I-3 - Taxation Act

Section 418.31 Disposition versions

2006-03-01

418.31. 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 to a particular corporation in circumstances in which section 418.16, 418.18, 418.19 or 418.21 or section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules (Revised Statutes of Canada, 1985, chapter 2, 5th Supplement), applies, the following rules apply:

(a)  the Canadian exploration and development expenses incurred by the original owner before he so disposed of the properties are, for the purposes of this Title, deemed after the disposition not to have been incurred by him except for the purposes of making a deduction under section 362 or 367 for the year and of determining the amount that may be deducted under section 418.16 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 first time referred to in the second paragraph of section 418.18, there shall be deducted the amount thereof determined immediately after the disposition;

(b.1)  for the purposes of the second paragraph of section 418.18, the cumulative Canadian exploration expense of the original owner determined immediately after the disposition that was deducted under section 400 or 401 in computing the original owner’s income for the year is deemed to be equal to the lesser of

i.  the amount deducted in respect of the disposition under paragraph b, and

ii.  the amount by which

(1)  the amount determined under paragraph a of section 418.31.1 in respect of the original owner for the year exceeds

(2)  the aggregate of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner in the year and before the disposition first referred to in this paragraph;

(b.2)  any amount, other than the amount determined under paragraph b.1, that was deducted under section 400 or 401 by the original owner for the year or a subsequent taxation year is deemed, for the purposes of the second paragraph of section 418.18, 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 subparagraph i of subparagraph a of the second paragraph of section 418.19, there shall be deducted the amount thereof determined immediately after the disposition;

(c.1)  for the purposes of the second paragraph of section 418.19, the cumulative Canadian development expense of the original owner determined immediately after the disposition that was deducted under section 413 or 414 in computing the original owner’s income for the year is deemed to be equal to the lesser of

i.  the amount deducted in respect of the disposition under paragraph c, and

ii.  the amount by which

(1)  the amount determined under paragraph b of section 418.31.1 in respect of the original owner for the year exceeds

(2)  the aggregate of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner in the year and before the disposition first referred to in this paragraph;

(c.2)  any amount, other than the amount determined under paragraph c.1, that was deducted under section 413 or 414 by the original owner for the year or a subsequent taxation year is deemed, for the purposes of the second paragraph of section 418.19, 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 a of the second paragraph of section 418.21, there shall be deducted the amount thereof determined immediately after the disposition;

(d.1)  for the purposes of the second paragraph of section 418.21, the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition that was deducted under section 418.7 in computing the original owner’s income for the year is deemed to be equal to the lesser of

i.  the amount deducted in respect of the disposition under paragraph d, and

ii.  the amount by which

(1)  the amount determined under paragraph c of section 418.31.1 in respect of the original owner for the year exceeds

(2)  the aggregate of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner in the year and before the disposition first referred to in this paragraph;

(d.2)  any amount, other than the amount determined under paragraph d.1, that was deducted under section 418.7 by the original owner for the year or a subsequent taxation year is deemed, for the purposes of the second paragraph of section 418.21, not to be in respect of the cumulative Canadian oil and gas property expense of the original owner determined immediately after the disposition;

(e)  the drilling and exploration expenses, including all general geological and geophysical expenses, incurred by the original owner before 1 January 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 1 January 1972 in searching for minerals in Canada are, for the purposes of section 88.4 of the Act respecting the application of the Taxation Act, deemed after the disposition not to have been incurred by the original owner except for the purpose of making a deduction under section 88.4 of that Act for the year and of determining the amount that may be deducted under that section 88.4, to the extent that that section refers to subsection 25 of section 29 of the Income Tax Application Rules, by the particular corporation or any other corporation that subsequently acquires any of the properties.

1989, c. 77, s. 49; 1993, c. 16, s. 172; 1995, c. 49, s. 115; 1997, c. 3, s. 71; 1998, c. 16, s. 163.