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.
| |
October 19, 1990 |
| Audit Programs Directorate |
Resource Industries |
| Special Audits Division |
Section |
| E.H. Gauthier |
John Chan |
| Director |
957-9795 |
| B. Chisholm |
| Specialized Industries |
7-902687 |
| Section |
SUBJECT: Oil & Gas Issue Report # O&G 02 Deductible Crown Rentals and Resource Profits
This is in reply to your memorandum dated September 26, 1990 wherein you request confirmation that the answer to a question (Question 21) regarding whether the tax treatment of certain lease rentals was prepared by the Rulings Directorate for the 1988 Roundtable of 24(1) reflects the Directorate's current position with respect thereto.
We confirm that there has been no change in the Directorate's position which was provided in the answer to question 21 of the 1988 Roundtable of 24(1).
Our understanding of the audit policy in your Oil and Gas Issue Report # O&G 02 is that Crown rentals which are deductible by virtue of Regulation 1211(d) should reduce resource profits computed under the provisions of Regulation 1204. While we concur with this audit policy, we suggest the following:
1. Exhibits A, B and C which were attached to O&G 02 reiterate that Crown lease rentals are deductible to the extent permitted under Regulation 1211 and do not directly enunciate the view that such amounts reduce resource profits.
2. The Directorate's position that deductible Crown lease rentals reduce resource profits was given in an answer to question 24 of the 1988 24(1) Roundtable. We enclose a copy for your convenience.
3. Regulation 1211(d) applies to lease rentals on property payable to the Crown in a taxation year during which there was no production from the property. Consequently, the second sentence in O&G 02 under Department's Policy should be replaced by "Since the potential source of income of non-producing properties would generally be from production, the deductible Crown rentals should reduce resource profits in the calculation of the resource allowance".
4. Regulation 1211(d) is applicable with respect to amounts that became payable or receivable, as the case may be, after October 31, 1982. The first sentence in O&G 02 under Background which commences "Effective October 31, 1982" should therefore be amended accordingly.
A/DirectorBilingual Services and ResourceIndustries DivisionRulings Directorate
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