Income Tax Regulations — 5905
ecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the hybrid surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time, (ii.3) the merged affiliate’s opening hybrid underlying tax in respect of the corporation shall be the total of all amounts each of which is the hybrid underlying tax of a predecessor corporation, in respect of the corporation, immediately before the merger time, (iii) the merged affiliate’s opening taxable surplus, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the taxable surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the taxable deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time, (iv) the merged affiliate’s opening taxable deficit, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the taxable deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the taxable surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time, and (v) the merged affiliate’s opening underlying foreign tax in respect of the corporation shall be the total of all amounts each of which is the underlying foreign tax of a predecessor corporation, in respect of the corporation, immediately before the merger time; (b) for the purposes of paragraph (a), (i) each of the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit and underlying foreign tax, in respect of the corporation, of each predecessor corporation immediately before the merger time is deemed to be the amount determined by the formula A × B/C where A is the amount of that surplus, deficit or tax, as the case may be, as otherwise determined, B is the surplus entitlement percentage of the corporation immediately before the merger time in respect of the predecessor corporation, and C is the percentage that would be the surplus entitlement percentage of the corporation immediately after the merger time in respect of the merged affiliate if the merged affiliate’s net surplus were the total of all amounts each of which is the net surplus of a predecessor corporation immediately before the merger time, but (ii) the values for A, B and C in the formula in subparagraph (i) shall take into account the application of paragraph 5902(1)(b) and subsection 5907(8) in respect of the merger; and (c) in respect of any foreign affiliate (other than a predecessor corporation) of the corporation in which a predecessor corporation had an equity percentage (within the meaning assigned by subsection 95(4) of the Act) immediately before the merger time, for the purposes of subsection (1), there is deemed to be an acquisition or a disposition of shares of the capital stock of that affiliate at the merger time. (4) [Repealed, 2013, c. 34, s. 44] (5) If there is, at any time, a disposition by a corporation (referred to in this subsection as the “disposing corporation”) resident in Canada of any of the shares (referred to in this subsection as the “disposed shares”) of the capital stock of a particular foreign affiliate of the disposing corporation to a taxable Canadian corporation (referred to in this subsection as the “acquiring corporation”) with which the disposing corporation is not dealing at arm’s length, (a) each of the opening exempt surplus or opening exempt deficit, opening hybrid surplus or opening hybrid deficit, opening hybrid underlying tax, opening taxable surplus or opening taxable deficit, and opening underlying foreign tax, in respect of the acquiring corporation, of