,canada ,cu/oms                       #a
& ,rev5ue ,ag5cy

          ,9t]pret,n ,bullet9
    
,subject3 ,9come ,tax ,act
  ,explor,n & ,develop;t ,exp5ses--,m1n+
  ( ,pr9cipal-,busi;s ,corpor,n
,numb]3 ,,it-#djj
,date3 ,novemb] #ad1 #aigg
,ref];e3 ,p>agraph #ff7#ae77h7

#a4 ,? bullet9 \tl9es ! crit]ia =
  det]m9+ :e!r a corpor,n qualifies z a
  8pr9cipal-busi;s corpor,n01 z t t]m is
  def9$ 9 p>agraph #ff7#ae77h7 (! ,9come
  ,tax ,act4
#b4 ,qualific,n z a pr9cipal-busi;s
  corpor,n may 2 important =a taxpay] 9
  3nec;n )! foll[+ provi.ns (! ,act3
  7a7 ,subsec;ns #ff7#a7 & #ff.a7#b7--
    ,special rules = -put+ ! am.t
    deducti# 0a pr9cipal-busi;s corpor,n
    =a tax,n ye> 9 respect ( xs
    ,canadian explor,n & develop;t
               ,,it-#djj             a#a
    exp5ses & cumulative ,canadian
    explor,n exp5se4
  7b7 ,subsec;ns #ff.a7#d7 & 7#e7--
    ,special rules = -put+ ! am.t
    deducti# 0a pr9cipal-busi;s corpor,n
    7: is a su3essor or second su3essor
    corpor,n7 =a tax,n ye> 9 respect (a
    pr$ecessor corpor,n's cumulative
    ,canadian explor,n exp5se4 7,if
    subsec;n #bh7#a7 ( ,bill ;,c-#ef is
    5act$ z pres5tly writt5 = #aigg &
    subsequ5t tax,n ye>s1 subsec;ns
    #ff.a7#d7 & 7#e7 w no l;g] 4t+ui% 2t
    su3essor or second su3essor
    corpor,ns t >e pr9cipal-busi;s
    corpor,ns & ^? t >e n47
  7c7 ,p>agraph #ff7#ae77g7--,require;t
    =a 8jo9t explor,n corpor,n0 6be a
    pr9cipal-busi;s corpor,n4 7,s* a
    corpor,n may ren\nce xs ,canadian
    explor,n & develop;t exp5ses1
    ,canadian explor,n exp5ses1 &
    ,canadian develop;t exp5ses 9 favor
    ( xs %>ehold] corpor,ns1 pursuant
               ,,it-#djj             b#a
    6subsec;ns #ff7#aj71 7#aj.a71 &
    7#aj.b747
  7d7 ,p>agraph #ei7#a.a77b7--,require;t
    6deduct1 9 -put+ a pr9cipal-busi;s
    corpor,n's cumulative ,canadian
    develop;t exp5se1 ! proce$s f !
    4posi;n (a "r1 lic;e1 or privilege
    describ$ 9 subsec;n #hc;,a7#e;a7 (!
    =m] ,act1 acquir$ 2f #aigb4
  7e7 ,subsec;n #ff7#e7--,5title;t (a
    pr9cipal-busi;s corpor,n ^: busi;s
    9cludes trad+ 9 res\rce prop]ties 6!
    applic,n ( sec;ns #ei1 #fd1 #ff.a1 &
    #ff.b & subsec;ns #ff7#c7 & 7#d74
    7,^! provi.ns >e n applica# 6a
    taxpay]1 o!r ?an a pr9cipal-busi;s
    corpor,n1 ^: busi;s 9cludes s*
    trad+47
#c4 ,= purposes (! provi.ns ref]r$ 6in
  7a7 & 7b7 (! prec$+ p>agraph1 x is !
  corpor,n's /atus z a pr9cipal-busi;s
  corpor,n =! tax,n ye> 9 : ! deduc;n =
  explor,n & develop;t exp5ses is
  claim$1 & n =! tax,n ye> 9 : s*
               ,,it-#djj             c#a
  exp5ses >e 9curr$1 t is relevant4
  ,?us1 ": a corpor,n qualifies z a
  pr9cipal-busi;s corpor,n 9 a "picul>
  tax,n ye>1 x may claim ! deduc;n 6: x
  is 5titl$ 9 t ye> z a pr9cipal-busi;s
  corpor,n
--------------------------------------#b
  9 respect ( exp5ses ( previ\s ye>s1
  )\t reg>d 6:e!r ! corpor,n 0 a
  pr9cipal-busi;s corpor,n at ! "t s*
  exp5ses 7 9curr$4
#d4 ,a corpor,n qualifies z a 8pr9cipal-
  busi;s corpor,n0 z def9$ 9 p>agraph
  #ff7#ae77h71 if xs pr9cipal busi;s
  op],ns >e (a k9d or any -b9,n (! k9ds
  specifi$ 9 t p>agraph4
#e4 ,! "q ( :e!r ! pr9cipal busi;s
  op],ns (a corpor,n >e (! k9ds specifi$
  9 p>agraph #ff7#ae77h7 is "o ( fact t
  m/ 2 det]m9$ 0ref];e 6all (! surr.d+
  circum/.es1 & 9 "picul>1 af a review (
  all (! v>i\s activities c>ri$ on 0!
  corpor,n4

