• About
  • Offices
  • Careers
  • News
  • Students
  • Alumni
  • Payments
  • FR
Background Image
Bennett Jones Logo
  • People
  • Expertise
  • Knowledge
  • Search
  • FR Menu
  • Search Mobile
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
View all
Practices
Corporate Litigation Regulatory Tax View all
Industries
Capital Projects Energy Funds & Finance Mining View all
Advisory
Crisis & Risk Management ESG Strategy and Solutions Governmental Affairs & Public Policy
View Client Work
International Experience
Insights News Events
New Energy Economy Series Business Law Talks Podcast Economic Outlook
ESG & the CIO Subscribe
People
Practices
Industries
Advisory Services
Client Work
About
Offices
News
Careers
Insights
Law Students
Events
Search
Alumni
Payments
Subscribe

Stay informed on the latest business and legal insights and events.

LinkedIn LinkedIn Twitter Twitter Vimeo Vimeo
 
Blog

Implication of Daishowa to Purchasers

January 19, 2018

Written By Greg M. Johnson and Wade Ritchie

Since the decision of the Supreme Court of Canada in Daishowa‑Marubeni International Ltd. v. Canada, 2013 SCC 29 [Daishowa], clarity exists for how a vendor treats abandonment obligations on the sale of resource properties—namely, the amount of the abandonment obligations do not form additional consideration but are simply factored into the purchase price for such properties. Daishowa did not address how the purchaser should characterize the costs incurred in meeting these assumed abandonment obligations.

In a recent article available to subscribers at Thomson Reuters, The Cost of Acquiring an Asset With Environmental Liabilities Post - Daishowa, we address this issue. The Canadian Revenue Agency (CRA) had historically taken the view that a purchaser should include the amounts paid for abandonment obligations as an additional cost of the property which would typically be additional COGPE (or Canadian oil and gas property expense). The CRA refused to update this position at the 2017 Canadian Petroleum Tax Society Conference, however, this view is inconsistent with Daishowa where the Court held that the proceeds of disposition for a resource property is the amount received (which would include consideration of, and be reduced by, any abandonment obligations). In our view, the purchaser should not include amounts paid for assumed abandonment obligations as an additional cost of the resource property, and should apply general tax principles to characterize these costs. The applicable test will be whether such amounts are on income or capital account. In the article we conclude that the payment of such abandonment costs should generally be on income account and be deductible in computing income.

Download PDF

Authors

  • Greg M. Johnson Greg M. Johnson, Partner
  • Wade  Ritchie Wade Ritchie, Associate

How Sustainable is the Government of Canada's Current Fiscal Plan?

Related Links

  • Insights
  • Media
  • Subscribe

Recent Posts

Blog

Force Majeure Clauses and COVID-19 Pandemic Impacts—An [...]

March 24, 2023
       

Blog

Canada's Underused Housing Tax: What You Need to Know Before May 1, 2023

March 23, 2023
       

Blog

Canadian Securities Regulators Announce Increased [...]

March 23, 2023
       

Blog

Unpaid Municipal Taxes Will Impact New AER Licences and Licence Transfers

March 22, 2023
       

Blog

Application of Statutory Bar to Workplace Bullying and Harassment Claims

March 20, 2023
       
Bennett Jones Centennial Footer
Bennett Jones Centennial Footer
About
  • Leadership
  • Diversity
  • Community
  • Innovation
  • Security
  • History
Offices
  • Calgary
  • Edmonton
  • Montréal
  • Ottawa
  • Toronto
  • Vancouver
  • New York
Connect
  • Insights
  • News
  • Events
  • Careers
  • Students
  • Alumni
Subscribe

Stay informed on the latest business and legal insights and events.

LinkedIn LinkedIn Twitter Twitter Vimeo Vimeo
© Bennett Jones LLP 2023. All rights reserved.
  • Privacy Policy
  • Disclaimer
  • Terms of Use
Logo Bennett Jones