Income Tax Act — I-3.3 95
e borrowing party’s capital gain is reduced under paragraph 39(2.1)(a) in respect of that repayment, and B is the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumptions that (I) the capital loss of the creditor affiliate, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, and (II) neither the creditor affiliate nor any other foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, and (B) if the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the formula A/(B × C) where A is the amount by which the borrowing party’s capital gain is reduced under paragraph 39(2.1)(a) in respect of that repayment, B is the proportion that the amount of the capital loss of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital loss so determined, and C is the total of all participating percentages, each of which is the participating percentage in respect of a share of the capital stock of a foreign affiliate of a qualifying entity, and that is owned by a qualifying entity, that is relevant in determining the amount that would be included in computing a qualifying entity’s income under subsection 91(1), on the assumptions that (I) the capital loss of the creditor partnership, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor partnership, and (II) neither the creditor partnership nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, and (ii) in the case of a capital gain, (A) if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain so determined, that is equal to the amount determined by the formula A/B where A is the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(b) in respect of that repayment, and B is the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumption that neither the creditor affiliate nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year other than its capital gain, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness, and (B) if the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the following formula A/(B × C) where A is the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(b) in respect of that repayment, B is the proportion that the amount of the capital gain of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital gain so determined, and C is the total of all participating percentages, each of which is the partici