Petroleum and Gas Revenue Tax Act

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• 1Short title

  This Act may be cited as the Petroleum and Gas Revenue Tax Act.

• 2Definitions
• 2(1)

  In this Act,

• 2(1)[p3]

  approved recovery project means

• 2(1)[p3](a)

  a project certified in writing by the Minister of Natural Resources to have commenced operations after March 31, 1985 and to be a water-flood or a major expansion to a water-flood,

• 2(1)[p3](b)

  a prescribed project certified in writing by the Minister of Natural Resources to have commenced operations after 1982, or

• 2(1)[p3](c)

  a project certified in writing by the Minister of Finance and the Minister of Natural Resources as a major energy project that commenced operations after March 31, 1985; (installation approuvée de récupération)

• 2(1)[p7]

  Crown royalty of a person for a taxation year in respect of the production in the year of petroleum or gas from a well or bituminous sands, oil sands or oil shale deposit or the ownership of a natural reservoir of gas or petroleum in Canada or a bituminous sands, oil sands or oil shale deposit in Canada means the amount, if any, by which the aggregate of the amounts, exceeds the aggregate of all reimbursements referred to in section 80.2 of the Income Tax Act received or receivable by him for the year in respect of that production or ownership; (redevance à la Couronne ou redevance en faveur de la Couronne)

• 2(1)[p7](a)

  paid, payable or receivable as prescribed in respect of that production or ownership,

• 2(1)[p7](b)

  included in computing his income for the year by virtue of paragraph 12(1)(o) of the Income Tax Act in respect of that production or ownership,

• 2(1)[p7](c)

  that were not deductible in computing his income for the year by virtue of paragraph 18(1)(m) of the Income Tax Act in respect of that production or ownership,

• 2(1)[p7](d)

  by which, in respect of the disposition by him of that production, his proceeds of disposition were increased by virtue of subsection 69(6) of the Income Tax Act, and

• 2(1)[p7](e)

  by which, in respect of the acquisition by him of that production, his cost was reduced by virtue of subsection 69(7) of the Income Tax Act

• 2(1)[p13]

  crude oil means a liquid mixture of hydrocarbons, other than heavy oil, recovered from a natural reservoir in Canada; (pétrole brut)

• 2(1)[p14]

  deepened well means an oil or gas well that, after is deepened by further drilling commenced after March 31, 1985 for the purpose of producing petroleum or gas from a different accumulation of petroleum or gas; (puits approfondi de pétrole ou de gaz)

• 2(1)[p14](a)

  being capable of producing petroleum or gas from an accumulation of petroleum or gas, or

• 2(1)[p14](b)

  being drilled for the purpose of producing petroleum or gas from an accumulation of petroleum or gas and having been abandoned,

• 2(1)[p17]

  exempt percentage, for a period in respect of an approved recovery project, means a percentage approved in writing by the Minister of Natural Resources for that period in respect of the project; (pourcentage d’exonération)

• 2(1)[p18]Repealed

  Federal Court[Repealed, R.S., 1985, c. 51 (4th Supp.), s. 16]

• 2(1)[p19]

  gas means natural gas or any fluid hydrocarbon, other than a hydrocarbon that is a liquid in its naturally occurring state, recovered from a natural reservoir in Canada; (gaz)

• 2(1)[p20]Repealed

  incremental Crown royalty[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p21]Repealed

  incremental oil revenue[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p22]Repealed

  incremental payout[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p23]Repealed

  incremental production royalty[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p24]Repealed

  incremental resource royalty[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p25]

  Minister means the Minister of National Revenue; (ministre)

• 2(1)[p26]

  new deep production means that part of the production from a deepened well that is directly attributable to the deepening; (production nouvelle en profondeur)

• 2(1)[p27]Repealed

  old oil[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p28]Repealed

  old oil base price[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p29]

  payout, in respect of a royalty, has the meaning assigned by subsection 26(7) or (9), whichever is applicable; (reversement)

• 2(1)[p30]

  petroleum means crude oil or heavy oil recovered from a natural reservoir in Canada and any liquid or solid hydrocarbon recovered from a bituminous sands, oil sands or oil shale deposit in Canada; (pétrole)

• 2(1)[p31]

  production revenue means petroleum and gas production revenue within the meaning of section 5; (revenu de production)

• 2(1)[p32]

  production royalty means an amount computed by reference to the amount or value of production after December 31, 1981 of petroleum or gas, including any minimum or advance royalty payment with respect to the amount or value of production, but does not include

• 2(1)[p32](a)

  a resource royalty, or

• 2(1)[p32](b)

  an amount to which paragraph 7(e) applies paid to a person referred to therein; (redevance de production)

• 2(1)[p35]

  resource royalty means an amount, other than an amount to which paragraph 7(e) applies paid to a person referred to therein, computed by reference to the amount or value of production

• 2(1)[p35](a)

  after December 31, 1980 and before January 1, 1982, of petroleum or gas, including any minimum or advance royalty payment with respect to the amount or value of production, or

• 2(1)[p35](b)

  after December 31, 1981, of petroleum or gas, including any minimum or advance royalty payment with respect to the amount or value of such production, but not including an amount computed by reference to the amount or value of such production of petroleum or gas where

• 2(1)[p35](b)(i)

  the recipient of the amount so computed would have a Crown royalty in respect of if the definition Crown royalty were read without reference to a taxation year and if the determination of the amount of the Crown royalty under that definition were made only in respect of such production or such ownership, or

• 2(1)[p35](b)(i)(A)

  such production, or

• 2(1)[p35](b)(i)(B)

  the ownership of property to which such production relates where the Crown royalty is computed by reference to an amount of production from the property

• 2(1)[p35](b)(ii)

  the recipient of the amount so computed would, but for an exemption or allowance, other than a rate of nil, that is provided by statute by a person referred to in paragraph 7(e), have a Crown royalty determined pursuant to subparagraph (i); (redevance pétrolière)

• 2(1)[p42]

  synthetic production means the production of petroleum from a mine in a bituminous sands deposit; (production par synthèse)

• 2(1)[p43]

  synthetic production revenue means that portion of production revenue that is derived from synthetic production; (revenu de production par synthèse)

• 2(1)[p44]Repealed

  taxable incremental oil revenue[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

• 2(1)[p45]

  taxation year of a person means but in no case shall a taxation year exceed fifty-three weeks. (année d’imposition)

• 2(1)[p45](a)

  the taxation year of that person as determined for the purposes of the Income Tax Act,

• 2(1)[p45](b)

  where that person has no taxation year referred to in paragraph (a), the period for which his accounts have been ordinarily made up for the purposes of assessment under this Act, or

• 2(1)[p45](c)

  where neither paragraph (a) nor (b) applies in respect of the person, such taxation year as may be adopted by the person,

• 2(2)Other words and expressions

  All words and expressions used in this Act and not otherwise defined have, with such modifications as the circumstances require, the same meanings as in the Income Tax Act.

• 2(3)Trusts

  A trust shall, for the purposes of this Act, and without affecting the liability of the trustee or legal representative for his own tax under this Act, be deemed to be, in respect of the trust property, an individual.

• 2(4)Changes in taxation year

  No change in the taxation year of a person shall be made for the purposes of this Act unless the Minister consents in writing to the change.

• 2(5)Interpreting tax imposed

  For greater certainty and notwithstanding anything in any other Act of Parliament or anything approved, made or declared to have the force of law thereunder, a tax imposed under this Act shall, for all purposes, be deemed not to be an income or profits tax, a surtax or an excess profits tax.

• 2(6)Associated corporations

  For the purposes of this Act, one corporation is associated with another corporation in a taxation year if

• 2(6)(a)

  the corporations are associated with each other in the year by virtue of a direction made under subsection 247(2) of the Income Tax Act; or

• 2(6)(b)

  the corporations would be associated with each other in the year by virtue of section 256 of the Income Tax Act, if the references in paragraphs (1)(c) to (e) thereof to “capital stock thereof” were read as references to “capital stock thereof, or had an equity percentage (within the meaning of paragraph 95(4)(b)) in each corporation of not less than 10%”.

• 2(7)Deeming of association

  Where, in the case of two or more corporations, the Minister is satisfied the corporations shall, if the Minister so directs, be deemed, for the purposes of this Act, to be associated with each other in the year.

• 2(7)(a)

  that

• 2(7)(a)(i)

  the separate existence of the corporations in a taxation year is not solely for the purpose of carrying out the business of the corporations in the most effective manner, and

• 2(7)(a)(ii)

  one of the main reasons for the separate existence in the year is to reduce the amount of tax that would be payable under this Act, or

• 2(7)(b)

  that the corporations have at any time entered into an agreement or transaction that lacks any substantial business purpose other than to increase the aggregate deduction from tax allowed to the corporations under subsection 10(1) in a taxation year,

• 2(8)Idem

  Where two corporations are associated by virtue of subsection (6) or (7), or are deemed by this subsection to be associated with the same corporation at the same time, they shall, for the purposes of this Act, be deemed to be associated with each other.

