11 January 1996 External T.I. 9600105 - JOINT EXPLORATION CORPORATION AND AMALGAMATION

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:

	whether a new corporation formed on 87(1.1) 	amalgamation will be "joint exploration 	corporation" ("JEC"), where one of predecessor 	corporations had more than 10 shareholders

Position:

no

Reasons:

	The definition JEC in 66(15) provides that the 	corporation cannot have had more than 10 	shareholders. Where 87(1.1) amalgamation, 87(1.2) 	applies to the definition of JEC to deem the new 	corporation to be the same corporation as, and a 	continuation of, each predecessor corporation. 	Where one of the predecessor corporations has had 	more than 10 shareholders the new corporation would 	not be a JEC.

		960010
XXXXXXXXXX                     	Denise Y. Dalphy
(613) 957-9231
Attention:  XXXXXXXXXX
January 11, 1996

Dear Sirs:

Re: Meaning of "joint exploration corporation"

This is in reply to your letter of July 21, 1995, in which you requested our interpretation of the term "joint exploration corporation", which is defined in subsection 66(15) of the Income Tax Act (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.

The definition of "joint exploration corporation" in subsection 66(15) of the Act includes a requirement that the corporation must not have had more than 10 shareholders at any time since its incorporation. Where there is an amalgamation to which the provisions of subsection 87(1.1) apply, subsection 87(1.2) applies for the purposes of, inter alia, the definition of "joint exploration corporation" in section 66 and the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation. Therefore, it is our view that, where there has been a subsection 87(1.1) amalgamation and one or more of the predecessor corporations has had more than 10 shareholders, the amalgamated corporation would not be a "joint exploration corporation".

These comments are provided in accordance with the guidelines set out in paragraph 21 of IC 70-6R2 and are not binding on the Department.

Yours truly,

A/Chief
Resource Industries Section
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch