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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Ownership of Flow-Through Shares at Time of Renunciation
This is in reply to your letter of July 6, 1993, wherein you requested our opinion on whether a resource expense could be renounced by an exploration corporation to a former flow-through shareholder in the following hypothetical situation.
Situation
1. An individual ("Individual A") has given consideration under an agreement to an exploration corporation ("B Co.") for the issue of flow-through shares of B Co. The flow-through shares which have been received from B Co. are capital property to Individual A.
2. Individual A contributes the acquired flow-through shares to his registered retirement saving plan ("RRSP") and recognizes a capital gain on the share transfer equivalent to the then fair market value of such shares.
3. After the share transfer, B Co. renounces its qualified resource expenses to Individual A within the time limit pursuant to subsection 66(12.6), (12.62) or (12.64) of the Act, and files a prescribed form in respect of the renouncement within the time limit pursuant to subsection 66(12.7) of the Act.
Our Views
It is our view that, in the above-noted situation, B Co. may renounce its qualified resource expenses to Individual A in respect of the flow- through shares which have been transferred to his RRSP, to the extent of the amount of consideration referred to in 1 above, even though Individual A is no longer the holder of such shares at the time of the renouncement.
Yours truly,
for Director Manufacturing Industries, Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1993
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© Sa Majesté la Reine du Chef du Canada, 1993
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