• 2(9)Deeming of non-association

  Where all the shares and rights to acquire shares of the capital stock of a corporation are owned directly or indirectly by one or more registered pension funds or plans and the corporation would, but for this subsection, be associated with another corporation in a taxation year under paragraph (6)(b) by reason that the corporations are controlled by the same trustee or trustees, the corporations shall be deemed not to be associated with each other in the year unless one of the main reasons for the separate existence of the corporations in the year is to reduce the amount of tax that would otherwise be payable under this Act.

• 2(10)Appeal

  On an appeal from an assessment made pursuant to a direction of the Minister under subsection (7), the Tax Court of Canada may

• 2(10)(a)

  confirm the direction;

• 2(10)(b)

  vacate the direction if

• 2(10)(b)(i)

  in the case of a direction under paragraph (7)(a), it determines that none of the main reasons for the separate existence of the corporations was to reduce the amount of tax payable under this Act, or

• 2(10)(b)(ii)

  in the case of a direction under paragraph (7)(b), it determines that the agreement or transaction referred to in that paragraph had a substantial business purpose, other than to increase the aggregate deduction from tax allowed under subsection 10(1); or

• 2(10)(c)

  vary the direction and refer the matter back to the Minister for reassessment.

• 2(11)Certification of prescribed project

  The Minister of Natural Resources shall not certify

• 2(11)(a)

  a project for the purposes of paragraph (a) of the definition “approved recovery project” in subsection (1) unless a request for the certification is filed with the Minister of Natural Resources within 180 days after the project commenced operations; or

• 2(11)(b)

  a prescribed project to have commenced operations after 1982 for the purposes of paragraph (b) of the definition “approved recovery project” in subsection (1) unless a joint election made under subsection 5(9) in respect of the project has been filed with the Minister of National Revenue in accordance with subsection 5(10).

• 2(12)Late-filed request

  Where, in the opinion of the Minister of Natural Resources, the circumstances of a case are such that it would be just and equitable to permit a request for certification to be filed under paragraph (11)(a) after the day on or before which it is required by that paragraph to be filed, that Minister may permit the request to be filed after that day and, where the request is filed pursuant to the permission, the request shall be deemed to have been filed on the day on or before which it is required to be filed.

• 2.1Application restricted

  This Act does not apply in respect of income or loss of a taxpayer from a source that is

• 2.1(a)

  the production after September 1986 of petroleum or gas;

• 2.1(b)

  the processing in Canada after September 1986 of petroleum to any stage that is not beyond the stage of crude oil or its equivalent; or

• 2.1(c)

  any amount received or receivable by the taxpayer as, on account of or in lieu of payment of, or in satisfaction of, a production royalty or resource royalty computed by reference to the amount or value of production after September 1986 of petroleum or gas.

• 3Binding on Her Majesty

  This Act is binding on Her Majesty in right of Canada or any province.

• 4Tax payable

  A tax shall be paid as required by this Part on the production revenue of every person for each taxation year.

• 5Production revenue defined
• 5(1)

  Petroleum and gas production revenue of a taxpayer for a taxation year is the amount, if any, by which the aggregate of all amounts each of which is the income of the taxpayer for the year from a source that is exceeds computed in accordance with the Income Tax Act, if that Act were read without reference to paragraph 81(1)(r) thereof, on the assumption that the taxpayer had during the year no income or loss except from those sources and was allowed no deduction in computing his income for the year in respect of

• 5(1)(a)

  the production before October 1986 of petroleum or gas,

• 5(1)(b)

  the processing in Canada before October 1986 of petroleum to any stage that is not beyond the stage of crude oil or its equivalent, or

• 5(1)(c)

  an amount received or receivable by the taxpayer as a production royalty or resource royalty computed by reference to the amount or value of production after 1985 and before October 1986,

• 5(1)(d)

  the aggregate of all amounts each of which is the loss of the taxpayer for the year from a source referred to in paragraph (a), (b) or (c),

• 5(1)(e)

  any amount, other than a prescribed amount, deductible in computing the taxpayer’s income for the year by virtue of section 20 (other than paragraph (1)(q), (s), (w), (x), (y) or (ii) thereof), 37 or 37.1, subsection 104(6) or (12) or Subdivision e of Division B of Part I of the Income Tax Act or the Income Tax Application Rules, 1971,

