The 25% resource allowance — a valuable incentive

CIM Bulletin, Vol. 73, No. 823, 1980

ROBERT D. BROWN, F.C.A., and ROBERT B. PARSONS, C.A., Price Waterhouse & Co. Toronto

Careful tax planning and proper attention to the regulations can result in an optimum deduction of the 25% federal resource allowance.Introduced in the Income Tax Act in 1976, in part to compensate for the disallowance of provincial mining taxes and royalties, the 25% "resource allowance" is a permitted deduction in computing taxable income from mining and petroleum. However, the rules relating to the deduction are complex, and the importance of the deduction— which can readily exceed 25% of net income—is frequently underestimated. This month, Tax Notes discusses the basic rules of calculating the resource allowance, and suggests some tax planning aspects which may warrant consideration.