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:
Meaning of "real property" and "mineral resource content" in definition for Canadian resource property, 66(15) of the Act.
Position TAKEN:
As the term is used in Canadian resource property, "real property" means land and rights issuing out of, annexed to and exercisable within or about land. Examples include fee simple ownership of minerals in situ and mining leases that are a profit a prendre or working interest in minerals in situ.
As the term is used in Canadian resource property, " mineral resource content" means minerals situated in the "mineral resource" as that term is defined in subsection 248(1) of the Act.
Reasons FOR POSITION TAKEN:
Black's Law Dictionary re: real property
Concise Oxford Dictionary re: mineral resource content
5-951493
XXXXXXXXXX B. Rankin
(613) 957-8974
Attention: XXXXXXXXXX
August 21, 1995
Dear Sirs:
Re: Investment in Canadian Mining
This is in reply to your letter of May 24, 1995 wherein you requested our views on "Canadian resource property" and "Canadian development expense" as those terms are defined in subsections 66(15) and 66.2(5) of the Income Tax Act (Canada) (the "Act"), respectively.
In a hypothetical situation, an Australian company ("Austco") pays $50 million to acquire a 25% interest in an undeveloped mining lease in Canada.
In respect of this situation, you asked:
1) What is meant by the term "real property" in paragraph (f) of the definition for Canadian resource property in subsection 66(15) of the Act.
2) What is meant by the term "mineral resource content" in paragraph (f) of the definition for Canadian resource property in subsection 66(15) of the Act.
3) Whether the $50 million would be considered to be a Canadian resource property and Canadian development expense.
For the purpose of paragraph (f) of the definition for Canadian resource property in subsection 66(15) of the Act, "real property" generally refers to land and rights issuing out of, annexed to and exercisable within or about land (e.g., a fee simple land and a profit à prendre in respect of minerals).
For the purpose of paragraph (f) of the definition for Canadian resource property in subsection 66(15) of the Act, "mineral resource content" refers to the mineral resource that is situated in or derived from the real property. Thus, in order to qualify as Canadian resource property under paragraph (f) of the definition, the property must be real property in Canada and the principal value of it must attribute to the mineral resource found on the property.
Under paragraph (e) of the definition for Canadian development expense in subsection 66.2(5) of the Act, Canadian development expense includes the cost of a property described in paragraph (f) of the definition for Canadian resource property in subsection 66(15) of the Act. In the above-noted hypothetical situation, the 25% interest in the undeveloped mining lease would be considered as Canadian resource property and the $50 million paid for such interest would be considered as Canadian development expense, provided that this amount represents fair market value of such interest, that the minerals to be extracted qualify as mineral resource within the meaning of the term in subsection 248(1) of the Act, and the above-noted other requirements are met. (A copy of these definitions was enclosed with our previous letter to you dated April 20, 1995.)
The foregoing comments represent our general views on the subject matter. As indicated in paragraph 21 of Information Circular 70-6R2, the above comments do not constitute an advance income tax ruling and accordingly are not binding on Revenue Canada.
Yours truly,
for Director
Manufacturing Industries,
Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1995
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1995
Email this Content