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Joint Committee, "Summaries of Feedback on the EIFEL Administration", 2 November 2024 Joint Committee Submission to the CRA International and Large Business Directorate-- summary under Ultimate Parent Summary Under Tax Topics- Income Tax Act- Section 18.21- Subsection 18.21(1)- Ultimate Parent Family trusts as ultimate parents (p. 3) Although there are many instances in which a family trust could be treated as the ultimate parent of a private Canadian group, a consolidated audit is rarely done at the family trust level – and preparing financial statements would entail significant complications, e.g., accounting for direct ownership by family members in the parent company as minority interests. ...

Eric Lockwood, Maria Lopes, "Subsection 88(3): Deferring Gains on Liquidation and Dissolution", Canadian Tax Journal (2013) 61:1, 209-28, p. 209-- summary under Subsection 5905(7.2) Summary Under Tax Topics- Income Tax Regulations- Regulation 5905- Subsection 5905(7.2) They use the facts in various scenarios to illustrate that a taxpayer (Canco) will realize a capital gain on the disposition of its shares of the disposing affiliate (Foreignco 1) – even where there has been a qualifying liquidation and dissolution (QLAD) election- where the adjusted cost base of Foreignco 1 in the distributed property, i.e., the inside basis, exceeds Canco's ACB of its Foreignco 1 shares. The authors then provide an example illustrating how, on the liquidation of a foreign affiliate (Foreignco 2), with a "blocking deficit," into Foreignco 1, followed by a "QLAD" liquidation of Foreignco 1 into Canco, the application of the fill-the-hole rule in proposed Reg. 5905(7.2) can give rise to situation where the inside basis is greater than the outside basis – thereby necessitating a suppression election by Canco under s. 88(3.3) in order to avoid a capital gain as a result of this difference. ...

One must agree with the court that the consequence is economic double taxation — the same increases in value are subject to taxation in the hands of different persons in different states:… …It is not understandable why the court still assumes that the application of the treaty generally leads to the avoidance of economic double taxation. ... Majority opinion in partnership Report (p. 292) [A]ccording to the majority's opinion regarding the solution of case study 16, the allocation of income in its source state is ultimately determinative — the royalties originate in State R and, under the tax laws of State R, must be allocated to the partners resident there. ...

Reconstituting Famco as a holding company allows the individual shareholders to receive eligible dividends notwithstanding that a portion — perhaps a large portion — of Famco's own surplus attracted either the small business deduction or the refundable portion of Part I tax…. ...

No clarification of certification process (p.636) The Ministerial certification process introduced in the 2015 Budget remains unchanged — and unclarified — in the July 31 Draft Legislation. ...

Melluish distinguished (pp. 650-1) [A]ccording to the CA,…in Melluish, the relevant anti-avoidance test focused on " the sole or main benefit" of a given transaction, whereas section 123(4) CAA 2001 focuses more loosely on "the main, or one of the main objects" of the relevant transaction. ... This effectively ignores Lord Upjohn's statement in IRC v Brebner that: "... when the question of carrying out a genuine commercial transaction... is considered, the fact that there are two ways of carrying it out—one by paying the maximum amount of tax, the other by paying no, or much less, tax—it would be quite wrong as a necessary consequence to draw the inference that in adopting the latter course one of the main objects is... avoidance of tax. ...

. … [T]he appearance of fairness has another aspect — that is, how the proceedings appear to the unrepresented party. ...

. … In our view, the result reached in what is characterized as the reverse scenario is not inappropriate. ... The issuer has repaid US$714 of its loan with Cdn$1,000 and the issuer received Cdn$714 for this portion of the loan. … Repayment of FX debt with FX-denominated property (pp. 26: 32-33) Similar questions arise when a foreign-currency denominated debt is repaid with foreign-currency denominated property, such as an amount owing to the debtor (by setoff), a promissory note/debt owing by a third party, or preferred shares denominated in foreign currency.... ...

. … Streaming of dividends on preferred shares (MRPS) for non-93(2.1) avoidance reasons (p. 26:49-50) Consider the example of a financing structure commonly implemented by Canadian-based multinationals, which was the subject of an advance tax ruling issued by the CRA in 2011. [fn 145: … 2010-0375111R3, 2011….] The structure described in the ruling involved the formation of a financing foreign affiliate in a third country to finance, by way of loans denominated in US dollars, the operations of another foreign affiliate in the United States. ...

., US Parent, in the US), the Chapter 6 “deductible payments rule” does not apply if a deduction can be offset against an amount that will be included in income in both jurisdictions, so that if the interest expense can be offset against income of Cansub (which is taxed in both jurisdictions), the rule may not apply – but may apply if Cansub is in a loss position. ... Example 3: non-application of second package (p. 7) Chapter 6, which is relevant to the application of the second package, includes, in its overview, a scoping rule, which denies a deduction in the payer jurisdiction (Canada) only where the parties are in the same control group or are part of a structured arrangement – so that if this loan is not a structured arrangement, chapter 6 may not apply, and the interest deduction may not be disallowed in Canada. ...