• 5(1)(f)

  the amount of any consideration paid or payable, other than a resource royalty or a production royalty, that may reasonably be considered to be for the use of, the right to use, or the preservation of any rights in respect of, property,

• 5(1)(g)

  any payout in respect of a production royalty or resource royalty received by the taxpayer that was computed by reference to the amount or value of production before 1986,

• 5(1)(h)

  any amount paid before 1981 in respect of the amount or value of production of petroleum or gas after 1980,

• 5(1)(i)

  any resource royalty or production royalty in respect of the year that was computed by reference to the amount or value of production before 1986 and was not paid on or before the day that is sixty days after the end of the year,

• 5(1)(i.1)

  any resource royalty in respect of the year, computed by reference to the amount or value of production after 1985, that is

• 5(1)(i.1)(i)

  payable by the taxpayer to a non-resident person who would be liable to taxation thereon under subsection 26(1) if he had received the resource royalty, and

• 5(1)(i.1)(ii)

  not paid by the taxpayer on or before the later of the day that is 60 days after the end of the year and February 28, 1987,

• 5(1)(j)

  any amount, other than a prescribed amount, paid or payable as a royalty, tax, lease rental or bonus referred to in paragraph 7(e),

• 5(1)(k)

  any deduction except to the extent that it may reasonably be considered to be applicable to those sources, and

• 5(1)(l)

  any resource royalty or production royalty computed by reference to the amount or value of production after September 1986.

• 5(2)Rules for calculating income

  For the purposes of computing the income of a taxpayer for a taxation year from any source referred to in subsection (1),

• 5(2)(a)

  where petroleum is processed to any stage that is beyond the stage of crude oil or its equivalent, the petroleum shall be deemed to be disposed of at the time that it reaches the crude oil stage or its equivalent for proceeds of disposition equal to its fair market value at that time;

• 5(2)(b)

  where petroleum or gas produced or processed by a taxpayer is used or consumed at any time by that taxpayer for any purpose, other than a prescribed purpose, it shall be deemed to be disposed of by him at that time for proceeds of disposition equal to its fair market value at that time;

• 5(2)(c)

  where an amount has been included in computing a taxpayer’s income for the year or a previous taxation year in respect of petroleum or gas not delivered before the end of the year,

• 5(2)(c)(i)

  there shall be deducted in computing the income of the taxpayer for the year a reasonable amount as a reserve in respect of petroleum or gas that it is reasonably anticipated will have to be delivered after the end of the year,

• 5(2)(c)(ii)

  there shall be included in computing the income of a taxpayer for the year any amount so deducted in computing his income for the immediately preceding taxation year, except to the extent that the amount may reasonably be attributed to petroleum or gas produced after September 1986 and delivered before the end of the year, and

• 5(2)(c)(iii)

  there shall be deducted in computing the income of the taxpayer for the year any repayment in the year by the taxpayer of an amount that has been included in computing his income for the year or a previous taxation year for the purposes of this Act in respect of petroleum or gas not delivered before the end of the year;

• 5(2)(c.1)

  where, in computing the income of a taxpayer for a taxation year, amounts are included in respect of petroleum or gas not delivered before the end of the year and the taxpayer has paid a reasonable amount in a particular taxation year to another taxpayer for undertaking to deliver the petroleum or gas, the taxpayers may jointly elect to be bound by the following subparagraphs by filing with the Minister a notice in writing on or before the earliest day on or before which either of the taxpayers is required under section 11 to file a return of production revenue for the taxation year in which the payment to which the election relates is made:

• 5(2)(c.1)(i)

  the payment may be deducted in computing the income for the particular year of the taxpayer who made the payment and no amount is deductible in respect of the petroleum or gas under subparagraph (c)(i) in computing the income of that taxpayer for that or any subsequent taxation year, and

• 5(2)(c.1)(ii)

  the taxpayer who received the payment shall be deemed to have received the payment in the course of a business on account of petroleum or gas not delivered before the end of the taxation year in which the payment was received and the payment shall be included in computing the income of that taxpayer for that year;

• 5(2)(d)

  there shall be included any amount required to be included in computing the income of the taxpayer by virtue of paragraph 12(1)(o) of the Income Tax Act that may reasonably be regarded as being in relation to the production of petroleum or gas before October 1986;

• 5(2)(e)

  there may be deducted such amount as an allowance, if any, in respect of the income of the taxpayer for the year from a source referred to in paragraph (1)(a), (b) or (c) as is allowed to the taxpayer by regulation; and

• 5(2)(f)

  there shall be deducted

• 5(2)(f)(i)

  in computing the income of the taxpayer for the 1984 taxation year, any amount that would be deductible in the year by virtue of paragraph 20(1)(mm) of the Income Tax Act if the reference in that paragraph to “injected before that time” were read as “injected after 1980 and before that time”, and

• 5(2)(f)(ii)

  in computing the income of the taxpayer for a taxation year ending after 1984, any amount that would be deductible in the year by virtue of paragraph 20(1)(mm) of the Income Tax Act if the reference in that paragraph to “injected before that time” were read as “injected in the year and before October 1986”.