               ,,it-#djj             a#b
#f4 ,9 det]m9+ :e!r a corpor,n qualifies
  z a pr9cipal-busi;s corpor,n1 xs
  activities =! full tax,n ye> m/ 2
  3sid]$1 n j ! activities at a "picul>
  po9t 9 "t 7see al #ae 2l74 ,al1 !
  busi;s op],ns (! -pany z a :ole %d 2
  3sid]$1 n only ! -pany's op],ns 9
  ,canada4

       ,qualify+ ,busi;s ,op],ns
             7p>agraph #g7
    
#g4 ,"s (! qualify+ busi;s op],ns 9clud$
  9 p>agraph #ff7#ae77h7 >e 4cuss$ 9 #h
  6#aa 2l4 ,! manage;t & adm9i/rative
  func;ns : >e nec 6! 3duct (! busi;s
  op],ns ref]r$ 6in p>agraph #ff7#ae77h7
  >e 3sid]$ 6be an 9tegral "p ( ^?
  op],ns4





      ,produc;n1 ref9+1 or m>ket+    b#b
         ( petroleum1 petroleum
        products1 or natural gas
     7subp>agraph #ff7#ae77h77;i77
             7p>agraph #h7
    
#h4 ,9 ref];e 6petroleum products1 ?
  phrase is 3sid]$ 69clude all /eps up
  6! produc;n & sale (a petroleum
  product z a raw mat]ial1 b n 69clude !
  fabric,n ( >ticles f s* raw mat]ial4
  7,= example1 ! fabric,n ( toys f
  pla/ic is n a qualify+ op],n47

     ,explor+ or drill+ = petroleum
      or natural gas 7subp>agraph
     #af7#ae77h77;i77 7p>agraph #i7
    
#i4 ,? phrase is 3sid]$ 6cov] all
  activities (a taxpay] 9 ! c\rse (
  4cov]+ & develop+ pot5tial petroleum-
  or gas-produc+ prop]ties1 9clud+ all
  drill+ op],ns :e!r or n s* op],ns
  result 9 produc+ wells4 ,= example1 !

               ,,it-#djj             c#b
  foll[+ activities >e view$ z 8explor+
  or drill+ = petroleum or natural gas03
  7a7 drill+ an oil or gas well1 build+
    a tempor>y a3ess road 6! well1 or
    prep>+ ! site 9 respect (! well1
  7b7 drill+ or 3v]t+ a well = 4posal (
    wa/e liquids f a petroleum or
    natural gas well1
  7c7 drill+ = wat] or gas = 9jec;n 96a
    petroleum or natural gas =m,n1 &
  7d7 drill+ or 3v]t+ a well =! 9jec;n (
    wat] or gas 6assi/ 9 ! recov]y (
    petroleum or natural gas f ano!r
    well4
  
        ,m9+ or explor+ = m9]als
     7subp>agraph #ff7#ae77h77ii77
             7p>agraph #aj7
    
#aj4 ,? phrase is 3sid]$ 69clude all
  activities nec 9 ! se>* =1 & exam9,n
  (1 prospective m9]al-be>+ prop]ties1 !
  develop;t ( m9]al-be>+ prop]ties = m9+

               ,,it-#djj             d#b
  &! produc;n ( ore or m9]als f ! e>?1
  s* z3
  7a7 prospect+1
  7b7 c>ry+ \ geological1 geophysical1
    or geo*emical surveys2
  7c7 drill+ 0rot>y1 diamond1 p]cus.n or
    o!r me?ods2
  7d7 tr5*+1 di7+ te/ pits1 & prelim9>y
    sampl+2 &
  7e7 cle>+1 remov+ ov]burd51 & /ripp+4
  
