12 June 1992 Income Tax Severed Letter 9216405 - Cost amount of a 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

SUBJECT: COST AMOUNT OF A RESOURCE PROPERTY SECTION: 88(1)(d),
98(3)(d)]

1992 CPTS ROUNDTABLE

QUESTION

• 8. In determining the proceeds of disposition of the shares of the capital stock of a subsidiary which has been wound up pursuant to subsection 88(1), subparagraph 88(1)(b)(i) refers to the lesser of the paid-up capital in respect of such shares immediately before the winding-up and the amount determined under subparagraph 88(1)(d)(i).
• Clause 88(1)(d)(i)(A) refers to any property owned by the subsidiary immediately before the winding-up, equal to the cost amount to the subsidiary of the property immediately before the winding-up. "Cost amount" is defined in subsection 248(1) but there is no specific reference to the cost amount of a Canadian resource property.
• What is Revenue Canada's position with respect to the cost amount of a Canadian resource property? Does the existence of undeducted resource pools have an impact upon the determination of the cost amount of a Canadian resource property?

ANSWER

• 8. It is our view that the "cost amount" of a Canadian resource property is nil. This nil cost amount would not be affected by the existence of undeducted resource pools.

Prepared by: John Chan

ISSUE SHEET

1992 CPTS Roundtable John Chan
Question 8 5-921640
June 12, 1992

This question asks what the "cost amount" of a Canadian resource property is in view of the absence of any specific reference to a Canadian resource property in the 248(1) definition of "cost amount".

The relevant portion of the subsection 248(1) definition of "cost amount" reads as follows -

• (f) in any other case, the cost to the taxpayer of the property as determined for the purpose of computing his income, except to the extent that such cost has been deducted in computing his income for any taxation year ending before that time.

XXX

Rulings continued its position that the cost amount of a Canadian resource property is nil and this was stated in a letter dated February 15, 1988 to 24(1) John Chan discussed the question and answer with Mr. John Bentley at his office on June 10, 1992 and he does not have any concerns about the question and answer.

A copy of the question and answer together with the issue sheet was sent by fax to Simon Thompson, Dept. of Finance on June 9, 1992 and John Chan spoke to Mr Thompson on June 10. Mr. Thompson said that Finance does not have any concerns about the question and answer.

The question and answer was reviewed by John Kurrant, Oil & Gas Specialist on June 12 and he said that he does not have any concerns.