
Marginal note:Disposal of Canadian resource properties
(14) Where in a taxation year a predecessor owner of Canadian resource properties disposes of Canadian resource properties to a corporation in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), 66.7(3), 66.7(4) or 66.7(5) applies,
(a) for the purposes of applying any of those subsections to the predecessor owner in respect of its acquisition of any Canadian resource property owned by it immediately before the disposition, it shall be deemed, after the disposition, never to have acquired any such properties except for the purposes of
(i) determining an amount deductible under subsection 66.7(1) or 66.7(3) for the year,
(ii) where the predecessor owner and the corporation dealt with each other at arm’s length at the time of the disposition or the disposition was by way of an amalgamation or merger, determining an amount deductible under subsection 66.7(4) or 66.7(5) for the year, and
(iii) determining the amount for F in the definition cumulative Canadian development expense in subsection 66.2(5), the amounts for paragraphs 66.7(14)(a) and 66.7(14)(b) in the description of L in that definition and the amount for F in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5); and
(b) where the corporation or another corporation acquires any of the properties on or after the disposition in circumstances in which subsection 66.7(4) or 66.7(5) applies, amounts that become receivable by the predecessor owner after the disposition in respect of Canadian resource properties retained by it at the time of the disposition shall, for the purposes of applying subsection 66.7(4) or 66.7(5) to the corporation or the other corporation in respect of the acquisition, be deemed not to have become receivable by the predecessor owner.
Marginal note:Disposal of foreign resource properties
(15) Where after June 5, 1987 a predecessor owner of foreign resource properties disposes of all or substantially all of its foreign resource properties to a corporation in circumstances in which subsection 66.7(2) applies, for the purpose of applying that subsection to the predecessor owner in respect of its acquisition of any of those properties (or other foreign resource properties retained by it at the time of the disposition which were acquired by it in circumstances in which subsection 66.7(2) applied), it shall be deemed, after the disposition, never to have acquired the properties.
Marginal note:Disposal of foreign resource properties — subsection (2.3)
(15.1) Where in a taxation year a predecessor owner of foreign resource properties disposes of foreign resource properties to a corporation in circumstances to which subsection (2.3) applies,
(a) for the purpose of applying that subsection to the predecessor owner in respect of its acquisition of any foreign resource properties owned by it immediately before the disposition, it is deemed, after the disposition, never to have acquired any such properties except for the purposes of
(i) where the predecessor owner and the corporation dealt with each other at arm’s length at the time of the disposition or the disposition was by way of an amalgamation or merger, determining an amount deductible under subsection (2.3) for the year, and
(ii) determining the value of F in the definition cumulative foreign resource expense in subsection 66.21(1); and
(b) where the corporation or another corporation acquires any of the properties on or after the disposition in circumstances to which subsection (2.3) applies, amounts that become receivable by the predecessor owner after the disposition in respect of foreign resource properties retained by it at the time of the disposition are, for the purposes of applying subsection (2.3) to the corporation or the other corporation in respect of the acquisition, deemed not to have become receivable by the predecessor owner.
Marginal note:Non-successor acquisitions
(16) If at any time a Canadian resource property or a foreign resource property is acquired by a person in circumstances in which none of subsections (1) to (5), nor subsection 29(25) of the Income Tax Application Rules, apply, every person who was an original owner or predecessor owner of the property before that time is, for the purpose of applying those subsections to or in respect of the person or any other person who after that time acquires the property, deemed after that time not to be an original owner or predecessor owner of the property before that time.
Marginal note:Restriction on deductions
(17) Where in a particular taxation year and before June 6, 1987 a person disposed of a Canadian resource property or a foreign resource property in circumstances in which any of subsection 29(25) of the Income Tax Application Rules and subsections 66.7(1) to 66.7(5) applies, no deduction in respect of an expense incurred before the property was disposed of may be made under this section or section 66, 66.1, 66.2 or 66.4 by the person in computing the person’s income for a taxation year subsequent to the particular taxation year.
Marginal note:Application of interpretation provisions
(18) The definitions in subsection 66(15) and sections 66.1 to 66.4 apply in this section.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 66.7
- 1994, c. 7, Sch. II, s. 42, c. 8, s. 8, c. 21, s. 31
- 1995, c. 21, s. 25
- 1997, c. 25, s. 16
- 1998, c. 19, s. 106
- 2001, c. 17, s. 49
- 2013, c. 34, ss. 116, 204
- Date modified: