Holding resource properties in a 2nd-tier partnership on a corporate acquisition of control should not deny successored expense deductions from that partnership’s allocated income

In Devon, Hogan J concluded that where, following an acquisition of control ("AOC") of a corporation, resource properties held by it in a directly-held partnership were dropped down into a 2nd-tier partnership, the corporation could continue to claim successored resource deductions in respect of income from those resource properties which was allocated to it.

The reasoning in the case also suggests that the corporation should be entitled to such deductions where the partnership instead is wound up following the AOC, or if at the time of the AOC there was a two-tier partnership structure with the bottom partnership owning all the resource properties. The latter proposition may turn on the proposition that a corporate member of an upper tier partnership also is a member of a lower tier partnership (Major v. Brodie cf. Haughey).

Neal Armstrong. Summary of Brian R. Carr, "Devon Canada Corporation v. The Queen," Resource Sector Taxation (Federated Press), Vol. IX, No. 4, 2014, p. 677 under s. 66.7(16)(j).