24 October 1990 External T.I. 9024635 F - Consideration of Timber Quota Certificate and Timber Licence as Timber Resource Property

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.

Dear Sirs:

Re:  24(1) "Timber Quota Certificate"/"Timber Licence") Paragraph 13(21)(d.1) of the Income Tax Act (the "Act")

We are writing in reply to your letter of September 11, 1990, in which you request our interpretation of whether a "Timber Quota Certificate" and a "Timber License" constitute a timber resource property, as defined in paragraph 13(21)(d.1) of the Act. For this purpose you provided us with two documents a "Coniferous Timber Quota Certificate" and a "Timber Licence", both issued by 24(1). We noted these documents to be incomplete.

We cannot comply with your request since the determination of whether the properties represented by the two documents would constitute a timber resource property would be one of fact. Such a determination would involve an examination of all the relevant facts in a particular situation, including an examination of a complete set of issuing documents, the applicable 24(1) legislation pertaining thereto and, where the documents and legislation are silent on the matter of "extensions, renewals or substitutions", a determination of the customary provincial practice in regards thereto.

We can however provide you with the following general comments which may be of assistance to you.

A timber resource property is defined by paragraph 13(21)(d.1) of the Act as a right or license to cut or remove timber from a limit or area in Canada acquired by a taxpayer after May 6, 1974 and, at the time of the acquisition of the "original" right, the taxpayer may be reasonably regarded as having acquired, directly or indirectly, the right to

(a)     extend or renew that original right, or

(b)     acquire another such right or license in substitution therefor,

or the taxpayer may reasonably expect, at the time of acquisition of the original right, to be able to extend or renew that right or to acquire another right or license in substitution thereof in the normal course of events. Any right or license acquired after May 6, 1974 as an extension, renewal or substitution, or as one of a series of extensions, renewals or substitutions, for the original right, is also a timber resource property even if the original right or license was acquired before May 7, 1974.

A timber limit is not defined in the Act. Accordingly, any right to cut timber not meeting the requirements of paragraph 13(21)(d.1) is considered a timber limit for purposes of the Act.

We have reviewed the "Forests Act" of Alberta (Revised Statutes of Alberta 1980 Chapter F-16) as it relates to the issuance of "Timber Quota Certificates" and "Timber Licences" and make the following observations:

1.     The sale of timber quota certificates and the issue of timber licences to quota holders are complementary actions and constitute one of three ways whereby the Minister of Energy and Natural Resources for the Province of Alberta may dispose of Crown timber. He may also do so pursuant to a forest management agreement or pursuant to a timber permit (Ref. Part 2 "Crown Timber", Section 15). In each method of disposition it appears evident that a right or licence to cut or remove timber from an area in Canada is being granted.

2.     The holder of a timber quota is generally entitled to a renewal of his quota if he is not in default or breach of the Forest Act or the regulations thereto either during the term or at the expiration of his quota and provided in the Minister's opinion there is adequate timber available in his particular "forest management unit" to justify the renewal of the quota (Ref. Part 2 "Crown Timber" Section 20, 21).

This would appear to satisfy at least the minimum requirements of section 13(21)(d.1)(i)(B) of the Act which calls for evidence that a taxpayer may reasonably be regarded as having acquired the right to extend or renew or that he may reasonably expect to be able to extend or renew the original right acquired.

Based on our review of the documents provided, your request appears to involve specific taxpayers and completed transactions. Therefore, you should consider referring the matter to the Edmonton District Office where additional information requirements can more easily be identified and met.

The above comments are expressions of opinion only and as such are not to be construed as advance income tax rulings, nor are they binding an the Department.

Yours truly,

Section ChiefResource Industries SectionBilingual Services and Resource Industries DivisionRulings Directorate