Income Tax Regulations — 5908
ear ending after 1971, made a contribution of capital to the partnership otherwise than by way of a loan, such part of the amount of the contribution as cannot reasonably be regarded as a gift made to or for the benefit of any other member of the partnership who was related to the affiliate, (v) such portion of any income or profits tax refunded before that time by the government of a country to the partnership as may reasonably be regarded as tax refunded in respect of an amount described in any of subparagraphs (b)(i) to (iii), and (vi) the amount, if any, determined under paragraph (11)(b); (b) there shall be deducted from that cost such of the following amounts as are applicable: (i) any amount included in the affiliate’s loss for a taxation year ending after 1971 that may reasonably be considered to relate to a loss of the partnership, (ii) the affiliate’s losses as described by the description of D in the definition foreign accrual property income in subsection 95(1) of the Act for a taxation year ending after 1971 and before that time that can reasonably be considered to relate to the losses of the partnership, (iii) any amount included in computing the exempt loss or taxable loss, as the case may be, of the affiliate for a taxation year ending after 1971 and before that time that may reasonably be considered to relate to a capital loss of the partnership, (iii.1) any amount included in computing the hybrid surplus or hybrid deficit of the affiliate before that time that may reasonably be considered to relate to a capital loss of the partnership, (iv) any amount received by the affiliate before that time and in a taxation year ending after 1971 as, on account or in lieu of payment of, or in satisfaction of, a distribution of the affiliate’s share of the partnership profits or partnership capital, and (v) such portion of any income or profits tax paid before that time to the government of a country by the partnership as may reasonably be regarded as tax paid in respect of an amount described in any of subparagraphs (a)(i) to (iii); and (c) for greater certainty, where any interest of a foreign affiliate in a partnership was reacquired by the affiliate after having been previously disposed of, no adjustment that was required to be made under this subsection before such reacquisition shall be made under this subsection to the cost to the affiliate of the interest as reacquired property of the affiliate. (11) If at any time a partnership owns, based on the assumptions contained in paragraph 96(1)(c) of the Act, a share of the capital stock of a particular foreign affiliate of a corporation resident in Canada and one or more members of the partnership is at that time a direct holder referred to in paragraph 5905(7.6)(a) or a subordinate affiliate referred to in paragraph 5905(7.6)(b), the following rules apply: (a) for the purposes of paragraph 92(1.1)(b) of the Act, there is to be added, in computing at or after that time the partnership’s adjusted cost base of the share, the total of all amounts each of which is the amount determined, in respect of an acquired affiliate referred to in subsection 5905(7.6), by the formula A × B where A is the amount, if any, determined under paragraph 5905(7.2)(a) in respect of the acquired affiliate, and B is the percentage that would, if the partnership were a corporation resident in Canada, be the partnership’s surplus entitlement percentage in respect of the acquired affiliate, at the adjustment time, if the partnership owned only the share; (b) for the purposes of subparagraph (10)(a)(vi), the amount determined under this paragraph, in respect of the interest in the partnership of the direct holder or the subordinate affiliate, is the amount determined by the formula A × B/C where A is the total of all amounts each of which is the amount, if any, determined under paragraph (a) in respect of a share of the capital stock of the particular affiliate, B is the fair market value, at the adj