Income Tax Regulations — 5907
iii) and subsection (5.1) do not apply to a particular disposition of property (referred to in this subsection as the “affiliate property”) by a particular foreign affiliate of a taxpayer to another foreign affiliate of the taxpayer if (a) the only consideration in respect of the particular disposition is one or any combination of (i) shares of the capital stock of the other affiliate, and (ii) the assumption by the other affiliate of a debt or other obligation owing by the particular affiliate that arose in the ordinary course of the business of the particular affiliate to which the affiliate property relates; (b) all of the shares of the capital stock of the other affiliate that are, immediately after the particular disposition, owned by the particular affiliate are disposed of, at a particular time that is within 90 days of the day that includes the time of the particular disposition, to a person or partnership that at the particular time is not a designated person or partnership in respect of the taxpayer; and (c) the affiliate property is not disposed of by the other affiliate as part of a series of transactions or events that includes the particular disposition. (2.011) Subparagraphs (2)(f)(ii) and (j)(iii) and subsection (5.1) do not apply to a particular disposition of property (referred to in this subsection as the “affiliate property”) by a particular foreign affiliate of a taxpayer to another foreign affiliate of the taxpayer if (a) the particular disposition is a disposition referred to in subparagraph 15(1.5)(c)(i) of the Act; (b) all of the shares of the capital stock of the other affiliate are owned, at a particular time that is within 180 days after the day that includes the time of the particular disposition, by a person or partnership that at the particular time is not a designated person or partnership in respect of the taxpayer; and (c) the affiliate property is not disposed of by the other affiliate as part of a series of transactions or events that includes the particular disposition. (2.02) If an amount or a portion of an amount would, in the absence of this subsection, be included in computing the exempt earnings, or deducted in computing the exempt loss, of a foreign affiliate of a corporation in respect of the corporation for a taxation year of the affiliate and the amount or portion arises from a disposition of property (other than money), at any time, to a person or partnership that was, at that time, a designated person or partnership in respect of the corporation where that disposition is a transaction (within the meaning of subsection 245(1) of the Act) that is, or would be (if the amount or portion were a tax benefit for the purposes of section 245 of the Act), an avoidance transaction (within the meaning of subsection 245(3) of the Act), the following rules apply: (a) the amount or portion is instead to be included in the affiliate’s taxable earnings for the year in respect of the corporation; and (b) any income or profits tax relating to the transaction that would otherwise be deducted in computing the exempt earnings, or included in computing the exempt loss, of the affiliate for the year in respect of the corporation, is instead to be deducted from the affiliate’s taxable earnings for the year in respect of the corporation. (2.03) The determination — under subparagraph (a)(iii) and paragraph (b) of the definition earnings , and paragraph (b) of the definition loss , in subsection (1) — of the earnings or loss of a foreign affiliate of a taxpayer resident in Canada for a particular taxation year from an active business is to be made as if the affiliate (a) had, in computing its income or loss from the business for each taxation year (referred to in this paragraph as an “earnings or loss year”) that is the particular year or is any preceding taxation year that ends after August 19, 2011, (i) claimed all deductions that it could have claimed under the Act, up to the maximum amount deductible in