Income Tax Act — I-3.3 138
 taxpayer. Insurance swaps (2.3) Subsection (2.4) applies in respect of one or more agreements or arrangements if (a) subsection (2.2) applies to deem one or more risks insured by a particular life insurer resident in Canada to be specified Canadian risks; and (b) those agreements or arrangements are in respect of risks described in paragraph (a) and have been entered into by any of the following (in subsection (2.4), referred to as an “agreeing party”): (i) the particular life insurer, (ii) another life insurer resident in Canada that does not deal at arm’s length with the particular life insurer, (iii) a partnership of which a life insurer described in subparagraph (i) or (ii) is a member, (iv) a foreign affiliate of either the particular life insurer or a person that does not deal at arm’s length with the particular life insurer, and (v) a partnership of which a foreign affiliate described in subparagraph (iv) is a member. Insurance swaps (2.4) If this subsection applies in respect of one or more agreements or arrangements, (a) to the extent that activities performed in connection with those agreements or arrangements can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph 95(2)(a.21)(ii) (with any modifications that the circumstances require), those activities are deemed to be, (i) if the agreeing party is a life insurer resident in Canada, or a partnership of which such a life insurer is a member, part of the life insurer’s insurance business carried on in Canada, and (ii) if the agreeing party is a foreign affiliate of a taxpayer, or a partnership of which such an affiliate is a member, a separate business, other than an active business, carried on by the affiliate; and (b) any income from those activities (including income that pertains to or is incident to those activities) is deemed to be, (i) if the agreeing party is a life insurer resident in Canada, income from the life insurer’s insurance business carried on in Canada, and (ii) if the agreeing party is a foreign affiliate of a taxpayer, income from the business, other than an active business. Ceding of Canadian risks (2.5) Any income of a life insurer resident in Canada for a taxation year, from its insurance business carried on in a country other than Canada, in respect of the ceding of specified Canadian risks that would, if the life insurer were a foreign affiliate of a taxpayer, be included in computing the life insurer’s income from a business, other than an active business, for the taxation year because of subparagraph 95(2)(a.2)(iii), is to be included in computing the life insurer’s income or loss for that taxation year from its insurance business carried on in Canada, except to the extent it is already included because of subsection (2.1), (2.2) or (2.4). Anti-avoidance (2.6) For the purposes of this section, (a) a risk is deemed to be a specified Canadian risk that is insured as part of an insurance business carried on in Canada by a particular life insurer resident in Canada if (i) the particular life insurer insured the risk as part of a transaction or series of transactions, (ii) the risk would not be a specified Canadian risk if this Act were read without reference to this subsection, and (iii) it can reasonably be concluded that one of the purposes of the transaction or series of transactions was to avoid (A) having a designated foreign insurance business, or (B) the application of any of subsections (2.1) to (2.5) to the risk; and (b) if one or more agreements or arrangements in respect of the risk have been entered into by any of the persons or partnerships described in subparagraphs (2.3)(b)(i) to (v) (in this paragraph, referred to as an “agreeing party”), (i) any activities performed in connection with those agreements or arrangements are deemed to be (A) if the agreeing party is a life insurer resident in Canada, or a partnership of which such a life insurer is a member, part of the life i