Ressources Eastmain Inc. v. Agence du revenu du Québec, 2021 QCCQ 4379
In finding that the recurring costs of racks and boxes incurred by an exploration company in order to store core samples were capital expenditures, Fournier J stated (at paras. 295-297, TaxInterpretations translation):
The core boxes and racks allowed for the permanent preservation of a duplicate of each sample taken during exploration, in accordance with the best practices of the exploration industry. In this sense, the expenses incurred for the purchase of core boxes and racks added value to the samples taken on the exploration sites since they were the result of a scientific process. The conservation of duplicate samples allowed the results obtained during exploration to be validated at any time.
Moreover, even if the exploration on a site lasted only one year, the expenses incurred for the purchase of the boxes and core racks would still be of a capital nature given the durable nature of the property acquired.
Nor is this a situation like Johns-Manville where the property acquired annually was, as it were, "consumed" in the mining process. That is not the case here, since the purchase of the core boxes and racks gave a lasting effect to the exploration carried out on REI's various exploration sites, which ensured an increase in value.
However, in finding that the costs of constructing dirt berms at the exploration sites to contain the escape of harmful effluent were currently deductible, Fournier J stated (at paras 317):
[T]he floor mats or environmental berms deteriorate and are damaged by bears. They must therefore be replaced each year. Even the ARQ acknowledges that the life span of these mats may not be very long, forcing REI to acquire them on an annual basis.
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|Tax Topics - Income Tax Regulations - Regulation 1206 - Subsection 1206(1) - Canadian exploration and development overhead expense - Paragraph (b)||as a junior exploration company’s CEO devoted "substantially all" (75%) of his time to exploration, his salary was not CEDOE||283|
|Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (k.1)||annual expenditures on core sample boxes and racks were excluded under para. (k.1)||105|
|Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - Canadian exploration expense - Paragraph (f)||geology course for an employee was necessary to exploration and resource identification||173|
Commissioner of Taxation v Healius Ltd,  FCAFC 173
A subsidiary (“Idameneo”) of an Australian public company provided medical centre facilities and services to doctors in consideration for 50% of the fees generated by them. In order to induce a doctor to join one of the medical centres operated by it, it would typically pay a lump sum in the range of $300,000 to $500,000 to the doctor in consideration for the doctor’s promise to conduct his or her practice from the medical centre for a specified period of around five years, along with an exclusivity covenant. The taxpayer entered into 505 such agreements in the four years that were assessed. The primary judge had found that such payments were not outgoings of “capital or of a capital nature” within the meaning of s 8-1(2)(a) of the Income Tax Assessment Act 1997 (Cth), so that they were deductible when incurred.
In finding that the payments (the “Lump Sums”) instead were capital expenditures, the Court stated (at paras 140, 144, 150 - 152):
… Just as much as the Centres needed the physical capital assets comprised by the bricks and mortar of the buildings, they also needed the capital asset of practitioner commitments to be at the Centre for five years (and thereafter subject themselves to the restraint). …
… The Lump Sum amounts were paid to achieve … lasting protection for the goodwill of the Centre. They did have an enduring character, at least to that extent.
… Each time it … made a payment of a further Lump Sum amount it was maintaining the structure of its business. It was ensuring it had in place the commitments that it needed to operate its business… .
… Those arrangements enabled Idameneo, in effect, to run the practices of the practitioners at Idameneo’s cost and in return to receive the agreed percentage of the fees earned. Its business activity was not focussed upon selling services to practitioners, it was focussed upon running the Centres and attracting patients. …
If all that Idameneo had done was to set up the Centres and then secured practitioners as customers to occupy the Centres and pay for services then term contracts with upfront lump sum payments might indeed be seen to be analogous to those made in BP Australia, National Australia Bank and Tyco. But, on the evidence, the Lump Sum amounts were not paid to secure the custom of the practitioners.
After a subsidiary (“Imageco”) of a Canadian-controlled private corporation (“Canco”) produced a film and DVD (the "CFVPs"), being Canadian film or video productions for which Imageco received the film and video production tax credit, it transferred the CFVPs to Canco. The Directorate indicated that the CFVPs likely were acquired by Canco on capital account, and were to be included as a Class 10(x) asset.
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|Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 10 - Paragraph 10(x)||full cost of CFVPs acquired by parent from production sub (which claimed the credits) added to Class 10(x)||88|