Income Tax Act — I-3.3 212
angement, or (B) it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because (I) all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or (II) the relevant funder anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or (ii) has a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership and (A) the existence of the specified right is required under the terms and conditions of the particular relevant funding arrangement, or (B) it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because (I) the specified right was granted, or (II) the relevant funder anticipated that the specified right would be granted; (d) the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to any ultimate funder rather than the immediate funder, is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.2)) in respect of the particular amount; and (e) at any time during the relevant period, the total of all amounts — each of which is an amount outstanding as or on account of a debt or other obligation owed by the immediate funder that is a relevant funding arrangement or the fair market value of a particular property in respect of which the immediate funder is granted a specified right that is a relevant funding arrangement — is equal to at least 25% of the total of (i) the amount outstanding as or on account of the particular debt or other obligation, and (ii) the total of all amounts each of which is an amount (other than the amount described in subparagraph (i)) that the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the immediate funder under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into where (A) the immediate funder is granted a security interest (as defined in subsection 18(5)) in respect of a property that is the debt or other obligation owed by the immediate funder or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other obligation, and (B) each security interest that secures the payment of a debt or other obligation referred to in clause (A) secures the payment of every debt or other obligation referred to in that clause. Back-to-back loan arrangement (3.2) If this subsection applies at any time in respect of a taxpayer, then for the purposes of paragraph (1)(b), the taxpayer is deemed, at that time, to pay interest to each ultimate funder, the amount of which is determined for each particular ultimate funder by the formula (A – B) × C/D × (E – F)/E where A is the particular amount referred to in paragraph (3.1)(a); B is the portion, if any, of the particular amount deemed by subsection 214(16) to have been paid by the taxpayer as a dividend; C is the average of all amounts each of which is, at a particular time in the relevant period, the amount determined by the formula G – H where G is the lesser of the following amounts: (a) the amount of the particular debt or other obligation referred to in paragraph (3.1)(a) outstanding at the particular time, and (b) the total of all amounts each of which is at that particular time (i) an amount outstanding as or on account of a debt or other obligation that is owed to the particular ultimate funder under a relevant funding arrangement, (ii) t