Income tax: where a taxpayer has incurred section 122J exploration or prospecting expenditure in the search for minerals , does section 122K apply to give rise to either an assessable balancing charge or deductible balancing amount on a subsequent abandonment or disposal of that area?

Exploration and prospecting can be carried forward indefinitely under section 122J even where the particular area to which the expenditure relates has been abandoned or disposed. This allows the taxpayer to carry forward unsuccessful exploration and prospecting expenditure indefinitely until a successful income generating tenement is discovered.

However, where the taxpayer no longer carries on or proposes to carry on prescribed mining operations or a business of exploring or prospecting for minerals obtainable by such operations, subsection 122J(4D) is no longer satisfied . The expenditure can no longer be carried forward or claimed as a deduction.

It is only once the taxpayer has ceased his general mining activities that section 122K will operate to allow a balancing adjustment.