5-910096
Dear Sirs:
Re: Successor Corporations Subsection 66.2(5) 66.7(4) and 66.7(14) of the Income Tax Act (the "Act")
Your letter dated December 28, 1990 requests a technical interpretation of the above-mentioned provisions of the Act in relation to a hypothetical situation described herein.
HYPOTHETICAL SITUATION
The facts in the hypothetical situation which you provided are as follows:
1. A predecessor owner of oil and gas properties has disposed of all intangible rights of the properties for $100 at a point in time when the only available resource pool is $200 of Canadian development expense("CDE") of an original owner.
2. The disposition takes place under circumstances such that the successor corporation rules contained in section 66.7 of the Act apply.
3. The predecessor owner has not incurred any Canadian oil and gas property expense ("COGPE"), does not have any COGPE of an original owner available to it and consequently will have an amount of $100 determined under subsection 66.4(1) at its year-end.
4. The predecessor owner has not incurred any CDE and pursuant to subparagraph 66.2(5)(b)(x) of the Act, the subsection 66.4(1) amount of $100 would cause the predecessor owner's cumulative GDE to be negative.
Your Questions
The question, in your view, is whether the $100 which is included in subparagraph 66.2(5)(b)(x) can be offset by $100 of the $200 of cumulative CDE ("CCDE") "determined at that time under paragraph 66.7(4)(a)" under clause 66.2(5)(b)(x)(A).
You have also alluded to the possible relevance of subsection 66.7(14) to the interpretation of clause 66.2(5)(b)(x)(A).
Our Comments
We acknowledge your questions and concerns but we are unable to comment at this time because we have previously referred these questions to the Department of Finance and are presently awaiting their reply.
The above comments are merely the expressions of opinion of those Revenue Canada officials named herein and as such should not be construed as advance income tax rulings, nor are they binding on the Department. Our practice is to make this specific disclaimer in all instances in which we provide an opinion. We refer you in this respect to paragraphs 21 and 22 of Information Circular 70-5R2.
Yours truly,
Section Chief Resource Industries SectionBilingual Services and Resource Industries DivisionRulings Directorate