Whitecap Resources Inc T.WCP

RBC

[retiredcf]

May 23, 2023

Whitecap Resources Inc.
CRA proposal letter related to prior tax deductions

TSX: WCP | CAD 10.27 | Outperform | Price Target CAD 14.00

Sentiment: Neutral

Whitecap has received a proposal letter from the Canada Revenue Agency (CRA) related to deduction of non-capital losses in 2018-2019. The CRA may move forward with a reassessment for the years in question, which could ultimately result in a sizeable tax liability. Management plans to defend the action and we note these processes can be drawn out with the timeline highly uncertain at this point.

Details:

• CRA proposal letter related to deductions in 2018/19. Whitecap has received a proposal letter from the Canada Revenue Agency (CRA) related to deduction of non-capital losses in 2018-2019. The CRA may move forward with a reassessment for the years in question, which could ultimately result in a sizeable tax liability. Deductions over that timeframe amounted to roughly $494 million, which could result in a tax liability of $133 million, plus any associated interest. If the CRA decides to move forward with a formal reassessment, Whitecap will be required to pay 50% of the estimated liability plus interest within 90 days.

[Citizen13]

I have no clue as to the legality of their write offs but man, if this was a mistake it is a whopper. They should fire the CFO and any chartered accountants involved . Not sure how a major mistake like this can happen . $ 485 mil should not be a " grey area"  subject to interpretation of the rules. Yikes. If I didnt know better I'd say this is Socks' way of doing  an

[Rainyday]

Is this similar to the Cameco episode (that was eventually settled in Cameco's favour)?

[pierrelebel]

"They should fire the CFO and any chartered accountants involved ." Why? Using a "tax loss" from an acquired company is always in a "grey area". Many factors have to be considered. I applaud the CFO for using the tax deductions.  Worse case: CRA will audit and disallow it. And then you bargain to split the difference (I have been to both Tax Court and Federal