Income Tax Regulations — 5907
cluded in computing the earnings amount of the affiliate for any taxation year by the income tax law that is relevant in computing that amount, and (ii) subject to subsections (2.01) and (2.011), does not arise with respect to a disposition (other than a disposition to which subsection (9) applies), of property by the affiliate, (A) to a person or partnership that was, at the time of the disposition, a designated person or partnership in respect of the taxpayer, and (B) to which a tax deferral, rollover or similar tax postponement provision of the income tax laws that are relevant in computing the earnings amount of the affiliate applied, and (f.1) any assistance from a government, municipality or other public authority (other than any such assistance that reduced the amount of an expenditure for purposes of computing the earnings amount for any taxation year) that the affiliate received or became entitled to receive in the year in connection with such business carried on in that country that is not otherwise required to be included in computing the earnings amount for the year or for any other taxation year, and there shall be deducted such portion of the following amounts as were included or were not deducted, as the case may be, in computing the earnings amount, (g) any income or profits tax refunded by the government of a country to the affiliate so included; (h) any capital gain of the affiliate in respect of the disposition of capital property so included (for greater certainty, capital property of the affiliate for the purposes of this paragraph includes all the property of the affiliate other than property referred to in any of subparagraphs 39(1)(a)(i) to (iv) of the Act on the assumption for this purpose that the affiliate is a corporation resident in Canada); (i) any amount that is included in the foreign accrual property income of the affiliate so included; (j) any loss, outlay or expense made or incurred in the year by the affiliate for the purpose of gaining or producing such earnings amount to the extent that (i) such loss, outlay or expense is not otherwise permitted to be deducted in computing the earnings amount of the affiliate for any taxation year by the income tax law that is relevant in computing that amount, or (ii) such outlay or expense can reasonably be regarded as applicable to any revenue added to the earnings amount of the affiliate under paragraph (f), where such loss, outlay or expense (iii) subject to subsections (2.01) and (2.011), does not arise with respect to a disposition (other than a disposition to which subsection (9) applies), of property by the affiliate, (A) to a person or partnership that was, at the time of the disposition, a designated person or partnership in respect of the taxpayer, and (B) to which a loss deferral or similar loss postponement provision of the income tax laws that are relevant in computing the earnings amount of the affiliate applied, and (iv) is not (A) a loss referred to in paragraph (c) or (d), (B) a capital expenditure other than interest, or (C) income or profits tax paid to the government of a country; (k) any outlay made in the year in repayment of an amount referred to in paragraph (f.1); and (l) if any property of the affiliate that was acquired from a person or partnership that was, at the time of the acquisition, a designated person or partnership in respect of the taxpayer has been disposed of, the amount in respect of that property that may reasonably be considered as having been included under paragraph (f) in computing the earnings amount of any foreign affiliate of the taxpayer or of a person or partnership that was, at the time of the disposition, a designated person or partnership in respect of the taxpayer. (2.01) 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 f