Income Tax Act — I-3.3 85.1
m the relevant taxpayer does not deal at arm’s length, at any time, for the purposes of clause (4)(a)(ii)(B) if, (i) where either the relevant taxpayer or the acquirer is a partnership and the other party is not, (A) any member of the partnership does not deal at arm’s length, at that time, with the other party, and (B) the acquirer — or, where the acquirer is a partnership, any member of the acquirer — is a non-resident person at that time, or (ii) where both the relevant taxpayer and the acquirer are partnerships, (A) the relevant taxpayer or any member of the relevant taxpayer does not deal at arm’s length, at that time, with the acquirer or any member of the acquirer, and (B) any member of the acquirer is a non-resident person at that time. Definitions (4.2) The following definitions apply in this subsection and subsections (4) and (4.1). particular person , in respect of a taxpayer at any time, means a person that is at that time (a) resident in Canada and not dealing at arm’s length with the taxpayer; (b) a successor corporation of the taxpayer; or (c) resident in Canada and not dealing at arm’s length with a person described in paragraph (a) or (b). ( personne déterminée ) successor corporation of a particular corporation means (a) a corporation of which the particular corporation is a predecessor corporation (within the meaning of subsection 87(1)); (b) a corporation into which the particular corporation was wound-up in a winding-up to which subsection 88(1) applied; or (c) a successor corporation of a successor corporation of the particular corporation. ( société remplaçante ) Foreign share for foreign share exchange (5) Subject to subsections (3) and (6) and 95(2), where a corporation resident in a country other than Canada (in this section referred to as the “foreign purchaser”) issues shares of its capital stock (in this section referred to as the “issued foreign shares”) to a vendor in exchange for shares of the capital stock of another corporation resident in a country other than Canada (in this section referred to as the “exchanged foreign shares”) that were immediately before the exchange capital property of the vendor, except where the vendor has, in the vendor’s return of income for the taxation year in which the exchange occurred, included in computing the vendor’s income for that year any portion of the gain or loss, otherwise determined, from the disposition of the exchanged foreign shares, the vendor is deemed (a) to have disposed of the exchanged foreign shares for proceeds of disposition equal to the adjusted cost base to the vendor of those shares immediately before the exchange, and (b) to have acquired the issued foreign shares at a cost to the vendor equal to the adjusted cost base to the vendor of the exchanged foreign shares immediately before the exchange, and where the exchanged foreign shares were taxable Canadian property of the vendor, the issued foreign shares so acquired by the vendor are deemed to be, at any time that is within 60 months after the exchange, taxable Canadian property of the vendor. Where subsection (5) does not apply (6) Subsection (5) does not apply where (a) the vendor and foreign purchaser were, immediately before the exchange, not dealing with each other at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) that is a right of the foreign purchaser to acquire the exchanged foreign shares); (b) immediately after the exchange the vendor, persons with whom the vendor did not deal at arm’s length or the vendor together with persons with whom the vendor did not deal at arm’s length (i) controlled the foreign purchaser, or (ii) beneficially owned shares of the capital stock of the foreign purchaser having a fair market value of more than 50% of the fair market value of all of the outstanding shares of the capital stock of the foreign purchaser; (c) consideration other than issued foreign shares was received by the vendor for the exchanged foreig