Income Tax Act — I-3.3 34.2
accrual property income of the affiliate in respect of the corporation; and (b) except to the extent that the context otherwise requires, the exempt surplus or exempt deficit, the hybrid surplus or hybrid deficit, and the taxable surplus or taxable deficit (as those terms are defined in subsection 5907(1) of the Income Tax Regulations ) of the affiliate in respect of the corporation. Special case — multi-tier alignment (9) If a corporation is a member of a partnership subject to a multi-tier alignment, subsection (2) does not apply to the corporation in respect of the partnership for taxation years preceding the taxation year that includes the end of the first aligned fiscal period of the partnership under the multi-tier alignment. Designations (10) Once a corporation makes a designation in calculating its adjusted stub period accrual in respect of a partnership for a taxation year under any of the description of E or F of paragraph (a), the description of E or F of subparagraph (b)(i) and the description of F or G of subparagraph (b)(ii) of the definition adjusted stub period accrual in subsection (1), the designation cannot be amended or revoked. Transitional reserve (11) If a corporation has qualifying transitional income in respect of a partnership for a particular taxation year, (a) the corporation may, in computing its income for the particular year, claim an amount, as a reserve, not exceeding the least of (i) the specified percentage for the particular year of the corporation’s qualifying transitional income in respect of the partnership, (ii) if, for the immediately preceding taxation year, an amount was claimed under this subsection in computing the corporation’s income in respect of the partnership, the amount that is the total of (A) the amount included under subsection (12) in computing the corporation’s income for the particular year in respect of the partnership, and (B) the amount by which the corporation’s qualifying transitional income in respect of the partnership is increased in the particular year because of the application of subsections (16) and (17), and (iii) the amount determined by the formula A – B where A is the corporation’s income for the particular year computed before deducting or claiming any amount under this subsection in respect of the partnership or under section 61.3 and 61.4, and B is the total of all amounts each of which is an amount deductible by the corporation for the year under section 112 or 113 in respect of a dividend received by the corporation after December 20, 2012; and (b) the portion of the amount claimed under paragraph (a) for the particular year that, because of subparagraph (5)(a)(iv), has (i) a character other than capital is deductible in computing the income of the corporation for the particular year, and (ii) the character of capital is deemed to be an allowable capital loss of the corporation for the particular year from the disposition of property. Inclusion of prior year reserve (12) Subject to subsection (5), if a reserve was claimed by a corporation under subsection (11) in respect of a partnership for the immediately preceding taxation year, (a) the portion of the reserve that was deducted under subparagraph (11)(b)(i) for that preceding year is to be included in computing the income of the corporation for the current taxation year; and (b) the portion of the reserve that was deemed by subparagraph (11)(b)(ii) to be an allowable capital loss of the corporation for that preceding year is deemed to be a taxable capital gain of the corporation for the current taxation year from the disposition of property. No reserve (13) No claim shall be made under subsection (11) in computing a corporation’s income for a taxation year in respect of a partnership (a) unless, (i) in the case of a corporation that is a member of a partnership in respect of which there is a multi-tier alignment, the corporation has been a member of the partnership continuously since before March