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27 June 2018 External T.I. 2018-0742881E5 F- Royalties under Canada Petroleum Resources Act-- summary under Income-Producing Purpose Summary Under Tax Topics- Income Tax Act- Section 18- Subsection 18(1)- Paragraph 18(1)(a)- Income-Producing Purpose Canadian Petroleum royalties generally deductible Respecting whether royalties paid under the Canada Petroleum Resources Act ("CPRA") would be considered a tax on income or profit and, therefore, not be deductible in computing business income under paragraph 18(1)(a), CRA first noted that, in a month preceding the month of payout, the royalties were calculated as percentages of the gross revenue from petroleum and, thereafter, as the greater of 30% of the net revenues from petroleum, and 5% of the gross revenues from petroleum, CRA then noted that following the repeal of s. 18(1)(m), resource royalties and mining taxes have been “deductible in the computation of income, subject to the usual restrictions on the deduction of expenses for tax purposes” and then, after referencing (and misquoting) the test in s. 18(1)(a), CRA stated: [T]he amount of royalties calculated by virtue of the CPRA and its Regulations is not subject to that restriction because, inter alia, if it were not paid, a taxpayer could lose the opportunity to carry on its business and thereby earn income. ...

CRA stated: [I]t would appear that the interest earned by FA may be considered to be derived from activities that are directly related to the active business activities of Manco for the purposes of clause 95(2)(a)(i)(A)…. ...

X's capital cost ($200,000) and the amount by which that cost exceeded the proceeds of disposition ($50,000) would be deemed to be CCA deducted in preceding taxation years, whereas “the capital cost to the corporation of the building for the purposes of all other provisions of the Act would, in accordance with our position in paragraph 10(a) of … IT-217R … be considered to be Mr. ...

If no s. 107(2.11)(a) election is made, does a distribution of the appreciated property of the trust to the non-resident beneficiary necessarily result in the taxable capital gain realized on that distribution being considered to be payable to the non-resident beneficiary so that the trustee would be required to withhold Part XIII tax respecting such amount? ...

Regarding the life insurance policy, it stated that “[t]he age and health of the insured, the value of the accumulation fund, the cash surrender value and the amount of premiums paid at the date of transfer are all factors to be considered in determining the FMV.” ...

The age and health of the insured, the value of the accumulation fund, the cash surrender value and the amount of premiums paid at the date of transfer are all factors to be considered when determining the fair market value of a life insurance policy. ...

The age and health of the insured, the value of the accumulation fund, the cash surrender value and the amount of premiums paid at the date of transfer are all factors to be considered when determining the fair market value of a life insurance policy. ...

., by delivery of the currency), then the expense could only be considered to have been "incurred" within the meaning of paragraph 18(1)(a) from that time”, or under s. 18(1)(e) if there was “uncertainty as to the payment of the debt.” ...

It could not increase its taxable income under section 110.5 in year 10 in order to be considered to have U.S. source income for Canadian foreign tax credit purposes in year 10. ...

After noting that it was a question of fact whether there indeed had been a cessation of an active business (and noting in this regard that “a manufacturing business could downsize by subcontracting some of its operations and still be considered an active business”), CRA went on to indicate that it appeared that if there were such a change, the partnership would now satisfy the “income from property” branch of the test, so that the partnership interest continued to be an excluded interest, stating: [I]f the partnership has held the real property since February 22, 1994 and has derived income (business or property) from it since that time, we are of the view that the interest in such a partnership still constitutes an "excluded interest" as defined in subsection 40(3.15) to the extent that it meets all the other conditions set out there. ...