Principal Issues: 1. Whether the gross asset value method or net asset value method should be used in determining whether more than 50% of the FMV of the shares of a corporation was derived from relevant Canadian property. 2. Whether the proportionate value method or another method should be used to determine whether more than 50% of the FMV of the share of a corporation owning shares of subsidiary corporations was derived directly or indirectly from one, or any combination of, RCP. 3. Whether intercompany receivables and payables in a wholly-owned corporate group should be excluded from the assets and liabilities in the determination of the relevant values.
Position: 1. The gross asset value method should be used in determining whether more than 50% of the FMV of the shares of a corporation was derived from relevant Canadian property. 2. The proportionate value approach should be used to determine the FMV of the shares of a subsidiary derived from relevant Canadian property for the purpose of applying the gross asset value method at the parent level. 3. Certain intercompany receivable and payable balances receive particular treatment when determining the relevant values.
Reasons: 1. CRA's long-standing position. 2. This method best reflects the value of underlying assets. 3. Certain intercompany indebtedness within the same corporate group, as described, could distort the calculations.