Income Tax Act — I-3.3 95
, of services or of an undertaking to provide services (i) is deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the amounts paid or payable in consideration for those services or for the undertaking to provide services (A) are deductible, or can reasonably be considered to relate to amounts that are deductible, in computing the income from a business carried on in Canada, by (I) any taxpayer of whom the affiliate is a foreign affiliate, or (II) another taxpayer who does not deal at arm’s length with 1 the affiliate, or 2 any taxpayer of whom the affiliate is a foreign affiliate, or (B) are deductible, or can reasonably be considered to relate to an amount that is deductible, in computing the foreign accrual property income of a foreign affiliate of (I) any taxpayer of whom the affiliate is a foreign affiliate, or (II) another taxpayer who does not deal at arm’s length with 1 the affiliate, or 2 any taxpayer of whom the affiliate is a foreign affiliate, and (ii) is deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the services are, or are to be, performed by (A) any taxpayer of whom the affiliate is a foreign affiliate, (B) a relevant person who does not deal at arm’s length with (I) the affiliate, or (II) any taxpayer of whom the affiliate is a foreign affiliate, (C) a partnership any member of which is a person described in clause (A) or (B), or (D) a partnership in which any person or partnership described in any of clauses (A) to (C) has, directly or indirectly, a partnership interest; (c) if a foreign affiliate (referred to in this paragraph as the “disposing affiliate”) of a taxpayer has, at any time, disposed of capital property (other than property the adjusted cost base of which, at that time, is greater than the amount that would, in the absence of this paragraph, be the disposing affiliate’s proceeds of disposition of the property in respect of the disposition) that was shares (referred to in this paragraph as the “shares disposed of”) of the capital stock of another foreign affiliate of the taxpayer to any other corporation that was, immediately after that time, a foreign affiliate (referred to in this paragraph as the “acquiring affiliate”) of the taxpayer for consideration that includes shares of the capital stock of the acquiring affiliate, (i) the cost to the disposing affiliate of any property (other than shares of the capital stock of the acquiring affiliate) receivable by the disposing affiliate as consideration for the disposition is deemed to be the fair market value of the property at that time, (ii) the cost to the disposing affiliate of each share of a class of the capital stock of the acquiring affiliate that is receivable by the disposing affiliate as consideration for the disposition is deemed to be the amount determined by the formula (A – B) × C/D where A is the total of all amounts each of which is the relevant cost base to the disposing affiliate at that time, in respect of the taxpayer, of a share disposed of, B is the fair market value at that time of the consideration receivable for the disposition (other than shares of the capital stock of the acquiring affiliate), C is the fair market value, immediately after that time, of the share, and D is the fair market value, immediately after that time, of all shares of the capital stock of the acquiring affiliate receivable by the disposing affiliate as consideration for the disposition, (iii) the disposing affiliate’s proceeds of disposition of the shares are deemed to be an amount equal to the cost to it of all shares a