CRA finds that resource royalties payable under a federal statute generally are deductible in computing business income
31 October 2018 - 12:09am
S. 18(1)(m), which generally prohibited the deduction of resource royalties, was repealed over 10 years ago – but is their deduction nonetheless prohibited by s. 18(1)(a)? CRA stated, regarding royalties paid under the Canada Petroleum Resources Act (Canada):
[T]he amount of [such] royalties … is not subject to that restriction because, inter alia, if it were not paid, a taxpayer could lose the opportunity to carry on its business and thereby earn income … [and such amount] is generally deductible in computing the business income of a taxpayer.
Neal Armstrong. Summary of 27 June 2018 External T.I. 2018-0742881E5 F under s. 18(1)(a) – income-producing purpose.