Income Tax Act — I-3.3 88
V by, the parent for any taxation year, (a) it shall be deemed to have been in existence during the particular period beginning immediately before the end of the subsidiary’s first expenditure year, gift year, foreign tax year or loss year, as the case may be, and ending immediately after it was incorporated or otherwise formed; (b) it shall be deemed to have had, throughout the particular period, fiscal periods ending on the day of the year on which its first fiscal period ended; and (c) it shall be deemed to have been controlled, throughout the particular period, by the person or persons who controlled it immediately after it was incorporated or otherwise formed. Qualified expenditure of subsidiary (1.4) For the purposes of this subsection and section 37.1, where the rules in subsection 88(1) applied to the winding-up of a subsidiary, for the purpose of computing the income of its parent for any taxation year commencing after the subsidiary has been wound up, the following rules apply: (a) where the parent’s base period consists of fewer than three taxation years, its base period shall be determined on the assumption that it had taxation years in each of the calendar years preceding the year in which it was incorporated, each of which commenced on the same day of the year as the day of its incorporation; (b) the qualified expenditure made by the parent in a particular taxation year in its base period shall be deemed to be the total of the amount thereof otherwise determined and the qualified expenditure made by the subsidiary in its taxation year ending in the same calendar year as the particular year; (c) the total of the amounts paid to the parent by persons referred to in subparagraphs (b)(i) to (iii) of the definition expenditure base in subsection 37.1(5) in a particular taxation year in its base period shall be deemed to be the total otherwise determined and all those amounts paid to the subsidiary by a person referred to in those subparagraphs in the subsidiary’s taxation year ending in the same calendar year as the particular year; and (d) there shall be added to the total of the amounts otherwise determined in respect of the parent under subparagraphs 37.1(3)(b)(i) and 37.1(3)(b)(iii) respectively, the total of the amounts determined under those subparagraphs in respect of the subsidiary. Application of s. 37.1(5) (1.41) The definitions in subsection 37.1(5) apply to subsection 88(1.4). Parent continuation of subsidiary (1.5) For the purposes of section 29 of the Income Tax Application Rules , subsection 59(3.3) and sections 66, 66.1, 66.2, 66.21, 66.4 and 66.7, where the rules in subsection (1) applied to the winding-up of a subsidiary, its parent is deemed to be the same corporation as, and a continuation of, the subsidiary. Idem (1.6) Where a corporation that carries on a farming business and computes its income from that business in accordance with the cash method is wound up in circumstances to which subsection 88(1) applies and, at the time that is immediately before the winding-up of the corporation, owned inventory that was used in connection with that business, (a) for the purposes of subparagraph 88(1)(a)(iii), the cost amount to the corporation at that time of property purchased by it that is included in that inventory shall be deemed to be the amount determined by the formula (A × B/C) + D where A is the amount, if any, that would be included under paragraph 28(1)(c) in computing the corporation’s income for its last taxation year beginning before that time if that year had ended at that time, B is the value (determined in accordance with subsection 28(1.2)) to the corporation at that time of the purchased inventory that is distributed to the parent on the winding-up, C is the value (determined in accordance with subsection 28(1.2)) of all of the inventory purchased by the corporation that was owned by it in connection with that business at that time, and D is the lesser of (i) such additional amount as