CRA considers that deductions of successored resource expenditures cannot generate a non-capital loss

CRA indicated that even though taking deductions under s. 66.7(3) to (5) from successored resource pools against income from successored properties can have the effect of preserving all or part of a current year’s loss from another business, such deductions cannot create or increase a taxpayer’s non-capital loss, stating that:

This is because a deduction under section 66.7 may only be applied to reduce current year income under paragraph 3(c) as it is a deduction that is permitted only pursuant to a specific provision within subdivision e.

CRA then stated:

[T]he above position, to the extent that it relates to deductions in respect of successored cumulative Canadian development expense and successored cumulative Canadian oil and gas expense, may differ from the CRA’s historic assessing practice. For taxation years ending after 2020, the CRA’s assessing practice will take into account the above position for all types of successored resource pools.

Neal Armstrong. Summaries of 11 August 2020 Internal T.I. 2018-0782181I7 under s. 66.7(3) and s. 18(1)(a) – incurring of expense.