Income Tax Act — I-3.3 18.2
) For the purposes of this section, a taxpayer and another taxpayer (referred to in this section as the “transferor” and the “transferee”, respectively) may jointly elect in prescribed form to designate an amount equal to all or a portion of the transferor’s cumulative unused excess capacity, and that amount is an amount of transferred capacity of the transferor for a taxation year and an amount of received capacity of the transferee for a taxation year, if (a) the taxation year of the transferor ends in the taxation year of the transferee; (b) each of the transferor and the transferee is (i) a taxable Canadian corporation or a fixed interest commercial trust throughout its taxation year, and (ii) an eligible group entity in respect of the other at the end of its taxation year; (c) where the transferor is a financial institution group entity or a financial holding corporation for its taxation year, the transferee is, for its taxation year, (i) a financial institution group entity, (ii) a financial holding corporation, or (iii) a special purpose loss corporation; (d) the election or amended election (i) specifies the amount of the transferred capacity, and (ii) is filed with the Minister by the transferor (A) on or before the later of the filing-due date of (I) the transferor for its taxation year, and (II) the transferee for its taxation year, or (B) on or before the day that is 90 days after the day of sending of (I) a notice of assessment of tax payable under this Part by the transferor or the transferee for their respective taxation years, or (II) a notification that no tax is payable under this Part by the transferor or the transferee for their respective taxation years; (e) the total of all amounts each of which would, if this subsection were read without reference to this paragraph, be an amount of transferred capacity of the transferor for its taxation year in respect of any transferee, does not exceed the transferor’s cumulative unused excess capacity for the year; (f) if the transferee is a financial holding corporation and the transferor is a financial institution group entity, it is the case that A ≥ B where A is the total of all amounts, each of which is an amount that is included in computing the income of the financial holding corporation for its taxation year in respect of excluded interest, the payer of which is, for the taxation year of the payer in which the interest is payable, (i) a financial institution group entity, or (ii) a special purpose loss corporation, if the amount gives rise to a loss of the special purpose loss corporation that is, or will be, utilized solely by a financial institution group entity, and B is the total of all amounts, each of which would, in the absence of this paragraph, be an amount that is both (i) received capacity of the financial holding corporation for its taxation year, and (ii) transferred capacity of a financial institution group entity for one of its taxation years; (g) if the transferee is a special purpose loss corporation and the transferor is a financial institution group entity, it is the case that C ≥ D where C is the total of all amounts, each of which is an amount that (i) would, in the absence of this section, be deductible in computing the income of the special purpose loss corporation for its taxation year, (ii) is paid or payable to a financial holding corporation, (iii) meets the conditions set out in paragraphs (a) to (d) of the definition excluded interest , and (iv) would, in the absence of this section, give rise to a loss that is, or will be, utilized solely by a financial institution group entity, and D is the total of all amounts, each of which would, in the absence of this paragraph, be an amount that is both (i) received capacity of the special purpose loss corporation for its taxation year, and (ii) transferred capacity of a financial institution group entity for one of its taxation years; (h) an amended election has not been filed in accordance