Income Tax Act — I-3.3 128.1
that is a member of the conduit (each referred to in this subsection as a “holder”), as the case may be, is deemed to own the shares of each class of the capital stock of the corporation that are owned by the conduit the number of which is determined by the formula A × B/C where A is the total number of shares of the class of the capital stock of the corporation that is owned by the conduit at that time; B is the fair market value, at that time, of the holder’s interest in the conduit; and C is the total fair market value, at that time, of all interests in the conduit. Paid-up capital adjustment (2) If a corporation becomes resident in Canada at a particular time, (a) for the purposes of subsection (1) and this subsection, the paid-up capital adjustment in respect of a particular class of shares of the corporation’s capital stock in respect of that acquisition of residence is the positive or negative amount determined by the formula (A × B/C) - D where A is the amount, if any, by which (i) the total of all amounts each of which is an amount deemed by paragraph (1)(c) to be the cost to the corporation of property deemed under that paragraph to have been acquired by the corporation at the particular time exceeds (ii) the total of all amounts each of which is the amount of a debt owing by the corporation, or any other obligation of the corporation to pay an amount, that is outstanding at the particular time, B is the fair market value at the particular time of all of the shares of the particular class, C is the total of all amounts each of which is the fair market value at the particular time of all of the shares of a class of shares of the corporation’s capital stock, and D is the paid-up capital at the particular time, determined without reference to this subsection, in respect of the particular class; and (b) for the purposes of this Act, in computing the paid-up capital in respect of a class of shares of the corporation’s capital stock at any time after the particular time and before the time, if any, at which the corporation next becomes resident in Canada, there shall be (i) added the amount of the paid-up capital adjustment in respect of the particular class, if that amount is positive and the corporation so elects for all such classes in respect of that acquisition of residence by notifying the Minister in writing within 90 days after the particular time, and (ii) deducted, if the amount of the paid-up capital adjustment in respect of the particular class is negative, the absolute value of that amount. Paid-up capital adjustment (3) In computing the paid-up capital at any time in respect of a class of shares of the capital stock of a corporation (a) there is to be deducted an amount equal to the lesser of A and B, and added an amount equal to the lesser of A and C, where A is the absolute value of the difference between (i) the total of all amounts deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of the class paid before that time by the corporation, and (ii) the total that would be determined under subparagraph (i) if this Act were read without reference to subsection (2), B is the total of all amounts required by subsection (2) to be added in computing the paid-up capital in respect of the class before that time, and C is the total of all amounts required by subsection (2) to be deducted in computing the paid-up capital in respect of the class before that time; and (b) there is to be added an amount equal to the lesser of (i) the amount, if any, by which (A) the total of all amounts deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of the class paid after March 28, 2012 and before that time by the corporation exceeds (B) the total that would be determined under clause (A) if this Act were read without reference to subparagraph (c.3)(i), and (ii) the total of all amounts required by subparagraph (c.3)(i) to be deducted in computing the paid-up capital in respect of the class before th