Income Tax Regulations (C.R.C., c. 945)
Full Document:
- HTMLFull Document: Income Tax Regulations (Accessibility Buttons available) |
- XMLFull Document: Income Tax Regulations [5468 KB] |
- PDFFull Document: Income Tax Regulations [7877 KB]
Regulations are current to 2024-10-30 and last amended on 2024-07-01. Previous Versions
PART XIIResource and Processing Allowances (continued)
Earned Depletion Base
1205 (1) For the purposes of this Part earned depletion base of a taxpayer as of a particular time means the amount by which 33 1/3 per cent of the aggregate of
(a) all amounts, in respect of expenditures (other than expenditures to acquire property under circumstances that entitled the taxpayer to a deduction under section 1202 or would so entitle the taxpayer if the amounts referred to in paragraphs 1202(2)(a) and (b) were sufficient for the purpose) incurred by the taxpayer after November 7, 1969 and before the particular time, each of which was
(i) a Canadian exploration and development expense or would have been such an expense if it had been incurred after 1971 and was actually incurred before May 7, 1974, other than
(A) a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was a Canadian exploration expense or an exploration, prospecting and development expense, as the case may be, of the taxpayer,
(B) the cost to the taxpayer of any Canadian resource property acquired by the taxpayer,
(C) a Canadian exploration and development expense that was incurred after a mine had come into production in reasonable commercial quantities and may reasonably be considered to be related to the mine or to a potential or actual extension thereof,
(D) an expense that would have been described in clause (C) if it had been incurred after 1971,
(E) an expense renounced by the taxpayer under subsection 66(10) of the Act or subsection 29(7) of the Income Tax Application Rules,
(F) an amount that, by virtue of subparagraph 66(15)(b)(iv) of the Act, was a Canadian exploration and development expense or would have been such an expense if it had been incurred after 1971, if such amount was a cost or expense referred to in clause (A), (B), (C), (D) or (E) that was incurred by an association, partnership or syndicate referred to in that subparagraph, or
(G) an amount that, by virtue of subparagraph 66(15)(b)(v) of the Act, was a Canadian exploration and development expense or would have been such an expense if it had been incurred after 1971, if such amount was a cost or expense referred to in clause (A), (B), (C), (D) or (E) that the taxpayer incurred pursuant to an agreement referred to in that subparagraph,
(ii) the stated percentage of a Canadian exploration expense other than
(A) a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was a Canadian exploration expense of the taxpayer,
(B) an expense renounced by the taxpayer under subsection 66(10.1) of the Act,
(C) an amount that, by virtue of subparagraph 66.1(6)(a)(iv) of the Act, was a Canadian exploration expense, if such amount was an expense referred to in clause (A), (B), (E), (F), (G) or (H) that was incurred by a partnership referred to in that subparagraph,
(D) an amount that, by virtue of subparagraph 66.1(6)(a)(v) of the Act, was a Canadian exploration expense, if such amount was an expense referred to in clause (A), (B), (E), (F), (G), or (H) that the taxpayer incurred pursuant to an agreement referred to in that subparagraph,
(E) an amount described in clause 66.1(6)(a)(ii)(B) or (ii.1) (B) of the Act,
(F) an amount that was a Canadian exploration and development overhead expense of the taxpayer,
(G) an amount that was a Canadian oil and gas exploration expense of the taxpayer, or
(H) an expense described in subparagraph 66.1(6)(a)(iii) of the Act incurred after April 19, 1983,
(iii) a Canadian development expense incurred before 1981 other than
(A) a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was a Canadian development expense of the taxpayer,
(B) an expense renounced by the taxpayer under subsection 66(10.2) of the Act,
(C) an amount referred to in subparagraph 66.2(5)(a)(iii) of the Act,
(D) an amount that, by virtue of subparagraph 66.2(5)(a)(iv) of the Act, was a Canadian development expense, if such amount was an expense referred to in clause (A), (B) or (C) that was incurred by a partnership referred to in that subparagraph, or
(E) an amount that, by virtue of subparagraph 66.2(5)(a)(v) of the Act, was a Canadian development expense, if such amount was an expense referred to in clause (A), (B) or (C) that the taxpayer incurred pursuant to an agreement referred to in that subparagraph,
(iv) the stated percentage of the capital cost to the taxpayer of any processing property acquired by the taxpayer principally for the purpose of
(A) processing in Canada
(I) ore, other than iron ore or tar sands ore, from a qualified resource to any stage that is not beyond the prime metal stage or its equivalent,
