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Taxpayers Other than ‘Principal Business Corporations’

19.A20. The deduction for exploration and development expenditure is limited to the amount of income derived from the oil or gas well or mine or royalties therefrom, together with the amount by which a consideration received on sale of a mine exceeds the amount that would ordinarily be allowed as capital expenditure in respect thereof; alternatively, the limit is 20 per cent of the accrued undeducted exploration and development expenses if that amount exceeds the amount of income described above. (If the taxpayer's ‘income from Canadian resources’ is insufficient, he may deduct up to 20 per cent of the allowable expenditure from income derived from other sources.) A similar allowance is available for foreign exploration and development expenses.

19.A21. It will be observed that the provisions outlined above are directed towards enabling immediate write-off of exploration expenditure against income and this appears to have been prompted by the recognition that, in the words of the Carter


  ― 323 ―
Commission (1966): ‘The more uncertain the value of the asset created by a particular expenditure, the more rapidly the cost should be written off. Because the probability of success for a particular exploration venture is usually low, it is reasonable to deduct exploration costs immediately in determining income’.

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