Income Tax Regulations (C.R.C., c. 945)

Regulations are current to 2014-12-08 and last amended on 2014-06-19. Previous Versions

Deductible Loss

  •  (1) For the purposes of the description of F in the definition “foreign accrual property income” in subsection 95(1) of the Act, subject to subsection (2), the prescribed amount for the year (referred to in this subsection and subsection (2) as the “particular year”) is the total of all amounts each of which is a portion designated for the particular year by the taxpayer of the foreign accrual property loss of the affiliate for a taxation year of the affiliate that is

    • (a) one of the 20 taxation years of the affiliate that immediately precede the particular year; or

    • (b) one of the three taxation years of the affiliate that immediately follow the particular year.

  • (2) For the purposes of this subsection and subsection (1),

    • (a) a portion of a foreign accrual property loss of the affiliate for any taxation year of the affiliate may be designated for the particular year only to the extent that the foreign accrual property loss exceeds the total of all amounts each of which is a portion, of the foreign accrual property loss, designated by the taxpayer for a taxation year of the affiliate that precedes the particular year;

    • (b) no portion of the affiliate’s foreign accrual property loss for a taxation year of the affiliate is to be designated for the particular year until the affiliate’s foreign accrual property losses for the preceding taxation years referred to in paragraph (1)(a) have been fully designated; and

    • (c) if any person or partnership that was, at the end of a taxation year (referred to in this paragraph as the “relevant loss year”) of the affiliate, a relevant person or partnership in respect of the taxpayer designates for a taxation year (referred to in this paragraph as the “relevant claim year”) of the affiliate a particular portion of the affiliate’s foreign accrual property loss for the relevant loss year, there is deemed to have been designated for the relevant claim year by the taxpayer the portion of that loss that is the greater of

      • (i) the particular portion, and

      • (ii) the greatest of the portions of that loss that are so designated by any other relevant persons or partnerships in respect of the taxpayer.

  • (3) For the purposes of this section, and subject to subsection (4), “foreign accrual property loss” of the affiliate for a taxation year of the affiliate means

    • (a) where, at the end of the year, the affiliate is a controlled foreign affiliate of a person or partnership that is, at the end of the year, a relevant person or partnership in respect of the taxpayer, the amount, if any, determined by the formula

      J – (K + L + M + N)

      where

      J 
      is the amount determined for D in the formula in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the affiliate for the year,
      K 
      is the amount, if any, by which
      • (i) the amount determined for A in that formula in respect of the affiliate for the year

      exceeds

      • (ii) the amount determined for H in that formula in respect of the affiliate for the year,

      L 
      is the amount, if any, by which
      • (i) the amount determined for B in that formula in respect of the affiliate for the year

      exceeds

      • (ii) the total of

        • (A) the amount determined for E in that formula in respect of the affiliate for the year, and

        • (B) the amount determined for F.1 in that formula in respect of the affiliate for the year,

      M 
      is the amount determined for C in that formula in respect of the affiliate for the year, and
      N 
      is the amount, if any, by which
      • (i) the total of

        • (A) the amount determined for A.1 in that formula in respect of the affiliate for the year, and

        • (B) the amount determined for A.2 in that formula in respect of the affiliate for the year

      exceeds

      • (ii) the amount determined for G in that formula in respect of the affiliate for the year; and

    • (b) in any other case, nil.

  • (4) In computing under subsection (3) the foreign accrual property loss of the affiliate for a taxation year, if the affiliate or another corporation receives a payment described in subsection 5907(1.3) from a non-resident corporation that is, at the time of the payment, a foreign affiliate of a relevant person or partnership in respect of the taxpayer and any portion of the payment can reasonably be considered to relate to a loss or portion of a loss of the affiliate for the year described in the description of D in the definition “foreign accrual property income” in subsection 95(1) of the Act, the amount of the loss or portion of the loss is deemed to be nil.

  • (5) For the purposes of this section and section 5903.1,

    • (a) if paragraph 95(2)(d.1) of the Act applies to a foreign merger, the new foreign corporation referred to in that paragraph is, except in the determination of the foreign accrual property income of a foreign affiliate predecessor referred to in that paragraph, deemed to be the same corporation as, and a continuation of, each foreign affiliate predecessor; and

    • (b) if paragraph 95(2)(e) of the Act applies to a liquidation and dissolution, of a disposing affiliate referred to in that paragraph, that is a designated liquidation and dissolution of the disposing affiliate, the shareholder affiliate referred to in that paragraph is, except in the determination of the foreign accrual property income of the disposing affiliate, deemed to be the same corporation as, and a continuation of, the disposing affiliate.

  • (6) In this section and section 5903.1, a “relevant person or partnership”, in respect of the taxpayer at any time, means the taxpayer or a person (other than a designated acquired corporation of the taxpayer), or a partnership, that is at that time

    • (a) a person (other than a partnership) that is resident in Canada and does not, at that time, deal at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act) with the taxpayer;

    • (b) an antecedent corporation of a relevant person or partnership in respect of the taxpayer;

    • (c) a partnership a member of which is at that time a relevant person or partnership in respect of the taxpayer under this subsection; or

    • (d) where paragraph (1)(b) is being applied, a corporation of which the taxpayer is an antecedent corporation.

  • (7) For the purposes of paragraphs (6)(a) to (d),

    • (a) if a person or partnership (referred to in this paragraph as the “relevant person”) is not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act) with another person or partnership (referred to in this paragraph as the “particular person”) at a particular time, the relevant person is deemed to have existed and not to have dealt at arm’s length with the particular person, nor with each antecedent corporation (other than a designated acquired corporation of the particular person) of the particular person, throughout the period that began when the particular person or the antecedent corporation, as the case may be, came into existence and that ends at the particular time; and

    • (b) where paragraph (1)(b) is being applied, if a corporation of which a particular person (other than a designated acquired corporation of the corporation) is an antecedent corporation is not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act) with another person or partnership at any time, the particular person is deemed to exist and not to be dealing at arm’s length with the other person or the partnership, as the case may be, at that time.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts and regulations. SOR/80-141, s. 2;
  • SOR/85-176, s. 2;
  • SOR/89-135, s. 2;
  • SOR/94-686, s. 79(F);
  • SOR/97-505, s. 5;
  • 2013, c. 34, ss. 42, 81.