1993 Internal T.I. 9311077 F - Statute Barred Date - Transactions Foreign Affiliates

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.

Attention:  Victor S. Fast

Subparagraph 152(4)(b)(iii) of the Income Tax Act

This is in reply to your memorandum dated April 7, 1993 concerning the application of the above referenced provision to transactions with foreign affiliates.

It is our view that the payment of a dividend represents a "transaction" for the purposes of paragraph 152(4)(b)(iii) of the Act. Therefore, the Minister would be permitted to make a reassessment that may be regarded as reasonably relating to such transaction within the extended reassessment period referred to in paragraph 152(4)(b) of the Act if such affiliate was a person with whom the taxpayer was not dealing at arm's length. However, it is a question of fact whether a reassessment "may reasonably be regarded as relating to" a transaction for the purposes of that provision.

The earning of foreign accrual property income ("FAPI") by a controlled foreign affiliate of a taxpayer in and by itself would generally not involve a transaction with the taxpayer. One exception would be in circumstances such as those described in paragraph 95(2)(b) of the Act, where the foreign affiliate actually receives payments from the taxpayer.

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for DirectorReorganizations and foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch