Income Tax Act — I-3.3 95
es or partnership interests, as the case may be, are deemed to be owned by that person or partnership; and (b) where a person or partnership acquires or disposes of shares of the capital stock of a corporation or interests in a partnership, either directly or indirectly, and it can reasonably be considered that the principal purpose for the acquisition or disposition is to permit a person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act, that acquisition or disposition is deemed not to have taken place, and where the shares or partnership interests were unissued by the corporation or partnership immediately before the acquisition, those shares or partnership interests, as the case may be, are deemed not to have been issued. Stock dividends from foreign affiliates (7) For the purposes of this Subdivision and subsection 52(3), the amount of any stock dividend paid by a foreign affiliate of a corporation resident in Canada shall, in respect of the corporation, be deemed to be nil. Tracking interests — interpretation (8) For the purposes of subsections (9) to (12), a particular property is a tracking interest in respect of a person or partnership (referred to in this subsection as the “tracked entity”) if (a) all or part of the fair market value of the particular property — or of any payment or right to receive an amount in respect of the particular property — can reasonably be considered to be determined, directly or indirectly, by reference to one or more of the following criteria in respect of property or activities of the tracked entity (referred to in this subsection and subsections (9) to (11) as the “tracked property and activities”): (i) the fair market value of property of the tracked entity, (ii) any revenue, income or cash flow from property or activities of the tracked entity, (iii) any profits or gains from the disposition of property of the tracked entity, and (iv) any similar criteria in respect of property or activities of the tracked entity; and (b) the tracked property and activities in respect of the particular property represent less than all of the property and activities of the tracked entity. Tracking interests — investment business definition (9) For the purposes of the definition investment business in subsection (1), if, at any time in a taxation year of a foreign affiliate of a taxpayer, a person or partnership holds a tracking interest in respect of the affiliate or a partnership of which the affiliate is a member, the tracked property and activities in respect of the tracking interest are, to the extent they would not otherwise be part of an investment business of the affiliate, deemed, in respect of the taxpayer, (a) to be a separate business carried on by the affiliate throughout the year; and (b) not to be part of any other business of the affiliate. Conditions for subsection (11) (10) Subsection (11) applies in respect of a foreign affiliate of a taxpayer for a taxation year of the affiliate if, at any time in the year, (a) the taxpayer holds a property that is a tracking interest in respect of the affiliate; and (b) shares of a class of the capital stock of the affiliate the fair market value of which can reasonably be considered to be determined by reference to the tracked property and activities in respect of the tracking interest (referred to in subsection (11) as a “tracking class”) are held by the taxpayer or a foreign affiliate of the taxpayer. Tracking class — separate corporation (11) If this subsection applies in respect of a foreign affiliate (referred to in this subsection as the “actual affiliate”), other than a controlled foreign affiliate, of a taxpayer for a taxation year of the actual affiliate, the following rules apply for the purpose of determining the amounts, if any, to be included under subsection 91(1), and to be deducted under subsection 91(4), by the taxpayer in respect of the year and for the purpose of applyi