Spruce Falls Remission Order (SI/90-118)

Short Title

1 This Order may be cited as the Spruce Falls Remission Order.

Interpretation

2 In this Order,

Act

Act means the Income Tax Act; (Loi)

Power Rights Agreement

Power Rights Agreement means the agreement dated October 31, 1989, entered into between Spruce Falls and Ontario Hydro for the supply of electrical power by Ontario Hydro to Spruce Falls at no charge; (Convention d’approvisionnement en électricité)

Spruce Falls

Spruce Falls means Spruce Falls Power and Paper Company, Limited; (Spruce Falls)

Water Power Lease Agreement

Water Power Lease Agreement means the agreement entered into between Her Majesty The Queen in Right of Ontario and Spruce Falls dated January 1, 1983, as amended by an amendment dated March 17, 1989, pursuant to which certain lands were leased by Her Majesty to Spruce Falls for the development of water power. (bail pour l’exploitation de ressources hydro-électriques)

Remission

3 Subject to section 4, remission is granted to Spruce Falls, in respect of each of the 1989 and subsequent taxation years, of an amount equal to the amount, if any, by which

• (a) the aggregate of the income tax payable under Part I of the Act by Spruce Falls for the year and the interest and penalties in respect thereof payable by it under the Act for the year

exceeds

• (b) the aggregate of the income tax that would be payable under Part I of the Act by Spruce Falls for the year and the interest and penalties in respect thereof that would be payable by it under the Act for the year, if subsections 13(4) and (4.1) and section 44 of the Act were to apply to the assignment by Spruce Falls of the Water Power Lease Agreement to Ontario Hydro and the acquisition by Spruce Falls of the Power Rights Agreement as if the Water Power Lease Agreement were a former business property and the Power Rights Agreement were depreciable property acquired as a replacement for that former business property, as those terms are defined for the purposes of the Act, and as if Spruce Falls had elected under subsection 13(4) of the Act as and when required for that subsection to apply with respect to the disposition of the Water Power Lease Agreement and the acquisition of the Power Rights Agreement.

Conditions

4 Remission is granted under this Order on condition that

• (a) in calculating the profit or loss (other than on account of capital) of Spruce Falls in respect of each of the 1989 and subsequent taxation years, no deduction in respect of the cost of the Power Rights Agreement to Spruce Falls resulting from the lease assignment is claimed by Spruce Falls;

• (b) if there is a disposition of the Power Rights Agreement by Spruce Falls,

  • (i) subsections 13(4) and 44(1) of the Act are treated by Spruce Falls as applying in respect of the assignment by Spruce Falls of the Water Power Lease Agreement to Ontario Hydro and the acquisition by Spruce Falls of the Power Rights Agreement as if the Water Power Lease Agreement were a former business property and the Power Rights Agreement were depreciable property acquired as a replacement for that former business property, as those terms are defined for the purposes of the Act, and as if Spruce Falls had elected under subsection 13(4) of the Act as and when required for that subsection to apply with respect to the disposition of the Water Power Lease Agreement and the acquisition of the Power Rights Agreement, and

  • (ii) for the purposes of subsection 13(1) of the Act, the Power Rights Agreement is treated by Spruce Falls for income tax purposes as property included in Class 14 in Schedule II to the Income Tax Regulations; and

• (c) all conditions precedent contained in the Power Rights Agreement are satisfied by the parties to that Agreement before 1996.