Income Tax Act — I-3.3 95
is multiplied by that corporation’s direct equity percentage at that time in the particular corporation except that for the purposes of the definition participating percentage in subsection 95(1), paragraph (b) shall be read as if the reference to “any corporation” were a reference to “any corporation other than a corporation resident in Canada”; ( pourcentage d’intérêt ) relevant cost base , of a property at any time to a foreign affiliate of a taxpayer, in respect of the taxpayer, means the greater of (a) the amount determined — or, if the taxpayer is not a corporation, the amount that would be determined if the taxpayer were a corporation resident in Canada — by the formula A + B – C where A is the amount for which the property could be disposed of at that time that would not, in the absence of paragraph (2)(f.1), result in any amount being added to, or deducted from, any of the affiliate’s (i) exempt earnings, exempt loss, taxable earnings and taxable loss (all within the meaning of subsection 5907(1) of the Income Tax Regulations ), in respect of the taxpayer, for the taxation year of the affiliate that includes that time, and (ii) hybrid surplus and hybrid deficit, in respect of the taxpayer, at that time, B is the amount, if any, by which any income or gain from a disposition of the property would, if the property were disposed of at that time for proceeds of disposition equal to its fair market value at that time be reduced under paragraph (2)(f.1), and C is the amount, if any, by which any loss from a disposition of the property would, if the property were disposed of at that time for proceeds of disposition equal to its fair market value at that time be reduced under paragraph (2)(f.1), and (b) either (i) if the affiliate is an eligible controlled foreign affiliate of the taxpayer at that time, the amount that the taxpayer elects, in accordance with prescribed rules, in respect of the property not exceeding the fair market value at that time of the property, or (ii) in any other case, nil. ( prix de base approprié ) Application of s. 87(8.1) (4.1) In this section, the expressions foreign merger , predecessor foreign corporation , new foreign corporation and foreign parent corporation have the meanings assigned by subsection 87(8.1). Income bonds or debentures issued by foreign affiliates (5) For the purposes of this Subdivision, an income bond or income debenture issued by a corporation (other than a corporation resident in Canada) shall be deemed to be a share of the capital stock of the corporation unless any interest or other similar periodic amount paid by the corporation on or in respect of the bond or debenture was, under the laws of the country in which the corporation was resident, deductible in computing the amount for the year on which the corporation was liable to pay income or profits tax imposed by the government of that country. Where rights or shares issued, acquired or disposed of to avoid tax (6) For the purposes of this Subdivision (other than section 90), (a) where any person or partnership has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, shares of the capital stock of a corporation or interests in a partnership and (i) it can reasonably be considered that the principal purpose for the existence of the right is to cause 2 or more corporations to be related for the purpose of paragraph 95(2)(a), those corporations shall be deemed not to be related for that purpose, or (ii) it can reasonably be considered that the principal purpose for the existence of the right is to permit any person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act, those shares or partnership interests, as the case may be, are deemed to be owned by that person or partnership; and (b) where a person or partnership acquires or disposes of shares of the capital stock of a co