Income Tax Act — I-3.3 212.3
hich are, at that time, owned by a parent or another non-resident person with which the parent does not, at that time, deal at arm’s length. ( société de substitution admissible ) Modification of terms — paragraph (10)(e) (5) In the case of an investment described in paragraph (10)(e), the CRIC is deemed for the purposes of paragraph (2)(a) to transfer to the subject corporation property that relates to the investment, the fair market value of which property is (a) if the investment is described in subparagraph (10)(e)(i), the amount owing in respect of the debt obligation referred to in that subparagraph immediately after the investment time, or (b) if the investment is described in subparagraph (10)(e)(ii), the fair market value of the shares referred to in that subparagraph immediately after the investment time. Sequential investments — paragraph (10)(f) (5.1) In the case of an investment (in this subsection referred to as the “second investment”) in a subject corporation by a CRIC described in paragraph (10)(f), the amount determined for A in paragraph (2)(a) in respect of the second investment is to be reduced by the amount determined for A in paragraph (2)(a) in respect of a prior investment (in this subsection referred to as the “first investment”) in the subject corporation by another corporation resident in Canada if (a) the first investment is an investment that is described in paragraph (10)(a) or (b) and to which paragraph (2)(a) applies; (b) immediately after the investment time in respect of the first investment, the other corporation is not controlled by (i) if there is one parent in respect of the CRIC, the parent, and (ii) if there is a group of parents in respect of the CRIC, the group of parents; and (c) the other corporation becomes, after the time that is immediately after the investment time in respect of the first investment and as part of a transaction or event or series of transactions or events that includes the making of the first investment, controlled by the parent or group of parents, as the case may be, because of the second investment. Anti-avoidance rule — cross-border class (6) A particular class of shares of the capital stock of a CRIC or a qualifying substitute corporation that, in the absence of this subsection, would be a cross-border class in respect of an investment is deemed not to be a cross-border class in respect of the investment if (a) a particular corporation resident in Canada that does not deal at arm’s length with a parent (i) acquires shares of the particular class (or shares that are substituted for those shares) as part of a transaction or event or series of transactions or events that includes the investment, or (ii) owns shares of the particular class (or shares that are substituted for those shares) and, as part of a transaction or event or series of transactions or events that includes the investment, (A) the paid-up capital in respect of the particular class is increased otherwise than as a result of an acquisition described in subparagraph (i), and (B) the increase in paid-up capital in respect of the particular class can reasonably be considered to be connected to funding provided to the particular corporation or another corporation resident in Canada (other than the corporation that issued the particular class) by a parent or a non-resident person that does not deal at arm’s length with a parent, unless (I) the funding results in an increase, equal to the amount funded, in the paid-up capital of shares of a class of the capital stock of the particular corporation, or the other corporation, that is a cross-border class in respect of the investment, and (II) the increase referred to in subclause (I) occurred at or before the time of the increase to the paid-up capital in respect of the particular class; and (b) it can reasonably be considered that one of the main reasons for the acquisition or for the funding, as the case may be, was to increase the amount of a deducti