I-3 - Taxation Act

Section 399.3 Disposition versions

2006-03-01

399.3. Where at any time in a taxpayer’s taxation year, one of the events described in the second paragraph occurs in respect of an oil or gas well of the taxpayer, the excess amount determined under the third paragraph is, for the purposes of this Part, deemed to be a Canadian exploration expense referred to in paragraph b.2 of section 395 incurred by the taxpayer at that time.

The events to which the first paragraph refers are the following:

(a)  the drilling or completing of an oil or gas well resulted in the discovery of a natural underground reservoir containing petroleum or natural gas and, before the time of the discovery, no person or partnership had discovered that the reservoir contained either petroleum or natural gas;

(b)  the period of 24 months commencing on the day of completion of the drilling of the oil or gas well ends and the well has not, within that period, produced otherwise than for specified purposes; or

(c)  the oil or gas well is abandoned without ever having produced otherwise than for specified purposes.

The excess amount to which the first paragraph refers is the amount by which the aggregate of the following amounts exceeds any assistance that the taxpayer or a partnership of which the taxpayer is a member has received or is entitled to receive in respect of the expenses referred to in any of subparagraphs a, b and c:

(a)  all Canadian development expenses, other than restricted expenses, described in subparagraph ii of paragraph a of section 408 in respect of the well that are deemed under section 359.5 or sections 417 and 418, as they read in respect of those expenses, to have been incurred by the taxpayer in the year or a preceding taxation year;

(b)  all Canadian development expenses, other than restricted expenses, described in subparagraph ii of paragraph a of section 408 in respect of the well that are required under the second paragraph of section 392 to be included by the taxpayer in the amount referred to in paragraph a of section 408 for the year or a preceding taxation year; and

(c)  all Canadian development expenses, other than expenses referred to in paragraph a or b and restricted expenses, described in subparagraph ii of paragraph a of section 408 incurred by the taxpayer in respect of the well in a taxation year preceding the year.

1988, c. 18, s. 31; 1997, c. 3, s. 71; 1998, c. 16, s. 148; 2001, c. 53, s. 64; 2004, c. 8, s. 75.