Canada Tax Court Issues Decision Clarifying Feasibility Study Cost Deductions for Natural Gas Pipeline Project

The Canadian Tax Court March 6 issued Decision No. 2026 TCC 42, clarifying feasibility study cost deductions for an Alaska-Canada natural gas pipeline project. The taxpayer, a Canadian company, claimed a large deduction for feasibility study costs upon joining a multinational pipeline study. The Tax Agency later denied the deduction and imposed Part XIII withholding tax. On appeal, the Tax Court found that: 1) the reassessment fell within the extended period because the assignment agreement created a transaction with a nonresident related party; 2) the feasibility study expenses qualified as business outlays because the taxpayer used the study to advance ...