A parent corporation (Corporation A) wholly owns three subsidiaries (Corporations B, D, and G) that in turn wholly own qualifying subsidiaries (Corporations C, E and H, respectively). Two of the subsidiaries (Corporations C and E) collectively (50% each) wholly own another corporation (Corporation F). Is Corporation F is closely related to Corporation A under s. 128(1)(a)(v) or 128(2); and is Corporation F closely related to Corporations G and H?
After noting that Corporations A, B, C, D, E, G and H would be closely related to each other under ss. 128(1)(a)(i) to 128(1)(a)(iv) where the voting rights requirements in s. 128(1.1) were met, CRA stated:
[W]here all such conditions are met, Corporation F would be closely related to Corporation A under subparagraph 128(1)(a)(v) as Corporation F is owned by a combination of qualifying subsidiaries referred to in subparagraph 128(1)(a)(ii); that is, a combination of qualifying subsidiaries (namely Corporation C and Corporation E) of the particular corporation (Corporation A).
Further, where the conditions relating to qualifying voting control and required share ownership are met, Corporation G (the particular corporation) would be closely related to Corporation F under subparagraph 128(1)(a)(v) as Corporation F is owned by a combination of qualifying subsidiaries referred to in subparagraph 128(1)(a)(iv); that is, a combination of qualifying subsidiaries (namely Corporation C and Corporation E) of a corporation (Corporation A) of which the particular corporation (Corporation G) is a qualifying subsidiary.
Corporation H (the particular corporation) would be closely related to Corporation F based on the same analysis.