• 5(2.1)Deduction for synthetic production

  A taxpayer may deduct in computing his production revenue for a taxation year an amount equal to that portion of the taxpayer’s synthetic production revenue for the year that may reasonably be attributed to production of petroleum after April 1986 and before October 1986.

• 5(3)Deduction of royalties

  Where a resource royalty or production royalty is not deductible in computing the production revenue of a taxpayer for a taxation year by virtue only of paragraph (1)(i), the resource royalty or production royalty may be deducted by the taxpayer in computing his production revenue for the subsequent taxation year in which the royalty is paid.

• 5(3.1)Idem

  Where a resource royalty is not deductible in computing the production revenue of a taxpayer for a taxation year by virtue only of paragraph (1)(i.1), the resource royalty may be deducted by the taxpayer in computing the taxpayer’s production revenue for the subsequent taxation year in which the royalty is paid.

• 5(3.2)Individual deduction

  An individual, other than a trust, may deduct in computing his production revenue for the 1986 taxation year an amount not exceeding $1,500,000.

• 5(4)Royalties re production before 1982

  Notwithstanding subsections (1) and (3), not more than one-half of any resource royalty computed by reference to the amount or value of production before 1982 may be deducted in computing the production revenue of a taxpayer that may reasonably be attributed to a period after 1981.

• 5(5)Corporation as beneficiary under a trust

  Where a corporation is a beneficiary under a trust, an amount that may, having regard to all the circumstances including the terms and conditions of the trust arrangement, reasonably be considered to be the corporation’s share of an amount that would be the production revenue of the trust for a taxation year that may reasonably be attributed to the period in the year commencing after the later of May 31, 1982 and the date the corporation first became a beneficiary under the trust, if shall, if so designated by the trust in respect of the corporation in the trust’s return of production revenue for the year and not designated by the trust in respect of any other beneficiary thereunder, be deemed to be production revenue of the corporation for the taxation year of the corporation in which the taxation year of the trust ended.

• 5(5)(a)

  subsection (1) were read without reference to paragraph (c) thereof,

• 5(5)(b)

  the reference in paragraph (1)(d) to “paragraph (a), (b) or (c)” were read as a reference to “paragraph (a) or (b)”, and

• 5(5)(c)

  the reference to “a production royalty” in paragraph (1)(f) were read as a reference to “production royalty in respect of production of petroleum or gas of the trust”,

• 5(5.1)Taxpayer as beneficiary under trust

  Where a taxpayer is a beneficiary under a trust, an amount, other than an amount deemed to be production revenue of the taxpayer pursuant to subsection (5), that may, having regard to all the circumstances, including the terms and conditions of the trust arrangement, reasonably be considered to be the taxpayer’s share of such portion of the production revenue of the trust for a taxation year as may reasonably be attributed to the period in the year commencing on the latest of shall, if so designated by the trust in respect of the taxpayer in the trust’s return of production revenue for the year and not designated under this section by the trust in respect of any other beneficiary thereunder, be deemed to be production revenue of the taxpayer for the taxation year of the taxpayer in which the taxation year of the trust ended.

• 5(5.1)(a)

  the first day of the year,

• 5(5.1)(b)

  January 1, 1986, and

• 5(5.1)(c)

  the date on which the taxpayer first became a beneficiary under the trust,

• 5(5.2)Non-application of subsection (5.1)

  Subsection (5.1) does not apply in respect of a non-resident person not carrying on a business described in subparagraph 66(15)(h)(i) of the Income Tax Act through one or more fixed places of business in Canada.

• 5(6)Presumption of payment of tax

  Where an amount, referred to in this subsection as the “designated amount”, included in the production revenue of a trust for a taxation year is designated by the trust under subsection (5) or (5.1) in respect of a taxpayer, the amount of the tax paid by the trust on its production revenue for the year that may reasonably be considered to relate to the designated amount shall be deemed to have been paid by the taxpayer on account of the tax payable under this Part by the taxpayer on the production revenue of the taxpayer for the taxpayer’s taxation year in which the taxation year of the trust ended.

