Example 2

…Mr. X establishes a personal trust (the Trust) in favour of his son, Mr. A, and grandson, Mr. B. He settles the Trust by transferring to the Trust, property consisting of 100 shares of XCorp and a parcel of land. Mr. A is the income beneficiary and Mr. B is the capital beneficiary. Mr. X is now deceased. …

Consider the situation where the shareholders of a public corporation (Pubco) acquire shares of a loss company (Lossco) on a triangular amalgamation of Pubco and a subsidiary wholly-owned corporation of Lossco. Since the shareholders of Pubco have acquired more than 50% of the shares of Lossco on the triangular amalgamation, paragraph 256(7)(c) will deem there to have been an acquisition of control of Lossco. In the CRA's view, subparagraph 256(7)(b)(i) does not override the acquisition of control under paragraph 256(7)(c) as control of Lossco has not been acquired solely because of the amalgamation.

…In order to comply with its prescribed emission limit for a particular year, X Corp. purchases carbon offset credits. Such credits are purchased as a compliance measure and are not considered a penalty under the relevant provincial climate change legislation. Accordingly, section 67.6 does not prevent X Corp. from deducting the credits purchased.

The following year, X. Corp exceeds its prescribed emission limit… . Any amount payable under the provincial climate change legislation that is described as a fine or penalty as a consequence of the non-compliance will be precluded from deduction by section 67.6.

1.20 If a fine or penalty is incurred in connection with the acquisition of an asset for which capital cost allowance (CCA) may be claimed, the fine or penalty may be included in the capital cost of that asset (or the CCA class to which the asset belongs). If a fine or penalty is incurred in connection with the acquisition or production of inventory, the fine or penalty is included in the cost of inventory.

1.21 If a fine or penalty is incurred in connection with the acquisition of an eligible capital property, the fine or penalty is an eligible capital expenditure provided all the other tests in the subsection 14(5) definition of eligible capital expenditure are met.

1.27 Section 67.6 prohibits the deduction of a fine or penalty imposed under a foreign statute... .

1.29 Fines or penalties levied as a result of a criminal conviction may be precluded from deduction by section 67.6… .