Income Tax Act — I-3.3 93
ription of B, and (b) the lesser of (i) the portion of the particular allowable capital loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, and (ii) ½ of the amount determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.3)(b)), of the particular corporation, that is the amount of a gain (other than a specified gain) that (A) was made within 30 days before or after the disposition time by the particular partnership to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be, and that (I) is deemed under subsection 39(2) to be a capital gain of the particular partnership for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, and (II) is in respect of the settlement or extinguishment of a foreign currency debt that 1 was issued or incurred by the particular partnership within 30 days before or after the acquisition of the partnership interest by the particular partnership, 2 was, at all times at which it was a debt obligation of the particular partnership, owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, and 3 can reasonably be considered to have been issued or incurred in relation to the acquisition of the partnership interest, or (B) is a capital gain (to the extent that the capital gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) realized within 30 days before or after the disposition time by the particular partnership under an agreement that (I) was entered into by the particular partnership, within 30 days before or after the acquisition of the partnership interest by the particular partnership, with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation, (II) provides for the purchase, sale or exchange of currency, and (III) can reasonably be considered to have been entered into by the particular partnership for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the partnership interest. Specified gain (2.32) For the purposes of subparagraph (2.31)(b)(ii), a specified gain means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in subclause (2.31)(b)(ii)(A)(II), or that arises under a particular agreement referred to in clause (2.31)(b)(ii)(B), if the particular partnership, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement. Exempt dividends (3) For the purposes of subsections (2.01), (2.11), (2.21) and (2.31), (a) a dividend received by a corporation resident in Canada is an exempt dividend to the extent of the amount in respect of the dividend that is deductible from the income of the corporation for the purpose of computing the taxable income of the corporation because of any of paragraphs 113(1)(a) to (c); and (b) a dividend received by a particular foreign affiliate of a corporation resident in Canada from another foreign affiliate of the corporation is an exempt dividend to the extent of the amount, if any, by which the portion of the dividend that was not prescribed to have been paid out of the pre-acquisiti