Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
May 21, 1998
Québec Tax Services Office Resource Industries
Richard Cloutier Section
Mining Specialist Peter Lee
(613) 957-8977
980948
Bituminous Sands In-Situ Project
This is in reply to your facsimile of April 9, 1998 wherein you have requested our comments in respect of a letter dated April 8, 1998 written by XXXXXXXXXX to you regarding the interpretation of subsections 1104(7) and 1107(1) of the Income Tax Regulations (the “Regulations”). You also sent us, for our reference, a copy of the letter dated May 1, 1998 written by Mr. Robert Clark of Natural Resources Canada to you in respect of this matter.
Background
Pursuant to paragraph 1104(7)(c) of the Regulations,
“... all wells of a taxpayer for the extraction of material from a deposit of bituminous sands or oil shales that the Minister, in consultation with the Minister of Natural Resources, determines constitute one project, are deemed to be one mine of the taxpayer.”
Pursuant to subsection 1107(1) of the Regulations,
“... for the purpose of the definition ‘bituminous sands’ in section 248(1) of the Act, viscosity or density of hydrocarbons shall be determined using a number of individual samples (constituting a representative sampling of that deposit or those deposits, as the case may be, from which the taxpayer is committed to produce by means of one mine) tested (a) at atmospheric pressure; (b) at a temperature of 15.6 degree Celsius; and (c) free of solution gas.”
Issues
A. Are there guidelines for determining whether certain wells constitute one project for the purposes of subsection 1104(7) of the Regulations?
B. How would the viscosity or density of hydrocarbons be determined under subsection 1107(1) of the Regulations?
1. Revenue Canada and Natural Resources Canada have not yet come up with general guidelines for determining whether certain wells would constitute one project for the purposes of subsection 1104(7) of the Regulations. However, we can deal with this issue on a case by case basis in the context of an advance income tax ruling request. After we have dealt with actual situations, it may then be possible to develop general guidelines for the public.
2. It is our understanding that the viscosity or density of hydrocarbons contained in a particular deposit of bituminous sands must be determined on the “dead oil” basis as prescribed in subsection 1107(1) of the Regulations by taking samples which may reasonably be considered as representative of the particular deposit. It is also our understanding that in the case of more than one deposit from which the taxpayer is committed to produce by means of one mine, the representative samples from each deposit tested in this manner must meet the requirements in the definition of “bituminous sands” under subsection 248(1) of the Act in order that such deposit be considered as “a deposit of bituminous sands”.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613)957-0682. The severed copy will be sent to you for delivery to the client.
If we could be of any further assistance to you, please contact the writer.
John Chan
Manager
Resource Industries Section
Resources, Partnerships and
Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
2
- 3 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1998
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1998
Email this Content