Income Tax Act — I-3.3 17
ender that (a) the fair market value of the member’s interest in the particular partnership at that time is of (b) the fair market value of all interests in the particular partnership at that time. Exception (7) Subsection (1) does not apply in respect of an amount owing to a corporation resident in Canada by a non-resident person if a tax has been paid under Part XIII on the amount owing, except that, for the purpose of this subsection, tax under Part XIII is deemed not to have been paid on that portion of the amount owing in respect of which an amount was repaid or applied under subsection 227(6.1). Exception (8) Subsection (1) does not apply to a corporation resident in Canada for a taxation year of the corporation in respect of an amount owing to the corporation by a non-resident person if the non-resident person is a controlled foreign affiliate of the corporation throughout the period in the year during which the amount is owing to the extent that it is established that the amount owing (a) arose as a loan or advance of money to the affiliate that the affiliate has used, throughout the period that began when the loan or advance was made and that ended at the earlier of the end of the year and the time at which the amount was repaid, (i) for the purpose of earning (A) income from an active business, as defined in subsection 95(1), of the affiliate, or (B) income that was included in computing the income from an active business of the affiliate under subsection 95(2), or (ii) for the purpose of making a loan or advance to another controlled foreign affiliate of the corporation where, if interest became payable on the loan or advance at any time in the period and the affiliate was required to include the interest in computing its income for a taxation year, that interest would not be required to be included in computing the affiliate’s foreign accrual property income for that year; or (b) arose in the course of an active business, as defined in subsection 95(1), carried on by the affiliate throughout the period that began when the amount owing arose and that ended at the earlier of the end of the year and the time at which the amount was repaid. Borrowed money (8.1) Subsection (8.2) applies in respect of money (referred to in this subsection and in subsection (8.2) as “new borrowings”) that a controlled foreign affiliate of a particular corporation resident in Canada has borrowed from the particular corporation to the extent that the affiliate has used the new borrowings (a) to repay money (referred to in this subsection and in subsection (8.2) as “previous borrowings”) previously borrowed from any person or partnership, if (i) the previous borrowings became owing after the last time at which the affiliate became a controlled foreign affiliate of the particular corporation, and (ii) the previous borrowings were, at all times after they became owing, used for a purpose described in subparagraph (8)(a)(i) or (ii); or (b) to pay an amount owing (referred to in this subsection and in subsection (8.2) as the “unpaid purchase price”) by the affiliate for property previously acquired from any person or partnership, if (i) the property was acquired, and the unpaid purchase price became owing, by the affiliate after the last time at which it became a controlled foreign affiliate of the particular corporation, (ii) the unpaid purchase price is in respect of the property, and (iii) throughout the period that began when the unpaid purchase price became owing by the affiliate and ended when the unpaid purchase price was so paid, the property had been used principally to earn income described in clause (8)(a)(i)(A) or (B). Deemed use (8.2) To the extent that this subsection applies in respect of new borrowings, the new borrowings are, for the purpose of subsection (8), deemed to have been used for the purpose for which the proceeds from the previous borrowings were used or were deemed by this subsection to have been used, or to acquire t