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.
Principal Issues:
Do costs to issue flow-through shares, related audit and legal fees and annual securities fees qualify as CEDOE.
Position TAKEN:
Costs to issue shares are not any expense for the purpose of CEE, CDE or COGPE and thus do not qualify as CEDOE. Cost in respect of financing is limited to interest.
Reasons FOR POSITION TAKEN:
Costs to issue shares are not any expense for drilling, CEE, CDE etc. and do not qualify to be capitalized. Interest is capitalized under 21(1), (2) or (4). Share issue costs do not qualify.
5-942990
XXXXXXXXXX B. Rankin
(613) 957-8974
Attention: XXXXXXXXXX
June 22, 1995
Dear Sirs:
Re: Income Tax Regulation 1206
This is in reply to your letter dated November 11, 1994 wherein you requested our comments on certain costs associated with issuing shares and complying with regulatory requirements. We apologize for the delay in our response.
In a hypothetical situation costs are incurred by a corporation in issuing shares and adhering to regulatory requirements in respect of the shares that are issued. You requested our view regarding whether such costs are considered to be Canadian exploration and development overhead expense ("CEDOE") when the money raised from issuing the shares was used for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada. The corporation also incurs legal and audit fees throughout the year.
We are of the view that costs associated with issuing shares, compliance with regulatory requirements, and audit and legal fees related to issuing shares do not qualify as CEDOE under paragraph (a) of that description of the term in Income Tax Regulation 1206. Such costs are generally considered as period costs and would not fall within the ambit of the definition of Canadian exploration expense. Consequently, the costs would not be included in CEDOE.
The foregoing comments represent our general views with respect to the subject matter. In accordance with paragraph 21 of Information Circular 70-6R2 the comments expressed herein do not constitute an advance income tax ruling and consequently are not binding on Revenue Canada.
Yours truly,
Acting Chief
Resource Industries Section
Manufacturing Industries
Partnerships and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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