26 June 2003 External T.I. 2003-0022535 - Income from a Mine

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Clarification of our views on the meaning of the term ' income from a mine' as it is used in subsection 1104(5) of the Regulations.

Position: Income attributable to processing ore from a mineral resource owned by a taxpayer to a stage not beyond the prime metal stage or its equivalent, would be included in income from a mine under subparagraph 1104(5)(a)(i) of the Regulations. If more than 10% of the ore processed by the taxpayer is custom processing, none of the income attributable to the custom processing would be included in income from a mine. This reasoning also applies to the subparagraphs (a)(ii) to (iv).

Reasons: Intention of the amended regulation.

XXXXXXXXXX                                            2003-002253
      David Shugar
(613) 957-2134
June 26, 2003

Dear XXXXXXXXXX:

Re: Income from a mine

This is in reply to your letter of June 5, 2003, wherein you requested clarification of our views on the meaning of the term 'income from a mine' as it is used in subsection 1104(5) of the Income Tax Regulations (the "Regulations").

The January 26, 1998 amendment adding the words "all or substantially all" to paragraph (a) of subsection 1104(5) of the Regulations was intended to be a relieving amendment, allowing incidental income from custom processing to be included in a taxpayer's 'income from a mine.' Prior to that amendment, none of a taxpayer's income from custom processing could be so included.

To clarify our letter # 2001-011275, dated July 5, 2002, if, in subparagraph 1104(5)(a)(i) for example, more than 10% of the taxpayer's total ore processing is not from his own mineral resource to a stage not beyond the prime metal stage or its equivalent, none of the taxpayer's income that is reasonably attributable to custom processing (i.e., processing ore from a mineral resource that is not his own) would be included in 'income from a mine.' Income reasonably attributable to processing ore that is from his own mineral resource to a stage not beyond the prime metal stage or its equivalent, however, would be so included.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch