Income Tax Regulations — 5907
al gains included in computing the amount, at any time in the year, of the particular affiliate’s hybrid surplus, or hybrid deficit, in respect of the particular corporation) exceed the total of (i) the amount of the taxable capital gains for the year referred to in the description of B in the definition foreign accrual property income in subsection 95(1) of the Act, (ii) the amount of the taxable capital gains for the year referred to in subparagraphs (c)(i), (e)(i) and (f)(iv) of the definition net earnings , and (iii) the portion of any income or profits tax paid to the government of a country for the year by the particular affiliate that can reasonably be regarded as tax in respect of the amount by which the capital gains of the particular affiliate for the year exceed the total of the amounts referred to in subparagraphs (i) and (ii), (a.1) the amount determined by the formula A – B where A is the total of all amounts each of which is a particular amount that would be included, in respect of a particular business of the particular affiliate, by paragraph (c), (c.1) or (c.2) of the definition capital dividend account in subsection 89(1) of the Act in determining the particular affiliate’s capital dividend account at the end of the year if (i) the particular affiliate were the corporation referred to in that definition, (ii) the references in paragraphs (c.1) and (c.2) of that definition, and in paragraph (c) of that definition as that paragraph (c) read in its application to taxation years that ended before February 28, 2000, to “a business” were read as references to a business that (A) is not an active business (as defined in subsection 95(1) of the Act), or (B) is an active business (as defined in that subsection 95(1)) the particular affiliate’s earnings from which for the year are determined under subparagraph (a)(iii) of the definition earnings , and (iii) the particular amount did not include any amount that can reasonably be considered to have accrued while no person or partnership that carried on the particular business was a specified person or partnership (within the meaning of section 95 of the Act) in respect of the particular corporation, and B is the amount determined for A at the end of the particular affiliate’s taxation year that immediately precedes the year, (b) where the year is the 1975 or any preceding taxation year of the particular affiliate, the total of all amounts each of which is the particular affiliate’s net earnings for the year, (c) where the year is the 1975 or any preceding taxation year of the particular affiliate, the earnings as determined in paragraph (b) of the definition earnings in this subsection to the extent that those earnings have not been included because of paragraph (b) or deducted in determining an amount included in subparagraph (b)(i) of the definition exempt loss in this subsection, (d) where the year is the 1976 or any subsequent taxation year of the particular affiliate and the particular affiliate is, throughout the year, resident in a designated treaty country, (i) the particular affiliate’s net earnings for the year from an active business carried on by it in Canada or a designated treaty country, or (ii) the particular affiliate’s earnings for the year from an active business to the extent that they derive from (A) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(i) of the Act and that would (I) if earned by the other foreign affiliate referred to in subclause 95(2)(a)(i)(A)(I) or (IV) of the Act, be included in computing the exempt earnings or exempt loss of the other foreign affiliate for a taxation year, (II) if earned by the life insurance corporation referred to in subclause 95(2)(a)(i)(A)(II) of the Act and based on the assumptions contained in subclause 95(2)(a)(i)(B)(II) of the Act, be included in computing the exempt earnings or exempt loss of the