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.
Principal Issues: Effect of proposed amendments to paragraphs (d) and (e) to the Canadian resource property definition.
Position: Above amendments add certain requirements to those paragraphs; however, they do not require that the proceeds of production from a particular well, accumulation or mineral resource be segregated.
Reasons: Review of the proposed amendments.
Tax Executives Institute, Inc.
December 2, 2003 CCRA Liaison Meeting
Question 25 - Canadian Resource Property
We invite the Agency to comment on its administrative position in respect of the proposed amendments to paragraphs (d) and (e) of the definition of "Canadian resource property" in subsection 66(15). The draft legislation requires a "rental or royalty" to be "payable out of, or from the proceeds of, the production from" the well, accumulation, or mineral resource. The proposed paragraph might be interpreted as requiring the "rental or royalty" be paid from a segregated source of funds that originates solely from the proceeds of production of the particular well, accumulation, or mineral resource. This seeming tracing requirement would impose a substantial administrative burden on taxpayers in order to qualify such putative "rentals and royalties" as "Canadian resource properties". Moreover, the burden of segregating and tracing the funds is misplaced. The payer of the "rental or royalty" is likely indifferent whether the rental or royalty qualifies as Canadian resource property, but the payer is burdened with segregating the funds in order to ensure that the recipient's payments qualify as being from a Canadian resource property. Would the Agency please comment?
CCRA Response
The determination of whether a particular rental or royalty satisfies the requirement in the amendments, that "90% or more of the rental or royalty is payable out of, or from the proceeds of" the relevant production, will be a question of fact. In determining whether that requirement is satisfied, the Agency would look to the terms of the rental/royalty agreement between the payer and the payee. Consequently, we are of the view that the above-mentioned amendments to paragraphs (d) and (e) to the definition of "Canadian resource property" would not necessarily require that the proceeds of production from a particular well, accumulation or mineral resource be segregated.
Al Cameron
2003-004860
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