Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Dear Sir:
We apologize for the delay in replying to your letter of May 29, 1980 in which you requested our interpretation of subparagraph 95(2)(a)(ii) of the Income Tax Act and sub-clause 5907(1)(b)(iv)(B)(ii) of the Regulations in a situation involving U.S. foreign affiliates which are filing returns for U.S. tax purposes on a consolidated basis.
You have asked us to confirm that, for purposes of subparagraph 95(2)(a)(ii), it is the Department's practice to determine the question of whether or not a particular amount paid by a U.S. foreign affiliate (which is a member of a consolidated group for U.S. tax purposes) is deductible for computing its earnings from an active business on the basis of the consolidated earnings of the group and not strictly on the basis of the earnings of the paying corporation alone. We regret that we are unable to provide such confirmation. It is our opinion that under the words of subparagraph 95(2)(a)(ii) the test of whether an amount is (or would be) deductible in computing "earnings from an active business" must be applied with respect to the computation of such earnings of the specific corporation paying or owing the amount in question.
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© Her Majesty the Queen in Right of Canada, 1981
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© Sa Majesté la Reine du Chef du Canada, 1981
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