Income Tax Regulations — 5907
uded at any time in the affiliate’s cumulative eligible capital in respect of the business, if (i) the business (A) is not an active business (as defined in subsection 95(1) of the Act), or (B) is an active business (as defined in subsection 95(1) of the Act) the affiliate’s earnings from which for the year are determined under subparagraph (a)(iii) of the definition earnings , and (ii) in computing its income for the year, the affiliate has deducted an amount described in paragraph 24(1)(a) of the Act for the year in respect of the business, (b) where the year is the 1975 or any preceding taxation year of the affiliate, the total of all amounts each of which is (i) the affiliate’s net loss for the year from an active business carried on by it in a country, or (ii) the amount, if any, for the year by which (A) the amount determined under the description of D in the definition foreign accrual property income in subsection 95(1) of the Act for the year exceeds (B) the amount determined under the description of A in the definition foreign accrual property income in subsection 95(1) of the Act for the year, (c) where the year is the 1976 or any subsequent taxation year of the affiliate and the affiliate is, throughout the year, resident in a designated treaty country, (i) the affiliate’s net loss for the year from an active business carried on by it in Canada or a designated treaty country, or (ii) the amount by which (A) the affiliate’s loss for the year from an active business to the extent determined under subparagraph (d)(ii) of the definition exempt earnings in respect of the year with any modifications that the circumstances require exceeds (B) the portion of any income or profits tax refunded by the government of a country for the year to the affiliate that can reasonably be regarded as tax that was refunded in respect of the amount determined under clause (A), or (d) where the year is the 1976 or any subsequent taxation year of the affiliate, each amount that is included in the affiliate’s exempt loss for the year because of subsection (10); ( perte exonérée ) exempt surplus , of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any particular time, means the amount determined by the following formula in respect of the period that begins with the latest of the following times and that ends with the particular time: (a) the first day of the taxation year of the subject affiliate in which it last became a foreign affiliate of the corporation, (b) the last time for which the opening exempt surplus of the subject affiliate in respect of the corporation was required to be determined under section 5905, and (c) the last time for which the opening exempt deficit of the subject affiliate in respect of the corporation was required to be determined under section 5905 A – B where A is the total of all amounts, in respect of the period, each of which is (i) the opening exempt surplus, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (b), (ii) the exempt earnings of the subject affiliate for any of its taxation years ending in the period, (iii) the portion of any dividend received in the period and before the particular time by the subject affiliate from another foreign affiliate of the corporation (including, for greater certainty, any dividend deemed under subsection 5905(7) to have been received by the subject affiliate) that was prescribed under paragraph 5900(1)(a) to have been paid out of the payer affiliate’s exempt surplus in respect of the corporation to the extent that it (A) does not give rise to the application of subsection 12.7(3) of the Act in computing the foreign accrual property income of a foreign affiliate of a taxpayer, and (B) is excluded in computing the subject affiliate’s foreign accrual property income because of subparagraph (b)(i) or (ii) of the