Income Tax Act — I-3.3 18.1
Definitions 18.1 (1) The definitions in this subsection apply in this section. matchable expenditure of a taxpayer means the amount of an expenditure that is made by the taxpayer to (a) acquire a right to receive production, (b) fulfil a covenant or obligation arising in circumstances in which it is reasonable to conclude that a relationship exists between the covenant or obligation and a right to receive production, or (c) preserve or protect a right to receive production, but does not include an amount for which a deduction is provided under section 20 in computing the taxpayer’s income. ( dépense à rattacher ) right to receive production means a right under which a taxpayer is entitled, either immediately or in the future and either absolutely or contingently, to receive an amount all or a portion of which is computed by reference to use of property, production, revenue, profit, cash flow, commodity price, cost or value of property or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares where the amount is in respect of another taxpayer’s activity, property or business but such a right does not include an income interest in a trust, a Canadian resource property or a foreign resource property. ( droit aux produits ) tax benefit means a reduction, avoidance or deferral of tax or other amount payable under this Act or an increase in a refund of tax or other amount under this Act. ( avantage fiscal ) tax shelter means a property that would be a tax shelter (as defined in subsection 237.1(1)) if (a) the cost of a right to receive production were the total of all amounts each of which is a matchable expenditure to which the right relates; and (b) subsections 18.1(2) to 18.1(13) did not apply for the purpose of computing an amount, or in the case of a partnership a loss, represented to be deductible. ( abri fiscal ) taxpayer includes a partnership. ( contribuable ) Limitation on the deductibility of matchable expenditure (2) In computing a taxpayer’s income from a business or property for a taxation year, no amount of a matchable expenditure may be deducted except as provided by subsection 18.1(3). Deduction of matchable expenditure (3) If a taxpayer’s matchable expenditure would, but for subsection 18.1(2) and this subsection, be deductible in computing the taxpayer’s income, there may be deducted in respect of the matchable expenditure in computing the taxpayer’s income for a taxation year the amount that is determined under subsection 18.1(4) for the year in respect of the expenditure. Amount of deduction (4) For the purpose of subsection 18.1(3), the amount determined under this subsection for a taxation year in respect of a taxpayer’s matchable expenditure is the amount, if any, that is the least of (a) the total of (i) the lesser of (A) 1/5 of the matchable expenditure, and (B) the amount determined by the formula (A/B) × C where A is the number of months that are in the year and after the day on which the right to receive production to which the matchable expenditure relates is acquired, B is the lesser of 240 and the number of months that are in the period that begins on the day on which the right to receive production to which the matchable expenditure relates is acquired and that ends on the day the right is to terminate, and C is the amount of the matchable expenditure, and (ii) the amount, if any, by which the amount determined under this paragraph for the preceding taxation year in respect of the matchable expenditure exceeds the amount of the matchable expenditure deductible in computing the taxpayer’s income for that preceding year, (b) the total of (i) all amounts each of which is included in computing the taxpayer’s income for the year (other than any portion of such amount that is the subject of a reserve claimed by the taxpayer for the year under this Act) in respect of the right to receive production to which the matchable expenditure relates, and (ii)