The Taxpayer, which is not in the business of exploration and development of mineral properties, wishes to transfer the Property (which may consist of subsurface rights to explore for qualifying mineral or hydrocarbon resources) on a tax deferred basis to a taxable Canadian corporation in consideration for shares. CRA stated:
If the Taxpayer is not in the business of exploring or developing resource properties and has not acquired the Property for value, we are of the view that the Taxpayer would not have incurred any Canadian development expense (“CDE”) as defined in subsection 66.2(5) and would not have a balance in his cumulative CDE (“CCDE”) as defined in subsection 66.2(5).
However, where the Taxpayer acquired the Property for value and the Property is a CRP under paragraph (a) of the definition, the cost of the CRP would represent a Canadian oil and gas property expense (“COGPE”) of the Taxpayer that would have been added to the Taxpayer’s cumulative COGPE (“CCOGPE”) balance pursuant to element “A” of the definition of that term in subsection 66.4(5). Where the Property is a CRP pursuant to paragraph (b) of the definition, the cost of acquiring the CRP would represent a CDE that would have been added to the Taxpayer’s CCDE pursuant to element “A” of the definition of that term in subsection 66.2(5).