Question
26. Is the Department of the view that Canadian exploration expenses ("CEE") that have been renounced to a "shareholder corporation" by a joint exploration corporation ("JEC") can then be renounced by the shareholder corporation to a third party under the terms of either the flow-through share or JEC provisions of the Act?
Answer
26. Paragraph 66(10.1)(c) deems a shareholder corporation to have incurred expenses only for purposes of the CEE and cumulative CEE definitions in the Act, not for any other purpose. Accordingly, it is the Department's position that a subsequent renunciation by a shareholder corporation under either the JEC or flow-through share provisions of the Act of CEE renounced to it under paragraph 66(10.1)(c) is not technically available, as the preambles of both subsections 66(10.1) and 66(12.6), pursuant to which CEE may be renounced under a JEC or flow-through share arrangement respectively, require the expenses to have been incurred by the party making the renunciation. Clearly, the expenses renounced by the JEC have not factually been so incurred by the shareholder corporation, and equally clearly, the JEC provisions do not deem the expenses to have been incurred by the shareholder corporation for either of subsections 66(10.1) or 66(12.6).