Prod Co, a wholly owned subsidiary of M Co and a "qualified corporation," produces a Canadian film or video production ("CFVP") at a cost of $1,900,000 that is intended to be eligible for the s. 125.4(3) credit. The Directorate stated:
[Y]ou requested that we assume that Prod Co has legal and beneficial ownership of the copyright in the CFVP (the film). In this regard, applying the CRA's position set out in paragraph 4 of Interpretation Bulletin IT-441, a third party (e.g., a distributor) could be considered to have acquired all beneficial ownership rights in the copyright in a production, if the production company grants to that third party all of the revenues from the distribution or the right to distribute or otherwise exploit the film in markets representing most or all of the exploitable value of the film. Such an acquisition would also take place if the producer transferred the entire exploitable value of the production during the foreseeable commercial life of the production and the rights subsequently reverted to the producer. If this were the case, the production would be an "excluded production" [under Reg. 1106(1)].