Income Tax Act — I-3.3 88
an amount in respect of the parent’s non-capital loss under paragraph 111(1)(a) in computing taxable income for a particular taxation year, for the purpose of determining the amount included under paragraph (h) of the description of B in the definition adjusted taxable income in subsection 18.2(1) in respect of the parent’s non-capital loss in computing the parent’s adjusted taxable income for the particular taxation year, any amount of the subsidiary for the subsidiary loss year that is referred to in the description of W or X in the definition adjusted taxable income in subsection 18.2(1) and that relates to the source from which the particular portion is derived (and any amount deemed by this subsection to be an amount of the subsidiary for the subsidiary loss year relating to the source) is deemed to be an amount of the parent relating to the source for the parent loss year. Net capital losses of subsidiary (1.2) Where the winding-up of a Canadian corporation (in this subsection referred to as the “subsidiary”) commenced after March 31, 1977 and not less than 90% of the issued shares of each class of the capital stock of the subsidiary were, immediately before the winding-up, owned by another Canadian corporation (in this subsection referred to as the “parent”) and all the shares of the subsidiary that were not owned by the parent immediately before the winding-up were owned at that time by persons with whom the parent was dealing at arm’s length, for the purposes of computing the taxable income of the parent for any taxation year commencing after the commencement of the winding-up, any net capital loss of the subsidiary for any particular taxation year of the subsidiary (in this subsection referred to as the “subsidiary’s loss year”), to the extent that it (a) was not deducted in computing the taxable income of the subsidiary for any taxation year of the subsidiary, and (b) would have been deductible in computing the taxable income of the subsidiary for any taxation year beginning after the commencement of the winding-up, on the assumption that it had such a taxation year and that it had sufficient income and taxable capital gains for that year, shall, for the purposes of this subsection, paragraph 111(1)(b) and subsection 111(3), be deemed to be a net capital loss of the parent for its taxation year in which the particular taxation year of the subsidiary ended, except that (c) where at any time control of the parent or subsidiary has been acquired by a person or group of persons, no amount in respect of the subsidiary’s net capital loss for a taxation year ending before that time is deductible in computing the parent’s taxable income for a taxation year ending after that time, and (d) any portion of a net capital loss of the subsidiary that would otherwise be deemed by this subsection to be a loss of the parent for a particular taxation year beginning after the commencement of the winding-up shall be deemed, for the purposes of computing its taxable income for taxation years beginning after the commencement of the winding-up, to be a net capital loss of the parent for its immediately preceding taxation year and not for the particular year, where the parent so elects in its return of income under this Part for the particular year. Computation of income and tax of parent (1.3) For the purpose of paragraphs 88(1)(e.3), 88(1)(e.6) and 88(1)(e.7), subsections 88(1.1) and 88(1.2), section 110.1, subsections 111(1) and 111(3) and Part IV, where a parent corporation has been incorporated or otherwise formed after the end of an expenditure year, gift year, foreign tax year or loss year, as the case may be, of a subsidiary of the parent, for the purpose of computing the taxable income of, and the tax payable under this Part and Part IV by, the parent for any taxation year, (a) it shall be deemed to have been in existence during the particular period beginning immediately before the end of the subsidiary’s first expenditure year, g