April 20, 1943

LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

There are other matters in connection with this section about which I am not clear. Toward the end of the new subsection G we find this:

Provided, however, that in the case of a corporation substantially all of whose income is subject to depletion under the provisions of this act. . . .

As I understand it, the depletion can be written off only at the rate of one-third. The depletion can be claimed only at the rate of one-third of the net realizations.

Topic:   INCOME WAR TAX ACT
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LIB
LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

That being so, 1 cannot conceive of a case of a corporation "substantially all of whose income is subject to depletion".

Topic:   INCOME WAR TAX ACT
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LIB
LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

One other point is troubling me. We have had so little time to consider these sections that one finds some difficulty in getting the import of them. Let us suppose that two or more oil companies clubbed together, drilled and got production in one of two wells drilled. The other one turned out to be a "duster". My understanding is that they could off-set the cost of drilling the dry well against the assessment of the other well. Suppose two companies clubbed together, and drilled a "duster"; could they offset the cost of producing the dry well against their separate, individual incomes?

Topic:   INCOME WAR TAX ACT
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LIB
LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

They are two companies, and each company has an income from some other oil operation.

Topic:   INCOME WAR TAX ACT
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LIB
LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

And they offset the cost of drawing the dry hole against the other operations.

Topic:   INCOME WAR TAX ACT
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Is the hon. member referring to a partnership company?

Topic:   INCOME WAR TAX ACT
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LIB
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

It could be set off against the income of the two participating companies in proportion to their contributions to the venture.

Topic:   INCOME WAR TAX ACT
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LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

That is the answer I wanted. Instead of two oil companies, we have two individuals, two natural persons, each of whose business is that of drilling for oil. Supposing the two persons clubbed together to drill a well, could they set off the cost of drilling against their other assessment?

Topic:   INCOME WAR TAX ACT
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

Is there any case like that?

Topic:   INCOME WAR TAX ACT
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LIB

George Henry Ross

Liberal

Mr. ROSS (Calgary East):

I could quite conceive of two or three clubbing together, with companies, advancing money, and doing it in that way. Or, a dozen individuals might club together to form a syndicate.

Topic:   INCOME WAR TAX ACT
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

There is little I can do with a question like that. I do not know what to say to that question. The hon. member asks if

Income War Tax

individuals who are in the oil drilling business may set off unproductive expenditures against their individual incomes for taxation purposes.

Topic:   INCOME WAR TAX ACT
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LIB
LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

I do not think they can under this.

Topic:   INCOME WAR TAX ACT
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LIB

Manley Justin Edwards

Liberal

Mr. EDWARDS:

I have in mind a man who would be willing to undertake to drill a well at his own expense. What would be his position so far as income tax is concerned if he should bring in a dry hole?

Topic:   INCOME WAR TAX ACT
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LIB

James Lorimer Ilsley (Minister of Finance and Receiver General)

Liberal

Mr. ILSLEY:

What is his present business?

Topic:   INCOME WAR TAX ACT
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April 20, 1943