Income Tax Act — I-3.3 212.1
ration to a purchaser corporation if (a) immediately before the disposition, the purchaser corporation controlled the non-resident corporation; and (b) it is not the case that, at the time of the disposition, or as part of a transaction or event or series of transactions or events that includes the disposition, a non-resident person (i) holds, directly or indirectly, shares of the capital stock of the purchaser corporation, and (ii) does not deal at arm’s length with the purchaser corporation. Tiered trusts and partnerships (5) For the purposes of this section and paragraph (k) of the definition proceeds of disposition in section 54, a person or partnership that is, at any time, a beneficiary under a trust (other than a trust that is the non-resident person referred to in subsection (1)), or a member of a partnership (such trust or partnership referred to in this subsection as the “particular conduit”), that is a beneficiary under a trust or member of a partnership (such trust or partnership referred to in this subsection as the “other conduit”) is deemed (a) to be a beneficiary under or member of, as the case may be, the other conduit; and (b) to hold the interest in the other conduit that is held by the particular conduit in the proportion expressed by the formula A/B where A is the portion of the fair market value, at that time, of the person or partnership’s interest in the particular conduit that is attributable to the interest in the other conduit held by the particular conduit, and B is the total fair market value, at that time, of all direct interests (determined without reference to this subsection) in the other conduit. Trusts and partnerships look-through rule (6) The following rules apply for the following purposes: (a) for the purposes of this subsection and subsections (1) and (1.1), if at any time an interest (in this paragraph referred to as the “pertinent interest”) in a trust or a partnership (each referred to in this subsection as a “conduit”) is disposed of by a person or partnership with an interest as a beneficiary under the conduit or that is a member of the conduit (each referred to in this subsection as a “holder”), as the case may be, to a purchaser and any portion of the fair market value of the pertinent interest is attributable to shares of the capital stock of a corporation resident in Canada held, directly or indirectly (unless all of the shares are held indirectly through one or more non-resident corporations), by the conduit (in this paragraph referred to as the “shares held by the conduit”), then (i) the holder is deemed, on a class-by-class basis, to have disposed, at that time, of the shares held by the conduit to the purchaser, and the purchaser is deemed to have acquired the shares, in the proportion expressed by the formula A/B where A is the portion of the fair market value, at that time, of the pertinent interest that is attributable to the shares held by the conduit, and B is the total fair market value, at that time, of the shares held by the conduit, and (ii) the holder is deemed to have received from the purchaser and the purchaser is deemed to have paid to the holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula A × B/C where A is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is received by the holder from the purchaser for the pertinent interest, B is the amount determined for A in subparagraph (i), and C is the total fair market value of the pertinent interest; (b) for the purposes of subsections (1) and (1.1) and paragraph (c), if at any time a conduit disposes of shares — other than a disposal of shares by a non-resident trust or by a trust resident in Canada that is, at that time, a graduated rate estate of an individual (if the trust acqui