Income Tax Act — I-3.3 18.1
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) the amount 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, and (c) the amount, if any, by which (i) the total of all amounts each of which is an amount of the matchable expenditure that would, but for this section, have been deductible in computing the taxpayer’s income for the year or a preceding taxation year exceeds (ii) the total of all amounts each of which is an amount of the matchable expenditure deductible under subsection 18.1(3) in computing the taxpayer’s income for a preceding taxation year. Special rules (5) For the purpose of this section, (a) where a taxpayer’s matchable expenditure is made before the day on which the related right to receive production is acquired by the taxpayer, the expenditure is deemed to have been made on that day; (b) where a taxpayer has one or more rights to renew a particular right to receive production to which a matchable expenditure relates for one or more additional terms, after the term that includes the time at which the particular right was acquired, the particular right is deemed to terminate on the latest day on which the latest possible such term could terminate if all rights to renew the particular right were exercised; (c) where a taxpayer has 2 or more rights to receive production that can reasonably be considered to be related to each other, the rights are deemed to be one right; and (d) where the term of a taxpayer’s right to receive production is for an indeterminate period, the right is deemed to terminate 240 months after it is acquired. Proceeds of disposition considered income (6) Where in a taxation year a taxpayer disposes of all or part of a right to receive production to which a matchable expenditure relates, the proceeds of the disposition shall be included in computing the taxpayer’s income for the year. Arm’s length disposition (7) Subject to subsections 18.1(8) to 18.1(10), where in a taxation year a taxpayer disposes (otherwise than in a disposition to which subsection 87(1) or 88(1) applies) of all of the taxpayer’s right to receive production to which a matchable expenditure (other than an expenditure no portion of which would, if this section were read without reference to this subsection, be deductible under subsection 18.1(3) in computing the taxpayer’s income) relates, or the taxpayer’s right expires, the amount deductible in respect of the expenditure under subsection 18.1(3) in computing the taxpayer’s income for the year is deemed to be the amount, if any, determined under paragraph 18.1(4)(c) for the year in respect of the expenditure. Non-arm’s length disposition (8) Subsection 18.1(10) applies where (a) a taxpayer’s particular right to receive production to which a matchable expenditure (other than an expenditure no portion of which would, if this section were read without reference to subsections 18.1(7) and 18.1(10), be deductible under subsection 18.1(3) in computing the taxpayer’s income) relates has expired or the taxpayer has disposed of all of the right (otherwise than in a disposition to which subsection 87(1) or 88(1) applies); (b) during the period that begins 30 days before and ends 30 days after the disposition or expiry, the taxpayer or a person affiliated, or who does not deal at arm’s length, with the taxpayer acquires a right to receive production (in this subsection and subsection 18.1(10) referred to as the “substituted property”) that is, or is identical to, the particular right; and (c) at the end of the period, the taxpayer or a person affiliated, or who does not deal at arm’s length, with the taxpayer owns the substituted property. Spec