(II) iron ore from a qualified resource to any stage that is not beyond the pellet stage or its equivalent, or
(III) tar sands ore from a qualified resource to any stage that is not beyond the crude oil stage or its equivalent, or
(B) processing in Canada
(I) ore, other than iron ore or tar sands ore, from an exporting resource beyond the furthest stage to which such ore or similar ore from that resource was ordinarily processed in Canada before such acquisition but not beyond the prime metal stage or its equivalent,
(II) iron ore from an exporting resource beyond the furthest stage to which such ore or similar ore from that resource was ordinarily processed in Canada before such acquisition but not beyond the pellet stage or its equivalent, or
(III) tar sands ore from an exporting resource beyond the furthest stage to which such ore or similar ore from that resource was ordinarily processed in Canada before such acquisition but not beyond the crude oil stage or its equivalent,
(v) where the taxpayer is a corporation that incurred a Canadian oil and gas exploration expense in respect of conventional lands in a calendar year after 1980 and before 1984, the specified percentage for that year of such expense to the extent that it is not an amount or expense referred to in clause (ii)(A), (B) or (F) or an expense that would be referred to in clause (ii)(C) or (D) if the references in those clauses to “clause (A), (B), (E), (F), (G) or (H)” were read as “clause (A), (B) or (F)”, or
(vi) where the taxpayer is a corporation,
(A) the specified percentage in respect of a Canadian oil and gas exploration expense in respect of non-conventional lands incurred in a calendar year after 1980 and before 1985 to the extent that it is not an amount or expense referred to in clause (ii)(A), (B) or (F) or an expense that would be referred to in clause (ii)(C) or (D) if the references in those clauses to “clause (A), (B), (E), (F), (G) or (H)” were read as “clause (A), (B) or (F)”,
(B) the stated percentage of a Canadian development expense incurred after 1980 in respect of a qualified tertiary oil recovery project of the taxpayer to the extent that such expense is not
(I) an amount or expense described in any of clauses (iii)(A) to (E),
(II) an amount that was a Canadian exploration and development overhead expense of the taxpayer, or
(III) an eligible expense within the meaning of the Canadian Exploration and Development Incentive Program Act in respect of which the taxpayer, a partnership of which the taxpayer was a member, a principal-business corporation of which the taxpayer was a shareholder or a joint exploration corporation of which the taxpayer was a shareholder corporation has received, is entitled to receive or may reasonably be expected to receive at any time an incentive under that Act,
(B.1) the stated percentage of a Canadian exploration expense incurred after 1981 in respect of a qualified tertiary oil recovery project of the taxpayer that
(I) would be referred to in subparagraph 66.1(6)(a)(ii) or (ii.1) of the Act if subparagraph 66.1(6)(a)(ii) were read without reference to clause (B) thereof, or
(II) would be referred to in subparagraph 66.1(6)(a)(iv) or (v) of the Act if the Act were read without reference to clause 66.1(6)(a)(ii)(B) and subparagraphs 66.1(6)(a)(i), (i.1), (ii.2), (iii) and (iii.1),
other than the portion of such expense referred to in subclause (I) or (II) that is
(III) described in any of clauses (ii)(A) to (D) and (F),
(IV) included in the amount determined under subparagraph (v) or clause (vi)(A),
(V) described in subclause (B)(III), or
(VI) an eligible expense within the meaning of the Canadian Exploration Incentive Program Act in respect of which the taxpayer, a partnership of which the taxpayer was a member or a principal-business corporation of which the taxpayer was a shareholder corporation, has received, is entitled to receive or may reasonably be expected to receive at any time an incentive under that Act,
(C) the stated percentage of the capital cost to it of property that is tertiary recovery equipment, and
(D) the stated percentage of the capital cost to it of property that is, or but for Class 41 of Schedule II would be, included in Class 10 in Schedule II by virtue of paragraph (u) of the description of that Class, other than the capital cost to it of property that had, before the property was acquired by it, been used for any purpose whatever by any person with whom it was not dealing at arm’s length,
