2016-0631181I7 Specified foreign property - mineral rights

Principal Issues: Whether a mineral right situated outside Canada is a specified foreign property.

Position: Yes, a mineral right situated outside Canada is a specified foreign property pursuant to paragraph (a) of that defined term in subsection 233.3(1). Please note that this view replaces the views expressed in document 2014-052224, which opined that a mineral right was a specified foreign property pursuant to paragraph (b) of that defined term in subsection 233.3(1).

Reasons: A mineral right is generally considered an intangible property.

Author: Naufal, Bob
Section: 233.3(1)

                                                                                                    March 1, 2016

Jyoti Lal                                                                                       HEADQUARTERS
Compliance Programs Branch                                                    Income Tax Rulings Directorate
International and Large Business
  Directorate

                                                                                                    2016-063118

Re: T1135 - Mineral rights situated outside of Canada

We are writing to clarify certain comments made in our letter dated October 5, 2015 [Document 2014-052224]. In that document we were asked whether the right to mine minerals in the US would be considered a “specified foreign property” as defined in subsection 233.3(1) of the Income Tax Act (the “Act”), and therefore reported on Form T1135, Foreign Income Verification Statement.

In document 2014-052224 we commented that a right to mine for minerals in a mineral resource outside Canada falls within subparagraph (b)(ii) of the definition of “foreign resource property” in subsection 248(1) of the Act. We further commented that for such mineral right to be considered specified foreign property, the right would have to be tangible property, which is understood to include real property such as land and rights issuing out of, annexed to and exercisable within or about land. Finally, we opined that a mineral right of a reporting entity would be considered a tangible property and therefore, a specified foreign property pursuant to paragraph (b) of that defined term in subsection 233.3(1) of the Act.

We wish to clarify that a specified foreign property can include inter alia tangible or intangible property. Furthermore, it is our general understanding that, real property can include both tangible property as well as intangible property. In addition, we wish to clarify that a mineral right would likely be considered an intangible property. Therefore, in our view, a property of a person or partnership that is a mineral right situated outside Canada would be considered a specified foreign property pursuant to paragraph (a) of that defined term in subsection 233.3(1) of the Act.

We trust our comments will be of assistance.

Yours truly,

Bob Naufal
Manager
Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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