• 5(7)Repealed

  [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 3]

• 5(8)Income deductions and inclusions

  For the purposes of computing the income of a taxpayer for a taxation year from a source referred to in paragraph (1)(a) or (b),

• 5(8)(a)

  subject to subsection (9), there shall be deducted in respect of a particular prescribed project, the amount equal to the lesser of

• 5(8)(a)(i)

  the production revenue of the taxpayer for the year that may reasonably be attributable to the production after December 31, 1982 of petroleum or gas or the processing after December 31, 1982 of petroleum to any stage that is not beyond the stage of crude oil or its equivalent from a prescribed reservoir in which the project is located, computed on the assumption that for the year the taxpayer was allowed no deductions under paragraph (2)(e) or this paragraph, and

• 5(8)(a)(ii)

  the cumulative enhanced recovery capital expense of the taxpayer at the end of the year in respect of the project; and

• 5(8)(b)

  there shall be included, in respect of a particular prescribed project, the amount, if any, by which exceeds

• 5(8)(b)(i)

  the aggregate of all amounts referred to in paragraphs 6(2)(e) to (k) that would be taken into account in computing the taxpayer’s cumulative enhanced recovery capital expense at the end of the year in respect of the project

• 5(8)(b)(ii)

  the aggregate of all amounts referred to in paragraphs 6(2)(a) to (d) that would be taken into account in computing the taxpayer’s cumulative enhanced recovery capital expense at the end of the year in respect of the project.

• 5(9)Election respecting deductions

  Where all taxpayers who in respect of a prescribed project, jointly make a valid election not to make any deductions under paragraph (8)(a) in respect of the project, deductions shall not be made under that paragraph in respect of the project in computing the income of any taxpayer for any taxation year.

• 5(9)(a)

  have made or incurred prescribed exploration and development expenses,

• 5(9)(b)

  have acquired prescribed enhanced recovery equipment, or

• 5(9)(c)

  are obligated to make or incur prescribed exploration and development expenses or to acquire prescribed enhanced recovery equipment,

• 5(10)Filing of election

  An election referred to in subsection (9) in respect of a prescribed project is not valid unless it is made in prescribed form and is filed with the Minister on or before the earliest day on or before which any taxpayer who is required to join in the election is required under section 11 to file a return of production revenue for the taxation year in which the taxpayer first in respect of the project.

• 5(10)(a)

  makes or incurs a prescribed exploration and development expense, or

• 5(10)(b)

  acquires prescribed enhanced recovery equipment,

• 5(11)Election binding on all interests

  Where an election in respect of a prescribed project is filed in accordance with subsection (10), any taxpayer who at any time thereafter in respect of the project shall be deemed to have joined in the election and is bound by it.

• 5(11)(a)

  makes or incurs prescribed exploration and development expenses, or

• 5(11)(b)

  acquires prescribed enhanced recovery equipment,

• 5(12)Late-filed request

  Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable to permit an election to be filed under subsection (10) after the day on or before which it is required by that subsection to be filed, the Minister may permit the election to be filed after that day and, where the election is filed pursuant to the permission, the election shall be deemed to have been filed on the day on or before which it is required to be filed.

• 6Definition of “proceeds of disposition”
• 6(1)

  In this section, proceeds of disposition has, subject to subsection (4), the same meaning as in section 13 of the Income Tax Act.

• 6(2)Definition of “cumulative enhanced recovery capital expense”

  For the purposes of subsection 5(8), cumulative enhanced recovery capital expense of a taxpayer in respect of a particular prescribed project at any time in a taxation year means the amount, if any, by which the aggregate of exceeds the aggregate of all amounts each of which is

• 6(2)(a)

  the aggregate of all prescribed exploration and development expenses made or incurred by the taxpayer after 1982, before October 1986 and before that time in respect of the project,

• 6(2)(b)

  the amount by which the capital cost to the taxpayer of each property that is prescribed enhanced recovery equipment acquired by the taxpayer after 1982, before October 1986 and before that time for use in the project exceeds any amount included therein that is in respect of financing,

• 6(2)(c)

  the aggregate of all amounts in respect of the project required by paragraph 5(8)(b) to be included in computing the taxpayer’s production revenue for his taxation years ending before that time, and