(b) all amounts, in respect of expenditures (other than expenditures referred to in paragraph (a) or expenditures to acquire property under circumstances that entitled the taxpayer to a deduction under section 1202 or would so entitle the taxpayer if the amounts referred to in paragraphs 1202(2)(a) and (b) were sufficient for the purpose) incurred by the taxpayer after May 8, 1972 and before the particular time, each of which was the stated percentage of the capital cost to the taxpayer of property that is or, but for Class 41, would be included in Class 10 in Schedule II because of paragraph (k) of the description of that Class and that was acquired for the purpose of processing in Canada
(i) ore (other than iron ore or tar sands ore), after its extraction from a mineral resource, to any stage that is not beyond the prime metal stage or its equivalent,
(ii) iron ore, after its extraction from a mineral resource, to any stage that is not beyond the pellet stage or its equivalent, or
(iii) tar sands ore, after its extraction from a mineral resource, to any stage that is not beyond the crude oil stage or its equivalent,
other than the capital cost to him of property that had, before the property was acquired by the taxpayer, been used for any purpose whatever by any person with whom the taxpayer was not dealing at arm’s length,
(c) all amounts, in respect of expenditures (other than expenditures referred to in paragraph (a) or (b) or expenditures to acquire property under circumstances that entitled the taxpayer to a deduction under section 1202 or would so entitle the taxpayer if the amounts referred to in paragraphs 1202(2)(a) and (b) were sufficient for the purpose) incurred by the taxpayer before the particular time, each of which was the stated percentage of the capital cost to the taxpayer of property (other than property that had, before it was acquired by the taxpayer, been used for any purpose whatever by any person with whom the taxpayer was not dealing at arm’s length) that is included in Class 28 or paragraph (a) of Class 41, in Schedule II, other than property so included
(i) by virtue of the first reference in Class 28 to paragraph (l) of Class 10 in Schedule II, where the property was acquired by the taxpayer before November 17, 1978,
(ii) by virtue of the reference in Class 28 to paragraph (m) of Class 10 in Schedule II,
(iii) that is bituminous sands equipment acquired by an individual, or
(iv) that is bituminous sands equipment acquired by a corporation before 1981,
(d) all expenditures (other than expenditures referred to in paragraph (a), (b) or (c)) each of which was incurred by him before November 8, 1969 relating to a mine that came into production in reasonable commercial quantities before that date and that were incurred for the purpose of
(i) exploration in respect of, or
(ii) development of the mine for the purpose of gaining or producing income from the extraction of material from,
a bituminous sands deposit, an oil sands deposit or an oil shale deposit,
(d.1) three times the total of all amounts each of which is an amount equal to the lesser of
(i) the amount that would be determined under subsection 1210(1) in computing the taxpayer’s income for a taxation year that ends before the particular time, if the amount determined for C under that subsection were nil, and
(ii) the amount determined for C under subsection 1210(1) in respect of the taxpayer for that year, and
(d.2) three times the aggregate of all amounts each of which is the specified amount determined under subsection 1202(4) in respect of the taxpayer for a taxation year ending after February 17, 1987 and before the particular time,
exceeds the aggregate of
(e) all amounts deducted by the taxpayer under section 1201 in computing his income for all taxation years ending after May 6, 1974 and before the particular time;
(f) 33 1/3 per cent of the aggregate of all amounts, each of which is the stated percentage of a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was
(i) included in the capital cost to him of depreciable property described in subparagraph (a)(iv), clause (a)(vi)(C) or (D) or paragraph (b) or (c), or
(ii) an expenditure described in paragraph (d);
(g) 33 1/3 per cent of the aggregate of all amounts, each of which is an amount
(i) that became receivable by the taxpayer after April 28, 1978 and before the earlier of December 12, 1979 and the particular time, and
(ii) in respect of which the consideration given by the taxpayer therefor was a property (other than a share, or a property that would have been a Canadian resource property if it had been acquired by the taxpayer at the time the consideration was given) or services, the cost of which may reasonably be regarded as having been primarily an expenditure that was added in computing
(A) the taxpayer’s earned depletion base by reason of subparagraph (a)(i), (ii) or (iii) or paragraph (d), or
(B) the earned depletion base of an original owner of a property by reason of subparagraph (a)(i), (ii) or (iii) or paragraph (d) as it applied to the original owner, where the taxpayer acquired the property in circumstances in which subsection 1202(2) applies,
