Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)

(e.1) a particular taxpayer’s loss, if any, from the disposition at any time to a particular person or partnership of an obligation — other than, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of the particular taxpayer in respect of another taxpayer, where the particular taxpayer or, if the particular taxpayer is a partnership, a member of the particular taxpayer is a foreign affiliate of the other taxpayer, an obligation that is, or would be, if the particular taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the particular taxpayer — that was, immediately after that time, payable by another person or partnership to the particular person or partnership is nil if the particular taxpayer, the particular person or partnership and the other person or partnership are related to each other at that time or would be related to each other at that time if paragraph 80(2)(j) applied for the purpose of this paragraph;

(e.2) subject to paragraph (e.3), a taxpayer’s loss on the settlement or extinguishment of a particular commercial obligation (in this paragraph having the meaning assigned by subsection 80(1)) issued by a person or partnership and payable to the taxpayer is deemed to be the amount determined by the following formula if any part of the consideration given by the person or partnership for the settlement or extinguishment of the particular obligation consists of one or more other commercial obligations issued by the person or partnership to the taxpayer:

(e.3) paragraph (e.2) does not apply, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, to the particular commercial obligation if the particular commercial obligation is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer;

(g) a taxpayer’s loss, if any, from the disposition of a property (other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, a property that is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer), to the extent that it is

(c) subject to paragraph 93(1)(b), the amount of the excess is deemed to be a gain of the taxpayer for the year from a disposition at that time of the property,

(d) for the purposes of section 93, the property is deemed to have been disposed of by the taxpayer at that time, and

(e) for the purposes of section 110.6, the property is deemed to have been disposed of by the taxpayer in the year.

(a) a corporation, trust or partnership (in this subsection and subsection (3.4) referred to as the “transferor”) disposes of a particular capital property — other than depreciable property of a prescribed class and other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of a foreign affiliate of a taxpayer, in respect of the taxpayer, where the transferor is the affiliate or is a partnership of which the affiliate is a member, property that is, or would be, if the transferor were a foreign affiliate of the taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the transferor — otherwise than in a disposition described in any of paragraphs (c) to (g) of the definition “superficial loss” in section 54;

(v) if the transferor is a corporation,

• (A) for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit, in respect of a taxpayer for a taxation year of the transferor where the transferor is a foreign affiliate of the taxpayer, at which the liquidation and dissolution of the transferor begins, unless the liquidation and dissolution is

  • (I) a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, or

  • (II) a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, and

• (B) for any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins,

(c) if subsections (3.3) and (3.4) apply to the disposition by a transferor of a share of the capital stock of a particular corporation and after the disposition

• (i) the particular corporation is merged or combined with one or more other corporations, otherwise than in a transaction in respect of which paragraph (b) applies to the share, then the corporation formed on the merger or combination is deemed to own the share while the corporation so formed is affiliated with the transferor,

• (ii) the particular corporation is wound up in a winding-up to which subsection 88(1) applies, then the parent (within the meaning assigned by subsection 88(1)) is deemed to own the share while the parent is affiliated with the transferor, or

• (iii) the particular corporation is liquidated and dissolved, the liquidation and dissolution is a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the corporation or a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the corporation, and the transferor is a foreign affiliate of a taxpayer, then for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit, in respect of the taxpayer for a taxation year of the transferor, the taxpayer referred to in subsection 88(3.1) or the particular shareholder referred to in the definition “designated liquidation and dissolution” in subsection 95(1), as the case may be, is deemed to own the share while the taxpayer or particular shareholder is affiliated with the transferor; and

Marginal note:Loss on shares

(3.6) If at any time a taxpayer disposes, to a corporation that is affiliated with the taxpayer immediately after the disposition, of a share of a class of the capital stock of the corporation (other than a share that is a distress preferred share (within the meaning assigned by subsection 80(1)) and other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, a property that is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer),

(b) where the property is a share of the capital stock of a non-resident corporation,

• (i) if the corporation is a foreign affiliate of the taxpayer,

  • (A) any amount required under paragraph 80.1(4)(d) or section 92 to be deducted in computing the adjusted cost base to the taxpayer of the share, and

  • (B) any amount received by the taxpayer before that time, on a reduction of the paid-up capital of the corporation in respect of the share, that is so received

    • (I) after 1971 and on or before August 19, 2011, or

    • (II) after August 19, 2011, where the reduction is a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of the share, or

• (ii) in any other case, any amount received by the taxpayer after 1971 and before that time on a reduction of the paid-up capital of the corporation in respect of the share;

(d) the income earned or realized by a corporation (referred to in this paragraph as the “affiliate”) for a period ending at a time when the affiliate was a foreign affiliate of another corporation is deemed to be the lesser of

• (i) the amount that would, if the Income Tax Regulations were read without reference to their subsection 5905(5.6), be the tax-free surplus balance (within the meaning of their subsection 5905(5.5)) of the affiliate in respect of the other corporation at that time, and

• (ii) the fair market value at that time of all the issued and outstanding shares of the capital stock of the affiliate;

Marginal note:Exception

(4) Subsection (3) does not apply in respect of a disposition at any time by a taxpayer of a share of the capital stock of a particular foreign affiliate of the taxpayer to another foreign affiliate of the taxpayer if

• (a) both

  • (i) all or substantially all of the property of the particular affiliate was, immediately before that time, excluded property (within the meaning assigned by subsection 95(1)) of the particular affiliate, and

  • (ii) the disposition is part of a transaction or event or a series of transactions or events for the purpose of disposing of the share to a person or partnership that, immediately after the transaction, event or series, was a person or partnership (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length; or

• (b) the adjusted cost base to the taxpayer of the share at that time is greater than the amount that would, in the absence of subsection (3), be the taxpayer’s proceeds of disposition of the share in respect of the disposition.