• 6(2)(d)

  any amount referred to in paragraph (f), (g) or (h) that is established by the taxpayer to have become a bad debt before October 1986 and before that time

• 6(2)(e)

  any amount deductible by the taxpayer under paragraph 5(8)(a) for a taxation year ending before that time in respect of the project,

• 6(2)(f)

  any amount that became receivable by the taxpayer before that time, as a result of a transaction that occurred after 1982 and before October 1986 for which the consideration given by the taxpayer was property, other than a share or Canadian resource property or an interest therein or a right thereto, or services, the original cost of which to the taxpayer may reasonably be regarded as having been an expense referred to in paragraph (a) in respect of the project,

• 6(2)(g)

  any amount that is, in respect of a disposition before October 1986 and before that time of a property referred to in paragraph (b), the lesser of

• 6(2)(g)(i)

  the proceeds of disposition of the property minus any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, and

• 6(2)(g)(ii)

  the amount by which the capital cost to the taxpayer of the property exceeds any amount that is included therein that is in respect of financing,

• 6(2)(h)

  any amount that became receivable by the taxpayer after 1982, before October 1986 and before that time, in respect of an expense referred to in paragraph (a) in respect of the project, from another person pursuant to an agreement between the taxpayer and that other person to unitize the field in which the project is located,

• 6(2)(i)

  any amount received before October 1986 and before that time on account of any amount referred to in paragraph (d),

• 6(2)(j)

  any amount of assistance or benefit that the taxpayer has received or is entitled to receive before that time in respect of any expense referred to in paragraph (a) in respect of the project, whether the amount is by way of grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit, or

• 6(2)(k)

  any amount of assistance or benefit that the taxpayer has received or is entitled to receive before that time in respect of the cost of property referred to in paragraph (b) in respect of the project, whether the amount is by way of grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit, to the extent that the amount has not been deducted in determining the capital cost of the property.

• 6(3)Where taxpayer member of partnership

  For the purposes of subsection (2), where a taxpayer was a member of a partnership at the end of a fiscal period of the partnership,

• 6(3)(a)

  any property acquired or disposed of by the partnership shall be deemed to have been acquired or disposed of by the taxpayer to the extent of his share thereof;

• 6(3)(b)

  any property deemed by paragraph (a) to have been acquired or disposed of by the taxpayer shall be deemed to have been acquired or disposed of by him on the day the property was acquired or disposed of by the partnership;

• 6(3)(c)

  if the partnership has received, or is entitled to receive, an amount referred to in paragraph (2)(j) or (k), the taxpayer shall be deemed to have received, or to be entitled to receive, the amount to the extent of his share thereof, on the day the partnership received, or is entitled to receive, the amount;

• 6(3)(d)

  any expenditure incurred or expense recovered by the partnership shall be deemed to have been incurred or recovered, as the case may be, by the taxpayer to the extent of his share thereof;

• 6(3)(e)

  any expenditure or expense deemed by paragraph (d) to have been incurred or recovered, as the case may be, by the taxpayer shall be deemed to have been incurred or recovered by him on the day the expenditure was incurred or the expense was recovered by the partnership;

• 6(3)(f)

  if an amount referred to in paragraph (2)(f) or (h) has become receivable by the partnership, the amount shall be deemed to have become receivable by the taxpayer, to the extent of his share thereof, on the day the amount became receivable by the partnership;

• 6(3)(g)

  any amount referred to in paragraph (2)(f), (g) or (h) in respect of the partnership that is established by the partnership to have become a bad debt before a particular time shall be deemed to have become an amount referred to in that paragraph that was established by the taxpayer to have become a bad debt before the particular time to the extent of his share thereof; and

• 6(3)(h)

  any amount referred to in paragraph (2)(i) received by the partnership shall be deemed to be an amount referred to in that paragraph received by the taxpayer at the time it was received by the partnership to the extent of the taxpayer’s share thereof.

• 6(4)Proceeds of disposition of property

  For the purposes of subsection (2), where a taxpayer disposes of a property referred to in paragraph (2)(b), his proceeds of disposition shall be deemed to be the greater of

• 6(4)(a)

  his actual proceeds of disposition, and

• 6(4)(b)

  the fair market value of the property.