(h) 33 1/3 per cent of the aggregate of all amounts, each of which is
(i) an amount in respect of a disposition of property (other than a disposition of property that had been used by the taxpayer to any person with whom the taxpayer was not dealing at arm’s length) of the taxpayer after April 28, 1978 and before the earlier of December 12, 1979 and the particular time, the capital cost of which was added in computing
(A) the taxpayer’s earned depletion base by reason of subparagraph (a)(iv) or paragraph (b) or (c), or
(B) the earned depletion base of an original owner of a property by reason of subparagraph (a)(iv) or paragraph (b) or (c) as it applied to the original owner, where the taxpayer acquired the property in circumstances in which subsection 1202(2) applies, and
(ii) equal to the lesser of
(A) the proceeds of disposition of the property, and
(B) the capital cost of the property to the taxpayer, where clause (i)(A) applies, or the original owner, where clause (i)(B) applies, computed as if no amount had been included therein that is a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business,
(i) any amount required by paragraph 1202(2)(b) (as it read in its application to taxation years ending before February 18, 1987) or paragraph 1202(3)(a) to be deducted at or before the particular time in computing the taxpayer’s earned depletion base,
(j) 33 1/3 per cent of the aggregate of all amounts, each of which is in respect of an amount of assistance or benefit in respect of Canadian exploration expenses or Canadian development expenses or that may reasonably be related to Canadian exploration activities or Canadian development activities, whether such amount is by way of a grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit that
(i) the taxpayer before the particular time has received or was entitled to receive, or that the taxpayer at or after the particular time becomes entitled to receive, or
(ii) an original owner or predecessor owner of a property before the particular time has received or was entitled to receive, or at or after the particular time becomes entitled to receive, where the original owner or the predecessor owner received, became entitled to receive or becomes entitled to receive that amount
(A) at or after the time at which the property was acquired by the taxpayer in circumstances in which subsection 1202(2) applies, and
(B) before the time at which the taxpayer becomes a predecessor owner of the property,
and that is equal to
(iii) where the assistance or benefit was in respect of an amount added by reason of subparagraph (a)(ii) or clause (a)(vi)(B) or (B.1) in computing
(A) the earned depletion base of the taxpayer (other than such portion thereof included in determining an amount described in paragraph 1202(2)(a) before the particular time), or
(B) the portion of the earned depletion base of the original owner included in determining an amount described in paragraph 1202(2)(a) before the particular time,
the stated percentage of the amount of the assistance or benefit, and
(iv) where the assistance or benefit was in respect of an amount of Canadian oil and gas exploration expense added by reason of subparagraph (a)(v) or clause (a)(vi)(A) in computing
(A) the earned depletion base of the taxpayer (other than such portion thereof included in determining an amount described in paragraph 1202(2)(a) before the particular time), or
(B) the portion of the earned depletion base of the original owner included in determining an amount described in paragraph 1202(2)(a) before the particular time,
the amount equal to the product obtained when the amount of the assistance or benefit is multiplied by the specified percentage in respect of the expense for the calendar year in which the taxpayer or the original owner, as the case may be, incurred the expense, and
(k) the amount, if any, by which
(i) the aggregate of all amounts that would be determined under paragraphs 1212(3)(d) to (i)
exceeds
(ii) the aggregate of all amounts that would be determined under paragraphs 1212(3) (a) to (c)
in computing his supplementary depletion base at the particular time.
(2) Where an expense is incurred before the particular time referred to in subsection (1) and a person at or after the particular time becomes entitled to receive an amount of assistance or benefit in respect of the expense, the amount of such assistance or benefit shall be included in “the amount of the assistance or benefit” referred to in subparagraphs (1)(j)(iii) and (iv) as of the particular time.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- SOR/78-137, s. 4
- SOR/78-493, s. 2(F)
- SOR/78-502, s. 6
- SOR/79-245, s. 4
- SOR/80-418, s. 3
- SOR/81-974, s. 6
- SOR/85-174, s. 6
- SOR/85-696, s. 2
- SOR/90-113, s. 4
- SOR/90-733, s. 3
- SOR/91-79, s. 6
- SOR/94-686, ss. 48, 78(F), 79(F)
- SOR/96-451, s. 3
- Date modified: