Income Tax Regulations — 5907
at is the particular year or is any preceding taxation year that ends after August 19, 2011, (i) claimed all deductions that it could have claimed under the Act, up to the maximum amount deductible in computing the income or loss from the business for that earnings or loss year, and (ii) made all claims and elections and taken all steps under applicable provisions of the Act, or of enactments implementing amendments to the Act or its regulations, to maximize the amount of any deduction referred to subparagraph (i); and (b) had, in computing its income or loss from the business for any preceding taxation year that ended on or before August 19, 2011, claimed all deductions, if any, that it actually claimed under the Act, up to the maximum amount deductible, and made all claims and elections, if any, and taken all steps, if any, under applicable provisions of the Act, or of enactments implementing amendments to the Act or its regulations, that it actually made. (2.1) In computing the earnings of a foreign affiliate of a corporation resident in Canada for a taxation year of the affiliate from an active business carried on by it in Canada or in a designated treaty country, where the affiliate is resident in a designated treaty country and the corporation, together with all other corporations resident in Canada with which the corporation does not deal at arm’s length and in respect of which the affiliate is a foreign affiliate, have so elected in respect of the business for the taxation year or any preceding taxation year of the affiliate, the following rules apply: (a) there shall be added to the amount determined under subparagraph (a)(i) of the definition earnings in subsection (1) after adjustment in accordance with the provisions of subsection (2) (in this subsection and in subsection (2.2) referred to as the “adjusted earnings amount”) the total of all amounts each of which is the amount, if any, by which (i) the amount that can reasonably be regarded as having been deducted in respect of the cost of a capital property or foreign resource property of the affiliate in computing the adjusted earnings amount exceeds (ii) the amount that may reasonably be regarded as having been deducted in respect of the cost of that capital property or foreign resource property in computing income or profit of the affiliate for the year from that business in its financial statements prepared in accordance with the laws of the country in which the affiliate is resident; (b) there shall be deducted from the adjusted earnings amount the aggregate of all amounts each of which is the amount, if any, by which (i) the amount determined under subparagraph (a)(ii) in respect of that capital property or foreign resource property exceeds (ii) the amount determined under subparagraph (a)(i) in respect of that capital property or foreign resource property; (c) where any capital property or foreign resource property of the affiliate has been disposed of in the taxation year, (i) there shall be added to the adjusted earnings amount the aggregate of the amounts deducted pursuant to paragraphs (b) and (2.2)(b) for preceding taxation years of the affiliate in respect of that capital property or foreign resource property, and (ii) there shall be deducted from the adjusted earnings amount the aggregate of the amounts added pursuant to paragraphs (a) and (2.2)(a) for the preceding taxation years of the affiliate in respect of that capital property or foreign resource property; and (d) for the purposes of paragraph (c), where the affiliate has merged with one or more corporations to form a new corporation, any capital property or foreign resource property of the affiliate that becomes a property of the new corporation shall be deemed to have been disposed of by the affiliate in its last taxation year before the merger. (2.2) Where the taxation year of a foreign affiliate of a particular corporation resident in Canada for which the particular corporation has made an e