• 6(5)Interpretation

  For the purposes of subsection (6),

• 6(5)[p174]

  former corporation means, in respect of

• 6(5)[p174](a)

  an amalgamation of corporations, a “predecessor corporation” described in subsection 87(1) of the Income Tax Act, or

• 6(5)[p174](b)

  a winding-up of a corporation, a “subsidiary” described in subsection 88(1) of the Income Tax Act; (personne morale remplacée)

• 6(5)[p177]

  successor corporation means, in respect of

• 6(5)[p177](a)

  an amalgamation of corporations, a “new corporation” described in subsection 87(1) of the Income Tax Act, or

• 6(5)[p177](b)

  a winding-up of a corporation, a “parent” described in subsection 88(1) of the Income Tax Act. (personne morale remplaçante)

• 6(6)Rules where amalgamation or winding-up

  Notwithstanding subsection (4), where at a particular time after December 31, 1982 there is an amalgamation of corporations within the meaning of subsection 87(1) of the Income Tax Act or a winding-up of a corporation as described in subsection 88(1) of that Act, the following rules apply for the purposes of subsection 5(8) and this section in respect of the successor corporation after the particular time:

• 6(6)(a)

  any prescribed exploration and development expense made or incurred by a former corporation shall be deemed to be a prescribed exploration and development expense made or incurred by the successor corporation at the time when the expense was made or incurred by the former corporation;

• 6(6)(b)

  any prescribed enhanced recovery equipment acquired by a former corporation shall be deemed to have been acquired by the successor corporation at the time when it was acquired by the former corporation, and that property shall be deemed to be prescribed enhanced recovery equipment acquired by the successor corporation at a capital cost to it equal to the capital cost of the property to the former corporation;

• 6(6)(c)

  any amount in respect of a particular prescribed project required by paragraph 5(8)(b) to be included in computing a former corporation’s production revenue for a taxation year of the former corporation shall be deemed to have been an amount in respect of the project required by paragraph 5(8)(b) to be included in computing the successor corporation’s production revenue for a taxation year of the successor corporation ending before the particular time;

• 6(6)(d)

  any amount referred to in paragraph (2)(f), (g) or (h) in respect of a former corporation that was established by a former corporation to have become a bad debt before the particular time shall be deemed to have been an amount referred to in that paragraph that was established by the successor corporation to have become a bad debt before the particular time;

• 6(6)(e)

  any amount in respect of a particular prescribed project that was deductible by a former corporation under paragraph 5(8)(a) for a taxation year of the former corporation shall be deemed to be an amount deductible in respect of the project by the successor corporation under paragraph 5(8)(a) for a taxation year of the successor corporation ending before the particular time;

• 6(6)(f)

  any amount referred to in paragraph (2)(f) or (h) in respect of a particular prescribed project that became receivable by a former corporation shall be deemed to be an amount referred to in that paragraph in respect of the project that became receivable by the successor corporation before the particular time;

• 6(6)(g)

  any amount referred to in paragraph (2)(g) in respect of a disposition by a former corporation shall be deemed to be an amount referred to in that paragraph in respect of a disposition by the successor corporation before the particular time;

• 6(6)(h)

  any amount referred to in paragraph (2)(i) received by a former corporation shall be deemed to be an amount referred to in that paragraph received by the successor corporation before the particular time;

• 6(6)(i)

  any amount of assistance or benefit referred to in paragraph (2)(j) or (k) that a former corporation has received or was entitled to receive shall be deemed to be an amount of assistance or benefit referred to in that paragraph that the successor corporation received or was entitled to receive before the particular time; and

• 6(6)(j)

  the successor corporation shall be deemed to have been in existence throughout the period in which the former corporation was in existence.

• 6(7)Deemed disposition

  For the purposes of this section, any transaction or event entitling a taxpayer to proceeds of disposition of property shall be deemed to be a disposition of that property by the taxpayer.

• 7Income or loss from a source
• 7(1)

  Income or loss from a source described in section 5 does not include

• 7(1)(a)

  income or loss from transporting or transmitting petroleum or refining crude oil or its equivalent;

• 7(1)(b)

  income or loss from transporting, transmitting or processing gas, other than treating gas to remove water and other impurities;

• 7(1)(c)

  any amount on which tax under Part II is required to be deducted or withheld that is a resource royalty or that is a production royalty received after December 31, 1983;

• 7(1)(d)

  any amount required by section 13 of the Income Tax Act to be included in computing the taxpayer’s income for the year;

• 7(1)(e)

  with respect to a royalty, tax, lease rental or bonus received or receivable by a person described in subparagraph (i), (ii) or (iii) by virtue of an obligation imposed by statute or a contractual obligation substituted for an obligation imposed by statute;

• 7(1)(e)(i)

  Her Majesty in right of Canada or a province,