19 December 1995 External T.I. 9531725 - PRODUCTION FROM THE PARTICULAR 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.

Principal Issues:

Would the production from infill wells qualify as "production from the particular property" for the purposes of clause 66.7(3)(b)(i)(C) of the Act where there are existing producing wells on the property which qualify for the purposes of clause 66.7(3)(b)(i)(C) of the Act.

Position:

Yes.

Reasons:

The provisions of the Act with respect to successor rules and clause 66.7(3)(b)(i)(C) of the Act.

		953172
XXXXXXXXXX             	A. Seidel
(613) 957-8974

Attention: XXXXXXXXXX

December 19, 1995

Dear Sirs:

Re: Successor Rules

This is in reply to your facsimile in which you requested our views with respect to the deduction of cumulative Canadian exploration expenses by a successor corporation, as referred to in subsection 66.7(3) of the Income Tax Act (the "Act"), against successor income attributable to production from a particular Canadian resource property ("CRP") as described in clause 66.7(3)(b)(i)(C) of the Act.

It appears that the interpretation you seek relates to specific transactions and taxpayers and, therefore, we bring to your attention Information Circular 70-6R2 ("IC 70-6R2") dated September 28, 1990, and the Special Release thereto dated September 30, 1992, issued by Revenue Canada. Confirmation with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling for particular taxpayers with respect to specific contemplated transactions, a written request for an advance income tax ruling should be submitted as outlined in IC 70-6R2. Nevertheless, we offer the following general comments in response to your letter.

In the situation where a successor corporation has acquired a particular oil and gas property that is a CRP under circumstances in which the "successor rules" in section 66.7 of the Act apply, and at the time of the acquisition of the CRP there are two producing wells on that property and the production therefrom qualifies as "production from the particular property" for the purposes of clause 66.7(3)(b)(i)(C) of the Act, it is our view that the increased production from that particular CRP by the addition of new infill wells by the successor corporation would also qualify as "production from the particular property" for the purposes of clause 66.7(3)(b)(i)(C) of the Act.

These comments are provided in accordance with the guidelines set out in paragraph 21 of IC 70-6R2.

Yours truly,

for Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch