Finance will address application of FAD rules to transfers within Canadian groups of FA debt

A Canadian "Acquire Co" of CRIC (i.e., a Canadian subsidiary of a non-resident parent) purchased the Canadian "Target," and then amalgamated with it.  Amalco then distributed shares and debt of "FA" (a U.S. sub previously held by Target) to CRIC.

A comfort letter contemplates unspecified amendments to the foreign affiliate dumping rules to address two problems:

• s. 212.3(18) does not exempt transfers of FA debt between related Canadian corporations
• the exemption in s. 212.3(18)(a) for transfers of FA shares between related Canadian corporations does not apply where the transferor dealt at arm’s length with the transferee at any time during the series of transactions – which is problematic here because Amalco is deemed by s. 212.3(22)(a) to be a continuation of Target

Neal Armstrong.  Summary of 9 July 2013 Comfort Letter addressed to Brian Bloom of Davies under s. 212.3(18)(a).