Income Tax Act — I-3.3 85.1
tion referred to in paragraph 85.1(3)(c). Exception (4) Subsection (3) does not apply in respect of a disposition at any time by a taxpayer of a share of the capital stock of a particular foreign affiliate of the taxpayer to another foreign affiliate of the taxpayer if (a) it is the case that (i) the disposition is part of a transaction or event or a series of transactions or events that includes a disposition (referred to in this paragraph as the “relevant disposition”) of a property that is (A) the share, (B) property (other than any property that is received by the taxpayer as consideration for the disposition and to which paragraph (3)(a) would apply in the absence of this subsection) substituted for the share, or (C) property any of the fair market value of which is derived, directly or indirectly, from property referred to in clause (A) or (B), and (ii) the relevant disposition is to a person or partnership (in this subsection and subsection (4.1) referred to as the “acquirer”) that (A) immediately after the transaction, event or series, deals at arm’s length with the taxpayer or a person that is, at any time during the period that begins at the time of the disposition and ends immediately after the transaction, event or series, a particular person in respect of the taxpayer, unless (I) the acquirer is a foreign affiliate of the taxpayer or of a successor corporation of the taxpayer in respect of which the taxpayer or the successor corporation, as the case may be, has a qualifying interest (within the meaning of paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, or (II) at the time of the relevant disposition, the property that is disposed of is not excluded property (as defined in subsection 95(1)) of a foreign affiliate of the taxpayer, of a person that is, at any time during the period, a particular person in respect of the taxpayer or of a partnership, any member of which is, at any time during the period, the taxpayer or a particular person in respect of the taxpayer, or (B) immediately after the relevant disposition, is a non-resident person or partnership that does not deal at arm’s length with the taxpayer or with a person that is, at any time during the period that begins at the time of the disposition and ends immediately after the relevant disposition, a particular person in respect of the taxpayer, unless (I) at the time of the transaction or event or throughout the series, the acquirer is a non-resident corporation that is, for the purposes of section 17, a controlled foreign affiliate of the taxpayer or of a successor corporation of the taxpayer, or (II) the relevant disposition is of a share of the capital stock of a corporation resident in Canada; or (b) the adjusted cost base to the taxpayer of the share at that time is greater than the amount that would, in the absence of subsection (3), be the taxpayer’s proceeds of disposition of the share in respect of the disposition. Interpretation — partnerships (4.1) In applying paragraph (4)(a), (a) a taxpayer or a particular person in respect of the taxpayer (each of which is referred to in this subsection as a “relevant taxpayer”) and an acquirer are deemed to be dealing with each other at arm’s length, at any time, for the purposes of clause (4)(a)(ii)(A) if, (i) where either the relevant taxpayer or the acquirer is a partnership and the other party is not, any member of the partnership deals at arm’s length, at that time, with the other party, or (ii) where both the relevant taxpayer and the acquirer are partnerships, the relevant taxpayer or any member of the relevant taxpayer deals at arm’s length, at that time, with the acquirer or any member of the acquirer; and (b) an acquirer is deemed to be a non-resident person with whom the relevant taxpayer does not deal at arm’s length, at any time, for the purposes of clause (4)(a)(ii)(B) if, (i) where either the relevant taxpayer or the acquirer is a partnership and the other p