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Income Tax Interpretation Bulletin
Exploration and Development Expenses - Meaning of Principal-Business Corporation
NO: IT-400SR
DATE: January 19, 1990
SUBJECT: INCOME TAX ACT
Exploration and Development Expenses - Meaning of Principal-Business Corporation
REFERENCE: SPECIAL RELEASE
IT-400 is amended as follows:
1. The references are revised to read as follows:
"Paragraph 66(15)(h) (also subsections 66(1) and (5) and 66.1(2) and paragraphs 66(15)(d.1) and (g) and 251(5)(b))".
2. Subparagraph 2(b) is deleted for 1977 and subsequent taxation years and replaced with:
"(b) Paragraph 66(15)(d.1) - Definition of a "flow-through share" through which a principal business corporation may renounce its Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses in favour of holders of such shares pursuant to subsections 66(12.6), (12.62) and (12.64) where such expenses are incurred after February 1986".
3. Subparagraph 2(c) is revised to read as follows:
"(c) Paragraph 66(15(g) - Requirement for a "joint exploration corporation" to be a principal-business corporation. (Such a corporation may renounce its Canadian exploration and development expenses, Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses in favour of its shareholder corporations, pursuant to subsections 66(10), (10.1), (10.2) and (10.3)).
4. Subparagraph 2(d) does not apply to dispositions in taxation years commencing after 1984 and is therefore cancelled in respect of those taxation years.
5. Subparagraph 2(e) is revised by adding a reference to section 66.4.
6. Paragraph 3 is amended by deleting "and (b)" in lines 1 and 2.
7. Paragraph 4 is revised to read as follows:
"4. To qualify as a principal-business corporation as defined in paragraph 66(15)(h),
(a) the principal business operations or activities of the corporation must be one or a combination of the kind described in subparagraphs (i) to (vii) of that paragraph, or
(b) all or substantially all of the assets of the corporation must be shares of the capital stock of one or more corporations which qualify as principal-business corporations pursuant to (a) above and which are related to the corporation otherwise than by reason of a right referred to in paragraph 251(5)(b)."
8. The word "operation" in line 7 of paragraph 15 is replaced by the word "corporation".
