CRA considers that the extended reassessment period can apply to FAPI earned even before the 2018 Budget
The Canadian corporate “Taxpayer” contributed marketable securities to a wholly-owned controlled foreign affiliate ("ForeignCo") in exchange for shares. Could CRA rely on the extended reassessment period under ss. 152(4)(b)(iii) and 152(4.01)(b)(iii) to reassess the Taxpayer respecting the foreign accrual property income (FAPI) earned by ForeignCo from the marketable securities (for a taxation year before the 2018 Budget reversal of Ho)? In responding “yes”, CRA stated:
[W]here there is a causal link between the FAPI earned by an FA and the taxpayer's investment in the capital stock of that FA, and where the shares have been acquired by the taxpayer directly from the FA, the adjustment attributable to FAPI arising from the assessment or reassessment can reasonably be considered to have been made as a result of a transaction (the investment in the FA) between the taxpayer and a related non-resident corporation (the FA). …
[T]he reassessments would be attributable to FAPI arising directly from the contribution by the Taxpayer of the Marketable Securities to ForeignCo which … would be a "transaction" between Holdco and ForeignCo referred to in subparagraph 152(4)(b)(iii) that it would be reasonable to consider as relating to the reassessments for purposes of subparagraph 152(4.01)(b)(iii).
Neal Armstrong. Summary of 13 August 2018 Internal T.I. 2018-0763611I7 F under s. 152(4.01)(b)(iii).