Income Tax Act — I-3.3 95
r the purpose of determining the amounts, if any, to be included under subsection 91(1), and to be deducted under subsection 91(4), by the taxpayer in respect of the year and for the purpose of applying section 233.4 in respect of the year: (a) the tracked property and activities of the actual affiliate are deemed to be property and activities of a non-resident corporation (referred to in this subsection as the “separate corporation”) that is separate from the actual affiliate and not to be property or activities of the actual affiliate; (b) any income, losses or gains for the year in respect of the property and activities described in paragraph (a) are deemed to be income, losses or gains of the separate corporation and not of the actual affiliate; (c) all rights and obligations of the actual affiliate in respect of the property and activities described in paragraph (a) are deemed to be rights and obligations of the separate corporation and not of the actual affiliate; (d) the separate corporation is deemed to have, at the end of the year, 100 issued and outstanding shares of a single class (referred to in this subsection as the “single class”) of its capital stock, having full voting rights under all circumstances; (e) each shareholder of the actual affiliate is deemed to own, at the end of the year, that number of shares of the single class that is equal to the product of 100 and the amount that would be the aggregate participating percentage (as defined in subsection 91(1.3)) of that shareholder in respect of the actual affiliate for the year if (i) the actual affiliate were a controlled foreign affiliate of that shareholder at the end of the year, (ii) the only shares of the capital stock of the actual affiliate issued and outstanding at the end of the year were shares of tracking classes in respect of the tracked properties and activities, and (iii) the only income, losses and gains of the actual affiliate for the year were those referred to in paragraph (b); and (f) any amounts included under subsection 91(1), or deducted under subsection 91(4), by the taxpayer in respect of shares of the separate corporation are deemed to be amounts included under subsection 91(1), or deducted under subsection 91(4), as the case may be, by the taxpayer in respect of shares of tracking classes held by the taxpayer or a foreign affiliate of the taxpayer, as the case may be. Tracking interests – controlled foreign affiliate (12) If subsection (11) does not apply in respect of a foreign affiliate of the taxpayer for a taxation year of the affiliate, the affiliate is deemed to be a controlled foreign affiliate of the taxpayer throughout the taxation year if, at any time in the year, a tracking interest in respect of the affiliate, or a partnership of which the affiliate is a member, is held by (a) the taxpayer; or (b) a person or partnership (each referred to in this paragraph as a “holder”), if (i) the holder does not deal at arm’s length with the taxpayer at that time, (ii) where either the taxpayer or the holder is a partnership and the other party is not, any member of the partnership does not deal at arm’s length, at that time, with the other party, or (iii) where both the taxpayer and the holder are partnerships, the taxpayer or any member of the taxpayer does not deal at arm’s length, at that time, with the holder or any member of the holder. Exception — no avoidance purpose (13) Subsections (11) and (12) apply in respect of a foreign affiliate of a taxpayer for a taxation year only if it can reasonably be considered that one of the purposes for the creation or issuance, or for the acquisition or holding, of a tracking interest in respect of the affiliate that is acquired or held by the taxpayer or another foreign affiliate of the taxpayer is to avoid, prevent or defer the inclusion of any amount in the income of the taxpayer under subsection 91(1). [NOTE: Application provisions are not included in the consolidated text; see relevant