Hamlyn T.C.J. .

These are appeals for the Appellant’s 1986 and 1987 taxation years.

In computing income for her 1986 taxation year, the Appellant deducted, inter alia, $100,000.00 in cumulative Canadian exploration expense ("CCEE") and $33,333.33 in mining exploration depletion allowance (“MEDA”).

In computing income for her 1987 taxation year, the Appellant deducted, inter alia, $87,638.28 in CCEE and $29,212.76 in MEDA.

O’Connor T.C.J.:

This appeal was heard at Vancouver, British Columbia on July 23 and July 24, 1998 pursuant to the General Procedure of this Court.

The issue is whether subsection 55(2) of the Income Tax Act (“Act’’) was applicable to dividends totalling $1.8 million paid by two wholly owned subsidiaries to their parent corporation in the 1991 fiscal year with the result that the dividends were to be treated as proceeds of disposition on a subsequent sale by the parent of one-third of the shares of the subsidiaries.