Income Tax Regulations — 5905
i.3) in the case of its opening hybrid underlying tax, that is the total of its hybrid underlying tax in respect of each predecessor corporation, determined immediately before that time, (iii) in the case of its opening taxable surplus, by which the total of its taxable surplus in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its taxable deficit in respect of each predecessor corporation, determined immediately before that time, (iv) in the case of its opening taxable deficit, by which the total of its taxable deficit in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its taxable surplus in respect of each predecessor corporation, determined immediately before that time, and (v) in the case of its opening underlying foreign tax, that is the total of its underlying foreign tax in respect of each predecessor corporation, determined immediately before that time; and (b) for the purpose of paragraph (a), each of the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax of an affiliate in respect of a predecessor corporation, determined immediately before that time, is deemed to be the amount determined by the formula A × B/C where A is the amount of that surplus, deficit or tax, as the case may be, as determined without reference to this subsection, B is the predecessor corporation’s surplus entitlement percentage immediately before that time in respect of the affiliate, and C is the new corporation’s surplus entitlement percentage immediately after that time in respect of the affiliate. (5.11) to (5.13) [Repealed, 2013, c. 34, s. 44] (5.2) If, at a particular time, control of a corporation resident in Canada has been acquired by a person or a group of persons and, at the particular time, the corporation owns shares of the capital stock of a foreign affiliate of the corporation, there shall be included — under subparagraph (v) of the description of B in the definition exempt surplus in subsection 5907(1) in computing the affiliate’s exempt surplus or exempt deficit, as the case may be, in respect of the corporation at the time that is immediately before the particular time — the amount, if any, determined by the formula (A + B – C)/D where A is the amount determined by the formula E × F where E is the affiliate’s tax-free surplus balance in respect of the corporation, determined at the time (referred to in this subsection as the “relevant time”) that is immediately before the time that is immediately before the particular time, and F is the corporation’s surplus entitlement percentage in respect of the affiliate determined at the relevant time; B is the total of all amounts each of which is the corporation’s cost amount, determined at the particular time, of a share of the capital stock of the affiliate that is owned by the corporation at the particular time; C is the total of (a) the fair market value, determined at the particular time, of all of the shares of the capital stock of the affiliate that are owned by the corporation at the particular time, and (b) the amount, if any, determined under paragraph 5908(6)(b); and D is the corporation’s surplus entitlement percentage in respect of the affiliate determined at the relevant time. (5.3) The cost amount of a share that is referred to in the description of B in subsection (5.2) shall be determined after taking into account the application of subsection 111(4) of the Act. (5.4) For the purposes of clause (B) of subparagraph 88(1)(d)(ii) of the Act, the prescribed amount is (a) if the property described in that subparagraph is a share of the capital stock of a foreign affiliate of the subsidiary, the amount determined by the formula A × B where A is the affiliate’s tax-free surplus balance, in respect of the subsidiary, determined at the time at which the parent last acqui