Income Tax Act — I-3.3 88
 with subsection 28(1.2)) of all of the inventory purchased by the corporation that was owned by it in connection with that business at that time, and D is the lesser of (i) such additional amount as the corporation designates in respect of the property, and (ii) the amount, if any, by which the fair market value of the property at that time exceeds the amount determined for A in respect of the property; (b) for the purpose of subparagraph 28(1)(a)(i), the disposition of the inventory and the receipt of the proceeds of disposition therefor shall be deemed to have occurred at that time and in the course of carrying on the business; and (c) where the parent carries on a farming business and computes its income therefrom in accordance with the cash method, for the purposes of section 28, (i) an amount equal to the cost to the parent of the inventory shall be deemed to have been paid by it, and (ii) the parent shall be deemed to have purchased the inventory for an amount equal to that cost, in the course of carrying on that business and at the time it acquired the inventory. Interpretation (1.7) For the purposes of paragraphs 88(1)(c) and 88(1)(d), where a parent of a subsidiary did not deal at arm’s length with another person (other than a corporation the control of which was acquired by the parent from a person with whom the parent dealt at arm’s length) at any time before the winding-up of the subsidiary, the parent and the other person are deemed never to have dealt with each other at arm’s length, whether or not the parent and the other person coexisted. Application of subsection (1.9) (1.8) Subsection (1.9) applies if (a) a corporation has made a designation (referred to in this subsection and subsection (1.9) as the “initial designation”) under paragraph (1)(d) in respect of a share of the capital stock of a foreign affiliate of the corporation, or an interest in a partnership that, based on the assumptions contained in paragraph 96(1)(c), owns a share of the capital stock of a foreign affiliate of the corporation, on or before the filing-due date for its return of income under this Part for the taxation year in which a disposition of the share or the partnership interest, as the case may be, occurred in the course of a winding-up referred to in subsection (1) or an amalgamation referred to in subsection 87(11); (b) the corporation made reasonable efforts to determine the foreign affiliate’s tax-free surplus balance (within the meaning assigned by subsection 5905(5.5) of the Income Tax Regulations ), in respect of the corporation, that was relevant in the computation of the maximum amount available under subparagraph (1)(d)(ii) to be designated in respect of that disposition; and (c) the corporation amends the initial designation on or before the day that is 10 years after the filing-due date referred to in paragraph (a). Amended designation (1.9) If this subsection applies and, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the initial designation to be amended, the amended designation under paragraph (1.8)(c) is deemed to have been made on the day on which the initial designation was made and the initial designation is deemed not to have been made. Winding-up of Canadian corporation (2) Where a Canadian corporation (other than a subsidiary to the winding-up of which the rules in subsection 88(1) applied) has been wound up after 1978 and, at a particular time in the course of the winding-up, all or substantially all of the property owned by the corporation immediately before that time was distributed to the shareholders of the corporation, (a) for the purposes of computing the corporation’s (i) capital dividend account, (i.1) capital gains dividend account (within the meaning assigned by subsection 131(6), where the corporation is an investment corporation, (ii) capital gains dividend account (within the meaning assigned by section 133), and (iii) pre-1972 capital s