     ,fabricat+ metals 7subp>agraph
     #ff7#ae77h77v77 7p>agraph #aa7
    
#aa4 ,? phrase is 3sid]$ 69clude op],ns
  s* z ! manufacture ( alloys 7=
  example1 brass1 sold]1 & /a9.s /eel7
  &! 9t]m$iate or f9al /ages (
  manufactur+ metals s* z /amp+1 =m+1
  ma*9+1 weld+1 cutt+1 or ca/+4 ,x does
  n 9clude ! buy+ & assembl+ ( "ps t h
  alr be5 fabricat$4


       ,g5]al 7p>agraphs #ab-ae7     e#b
    
#ab4 ,": a corpor,n is a memb] (a
  "pn]%ip1 jo9t v5ture1 syndicate or
  simil> associ,n1 = purposes ( det]m9+
  :e!r ! corpor,n qualifies z a
  pr9cipal-busi;s corpor,n1 ! busi;s
  op],ns c>ri$ on 0s* organiz,ns >e
  reg>d$ z 2+ c>ri$ on 0! corpor,n
  directly1 6! ext5t (! corpor,n's 9t]e/
  9 ! "pn]%ip1 jo9t v5ture1 syndicate1
  or associ,n4
#ac4 ,=a corpor,n 6qualify z a pr9cipal-
  busi;s corpor,n1 x is n nec t !
  qualify+ activities describ$ 9
  p>agraph #ff7#ae77h7 2 p]=m$ on
  prop]ty [n$ 0t corpor,n4 ,= example1 a
  corpor,n ^: pr9cipal busi;s is !
  develop;t & manage;t ( m9]al prop]ties
  [n$ 0o!r -panies may qualify z a
  pr9cipal-busi;s corpor,n4
#ad4 ,x is ! ,de"p;t's view t z a g5]al
  rule a corpor,n 5gag$ 9 bo? natural
  res\rce & o!r busi;s op],ns qualifies
  z a pr9cipal busi;s corpor,n if1 :5
               ,,it-#djj             f#b
  3sid]$ tgr1 ! corpor,n's activities (!
  k9d describ$ 9 p>agraph #ff7#ae77h7
  repres5t a l>g] or m important busi;s
  op],n ?an all o!r activities (!
  corpor,n -b9$4 ,! det]m9,n (! size or
  import.e (! busi;s op],ns (a k9d
  specifi$ 9 p>agraph #ff7#ae77h7 9
  rel,n 6a corpor,n's o!r busi;s op],ns
  is det]m9$ 0an exam9,n & -p>ison ( all
  ! facts 3c]n+ ea* (! busi;s op],ns 9 :
  ! corpor,n is 5gag$4 ,! foll[+ >e
  reg>d$ z important crit]ia = mak+ s* a
  det]m9,n3
  7a7 ! am.t ( 9come deriv$ f ea* busi;s
    op],n1
  7b7 ! am.t ( gross rev5ue attributa#
    6ea* busi;s op],n1
  7c7 ! op]at+ co/s & exp5ses ( ea*
    busi;s op],n1
  7d7 ! capital employ$ 9 ea* busi;s
    op],n1 &
  7e7 ! "t & ef=t exp5d$ 0! employees on
    ea* busi;s op],n4
  
               ,,it-#djj             g#b
  ,no "o (! abv factors w necess>ily 2
  decisive1 &! signific.e (a "picul>
  factor may v>y f case 6case4
#ae4 ,al?1 9 det]m9+ a corpor,n's
  pr9cipal busi;s =a "picul> tax,n ye>1
  norm,y only ! busi;s op],ns 9 t
  "picul> ye> %d 2 3sid]$1 x may 2 nec
  6review ! op],ns (! -pany ov] a l;g]
  p]iod ( "t4 ,= example1 a m9+ corpor,n
  : = _m ye>s has qualifi$ z a pr9cipal
  busi;s op],n mi<t 9 a "picul> ye> su6]
  a tempor>y decl9e 9 xs m9+ activ;y due
  6adv]se economic 3di;ns1 lab\r pro#ms1
  or o!r %ort-t]m di6iculties4 ,9 s*
  circum/.es x may 2 appropriate 63t9ue
  6reg>d ! -pany z a pr9cipal-busi;s
  corpor,n = t ye> ev5 ?\<1 if ! ye> 7
  view$ 9 isol,n1 ! corpor,n mi<t n s
  qualify4 ,h["e1 9 3sid]+ :e!r a
  corpor,n qualifies z a pr9cipal-busi;s
  corpor,n =a "picul> ye>1 reg>d may 2
  _h 6a future plan (! corpor,n only 6!
  ext5t t x is imple;t$ 9 ! ye>4