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.
Revenue Canada Round Table
Tax Executive Institute Conference
May, 1994
Question II (3)
RESOURCE INDUSTRY - RESOURCE ALLOWANCE
Regulation 1210(1)(a)(iii) removes resource royalties from resource profits for purposes of the resource allowance. Would Revenue Canada offer its interpretation as to whether the resource royalties to be removed are gross amounts or gross amounts less applicable expenses?
Department's Position
A resource royalty, which is not a "production royalty" within the meaning of the term in subsection 1206(1) of the Regulations and which does not fall within the ambit of the carve-out rules in section 209 of the Act, would generally be included in computing its recipient's resource profits pursuant to paragraph 1204(1)(b.1) of the Regulations and be deducted in computing its recipient's resource allowance by virtue of subparagraph 1210(1)(a)(iii) of the Regulations. The resource royalty could be computed by reference to gross production revenue or production revenue net of production expenses incurred, as the case may be. However, the amount of such resource royalty must be the same for the purposes of the calculations under paragraph 1204(1)(b.1) and subparagraph 1210(1)(a)(iii) of the Regulations.
Author: Peter Lee
File: 941038
Date: May 3, 1994
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