CRA considers that a QROC distribution by a foreign affiliate to its Canadian shareholder of ECP results in ECE to the shareholder of the property’s FMV

CRA considers that property contributed for no consideration to a corporation by its shareholder, or received by a Canadian corporate shareholder from its wholly-owned foreign affiliate on a return of capital (or other upstream transfer), generally will have a cost to the transferee equal to the property’s fair market value.

CRA has extended this position to a return-of-capital distribution by the foreign affiliate of a Canadian corporation of eligible capital property (in this case, intellectual property with an unlimited life), so that the distribution gave rise, for purposes of applying the eligible capital expenditure definition to the Canadian shareholder, to an expenditure incurred by it equal to the FMV of the property at the time of distribution.

Neal Armstrong. Summaries of 2013-0506561I7 under s. 14(5) – eligible capital expenditure, s. 69(1)(c) and s. 69(4).