CRA finds that income from the sale of life insurance business asset by a Canadian insurer’s FA to the insurer’s non-resident branch generally will not generate FAPI

S. 95(2)(a.1) may deem business income realized by FA from a sale of property to its Canadian parent to be foreign accrual property income where the cost to Canco of the property "is relevant" in computing its business income.  However, if Canco is an insurer which acquires property (previously used by FA in its foreign life insurance business) for use in Canco’s foreign life insurance branch, CRA accepts that the cost to that branch of the property will not be relevant to computing Canco’s business income (so that s. 95(2)(a.1) will not apply) as any gain or loss to Canco from a subsequent sale of the property would be excluded from its income by ss. 138(2) and (9).

Neal Armstrong.  Summary of 14 May 2015 CLHIA Roundtable, Q. 2, 2015-0573801C6 under s. 95(2)(a.1).