CRA rules that the unwinding of a sandwich structure avoids the application of the upstream loan rule

A US marketing subsidiary (US Salesco) has lent to an indirect Canadian parent (Can Opco 1) which, in turn, is ultimately indirectly owned by a non-resident parent.  Can Opco 1 repays this payable, the sandwich structure is unwound (so that US Salesco now is a "sister" rather than indirect sub of Can Opco 1), and US Salesco then relends the same amount back to Can Opco 1.

CRA ruled that this avoids the application of the upstream loan rule in s. 90(6).  It also ruled on routine applications of the reorganization exemption rules in s. 212.3(18) to the "de-sandwiching" transactions, including a mildly interesting illustration of the dovetailing of those rules with the partnership look-through rule in s. 212.3(25).

Neal Armstrong.  Summary of 2013 Ruling 2013-0491061R3 under s. 90(8)(a).