The application of the fresh start rule to arm’s length FA acquisitions often will supplant the carve-out rule

2014-0536581I7 indicates that the fresh start rule may often extend to arm’s length acquisitions – for example when there is such an acquisition of a foreign affiliate (FA) which is carrying on a business which, post-acquisition, is considered to be an investment business – and noted that "the threshold amount of activity that is required to cause any corporation (including a FA) to be considered to be carrying on business is extremely low." Consequently, in many instances the fresh start rule in s. 95(2)(k.1) will supplant the carve-out rule in s. 95(2)(f.1).

Neal Armstrong. Summary of Paul Barnicke and Melanie Huynh, "Fresh-Start FA Rules," Canadian Tax Highlights, Vol. 22, No. 12, December 2014, p. 7 under s. 95(2)(k).