13 November 1991 External T.I. 9121765 F - Success FEDE

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.

5-912176

Dear Sirs

Re:  Success FEDE - Subsections 66.7(2) and (8) of the Income Tax Act (the "Act") and Bill C-18 Amendments

This is in reply to your letter dated July 30, 1991 wherein you requested a technical interpretation of subsection 66.7(2) of the Act and the amendments thereto proposed in Bill C-18.

Facts

The relevant facts which you provided are summarized as follows:

1.     

2.        24(1)

3.     

Your Questions

Your questions are threefold.

1.

2.        24(1)

3.     

Our Comments

Our response to your first question is that since subsection 66.7(2) of the Act is subject to subsection (8), inter alia, the requirements of subsection 66.7(8) would have to be satisfied in order for 24(1) to claim a successor deduction under subsection 66.7(2).

Since your second and third questions appear to involve contemplated transactions, we refer you to Information Circular 10-6R2 which states at paragraph 21 that when a requested interpretation relates to a contemplated transaction, a taxpayer should request an advance ruling rather than an opinion.  An advance ruling could be requested once the proposed amendments become law. In the meantime, however, we are providing the following general comments which may be of assistance to you .

For purposes of determining a taxpayer's successor FEDE deduction under subsection 66.7(2) of the Act, the amendments to clause 66.7(2)(b)(ii)(A) proposed in Bill C-18 would permit the taxpayer to designate production income from a Canadian resource property "acquired with the particular property". The particular property in this case would be the foreign resource property. Your question concerns whether it is necessary for the foreign resource property and the Canadian resource property to be acquired contemporaneously.

It is your view that "acquired with" means acquired in relation to" or "acquired with respect to" and this does not mean that the foreign and Canadian resource properties have to be acquired contemporaneously. We are unable to share your view.

The word "with" has several meanings and senses, one of which, according to The Concise Oxford Dictionary, is "at the same time as". It is our view that the words "acquired with" in the context in which they are used in proposed clause 66.7(2)(b)(ii)(A) mean "acquired at the same time as".

Consequently, the particular foreign resource property in respect of which a successor FEDE deduction is being claimed would have to be acquired at the same time as the Canadian resource property for purposes of proposed clause 66.7(2)(b)(ii)(A) of the Act.

Our response to your third question is that if a taxpayer were to acquire foreign resource property in 1991 in respect of which a successor FEDE deduction is being claimed, it is our view that proposed clause 66.7(2)(b)(ii)(A) would not permit the taxpayer to designate production income from a Canadian resource property acquired in 1987 for purposes of computing that 1991 successor FEDE deduction.  Therefore, it would not be necessary to invoke GARR in order to deny the deduction that was so computed.

The above comments are merely the expressions of opinion of those Revenue Canada officials named herein and as such should not be construed as advance income tax rulings, nor are they binding on the Department.  Our practice is to make this specific disclaimer in all instances in which we provide an opinion. We refer you in this respect to paragraphs 21 and 22 of Information Circular 70-6R2.

Yours truly,

Section ChiefResource Industries SectionManufacturing Industries, Partnerships and Trusts DivisionRulings Directorate