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.
We are writing in reply to your letter of December 8, 1989 wherein you requested our opinion as to whether a taxpayer is permitted under the Income Tax Act (the "Act") to create a non-capital loss by claiming various resource expenditures, assuming that these resource expenses are referrable to a source of income and not claimed under subdivision e of Part 1 of the Act, as provided by subsection 3(c) of the Act. In addition, you requested the Departments opinion as to whether flow-through shares would be considered as a source of income under the Act.
A taxpayer's deduction of Canadian Exploration Expense ("CEE") or Canadian Development Expense ("CDE") will not be restricted to the taxpayer's income otherwise determined for income tax purposes provided the taxpayer is not a principal business corporation. However in order for the taxpayer to deduct an amount of CEE and/or CDE in excess of his income as determined for tax purposes, and create a non-capital loss as defined in paragraph 111(8)(b) of the Act, the deduction under subsection 66.1(3) or 66.2(2) of the Act must be referrable to a source i.e. business or property. Should the said deduction not be referrable to a particular source, then pursuant to paragraph 3(c) of the Act it may only be claimed as a subdivision e deduction which would limit it to the amount of income determined under paragraphs 3(a) and (b) of the Act.
For purposes of subsection 3(a) of the Act, fIow-through shares constitute a source for purposes of a taxpayer claiming amounts of expenses. With regards to whether income from a source is property or business, each individual income item must be examined as this is a question of fact.
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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