Income Tax Regulations — 1202
1202 (1) For the purposes of computing the earned depletion base of a corporation, control of which has been acquired under circumstances described in subsection 66(11) of the Act, the amount by which the earned depletion base of the corporation at the time referred to in that subsection exceeds the aggregate of amounts otherwise deducted under section 1201 in computing its income for taxation years ending after that time and before control was so acquired shall be deemed to have been deducted under section 1201 by the corporation in computing its income for taxation years ending before such acquisition of control. (2) Subject to subsections (5) and (6), where after November 7, 1969 a corporation (in this subsection referred to as the “successor”) acquired a particular property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of (a) the earned depletion base of the original owner immediately after the original owner disposed of the particular property (determined as if, in the case of a disposition after April 28, 1978 as a result of an amalgamation described in section 87 of the Act, the original owner existed after the time of disposition and no property was acquired or disposed of in the course of the amalgamation) to the extent of the amount thereof that was not (i) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year, (ii) deducted by the successor in computing income for a preceding taxation year, or (iii) otherwise deducted by the successor in computing income for the taxation year, and (b) 25 per cent of the amount, if any, by which (i) the part of the successor’s income for the year that can reasonably be regarded as attributable to (A) the part of any amount included under paragraph 59(3.2)(c) of the Act in computing its income for the year that can reasonably be regarded as attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to the particular property, to the extent that the proceeds of the disposition have not been included in determining an amount under this clause, paragraph (7)(g), clause 29(25)(d)(i)(A) of the Income Tax Application Rules or clause 66.7(1)(b)(i)(A) or (3)(b)(i)(A) or paragraph 66.7(10)(g) of the Act for a preceding taxation year, (B) its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property, (C) production from the particular property, or (D) processing described in subparagraph 1204(1)(b)(iii), (iv) or (v) with the particular property computed as if no deduction were allowed under section 29 of the Income Tax Application Rules or under any of sections 65 to 66.7 of the Act and as if that income did not include any amount designated under clause 66.7(2)(b)(ii)(A) of the Act, exceeds (ii) the total of (A) four times the total of all other amounts deducted under this subsection for the year that can reasonably be regarded as attributable to the part of the successor’s income for the year described in subparagraph (i), and (B) the total of all amounts each of which is an amount deducted under subsection 66.7(1), (3), (4) or (5) of the Act or subsection 29(25) of the Income Tax Application Rules for the year that can reasonably be regarded as attributable to the part of the successor’s income for the year described in subparagraph (i). (3) Where in a taxation year ending after February 17, 1987 an original owner of a property disposes of the property in circumstances in which subsection (2) applies, (a) the amount of the earned depletion base of the original owner determined immediately after the time of that disposition shall b