Income Tax Act — I-3.3 95
tion year, acquired or disposed of shares of the capital stock of that non-resident corporation or of any other corporation and, because of that acquisition or disposition, that non-resident corporation becomes or ceases to be a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest, and (b) at the beginning of that particular taxation year or at the end of that particular taxation year, the non-resident corporation is a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest. Controlled foreign affiliate throughout year (2.201) For the purposes of paragraphs (2)(a) and (g), a non-resident corporation is deemed to be a controlled foreign affiliate of a taxpayer throughout a taxation year of the non-resident corporation if (a) in the taxation year, a person or partnership acquires or disposes of shares of the capital stock of a corporation and, because of the acquisition or disposition, the non-resident corporation becomes or ceases to be a controlled foreign affiliate of the taxpayer; and (b) at either or both of the beginning and end of the taxation year, the non-resident corporation is a controlled foreign affiliate of the taxpayer. Rule re subsection (2.2) (2.21) Subsection (2.2) does not apply for the purpose of paragraph (2)(a) in respect of any income or loss referred to in that paragraph, of a particular foreign affiliate of the taxpayer, to the extent that that income or loss can reasonably be considered to have been realized or to have accrued before the earlier of (a) the time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, and (b) the time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of another person resident in Canada in respect of which the other person resident in Canada had a qualifying interest, where (i) the taxpayer is a corporation, (ii) the taxpayer did not exist at the beginning of the taxation year, (iii) the particular affiliate became a foreign affiliate of the taxpayer in the taxation year because of a disposition, in the taxation year, of shares of the capital stock of the particular affiliate to the taxpayer by the other person resident in Canada, and (iv) the other person resident in Canada was, immediately before that disposition, related to the taxpayer. Application of paragraph (2)(a.1) (2.3) Paragraph 95(2)(a.1) does not apply to a foreign affiliate of a taxpayer in respect of a sale or exchange of property that is currency or a right to purchase, sell or exchange currency where (a) the taxpayer is (i) a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province, or (ii) a subsidiary wholly-owned corporation of a corporation described in subparagraph 95(2.3)(a)(i); (b) the sale or exchange was made by the affiliate in the course of a business conducted principally with persons with whom the affiliate deals at arm’s length, if (i) the business is principally carried on in the country (other than Canada) under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, or (ii) the affiliate is a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities and the activities of the business are regulated (A) under the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last contin