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Is Father not considered to have made a contribution because the loan qualified as an arm’s length transfer on the basis that “it is reasonable to conclude that none of the reasons … for the transfer is the acquisition at any time by any person or partnership of an interest as a beneficiary under a non-resident trust”.? ... Such a conclusion would be highly unlikely given his relationship to them – so that he would be considered to have made a contribution to the trust, he would be a resident contributor and the trust would be deemed to be resident for the purposes listed in s. 94(3)(a). ...

This loan will not be considered to be a contribution by him (so that it will not cause the trust to be resident for various purposes under s. 94(3)(a)) if it is an “arm’s length transfer,” whose definition relevantly requires that it reasonably be considered “that none of the reasons … for the transfer is the acquisition at any time by any person or partnership of an interest as a beneficiary under a non-resident trust.” ... CRA indicated that such a conclusion would be highly unlikely given his relationship to them – so that his loan would be considered to be a contribution to the trust causing him to be a resident contributor and the trust to come within s. 94(3)(a). ...

CRA stated that it was “not prepared to take an administrative position to consider that subsection 247(7) would apply in respect of the loan between the FA and LP ….” ... Further, “adopting the requested administrative position could potentially facilitate the use of structures using hybrid entities to achieve a tax benefit. … As a general rule, taxpayers should expect that administrative relief requests that appear to potentially facilitate such planning will be denied by the CRA. ...

S. 20(1)(j) refers inter alia to “such part of any loan or indebtedness repaid by the taxpayer in the year as was by virtue of subsection 15(2) included in computing the taxpayer’s income for a preceding taxation year (except to the extent that the amount of the loan or indebtedness was deductible from the taxpayer’s income for the purpose of computing the taxpayer’s taxable income for that preceding taxation year) ….” ... Consequently, X having claimed the s. 20(1)(ww) deduction should not preclude X from subsequently claiming the s. 20(1)(j) deduction when the loan is repaid – and that this appears to be the right policy result. ...

CRA noted that the foreign incorporation produces a tax benefit consisting of the “avoidance” of the refundable tax under s. 123.3, and the generation of the s. 123.4(2) deduction, and then stated: … If the purpose of such a transaction were to avoid CCPC status in order to defeat the purpose and intent of various anti-avoidance rules applicable to investment income, including section 123.3 and subsection 123.4(2), the CRA would consider, depending on the circumstances, application of the GAAR …. ...

CRA responded: (a) … In a context similar to that described in the statement of this question, the CRA generally accepts that shareholders may give their concurrence in advance, through undertakings under the various sale agreements, to the making of [the] election …. ...

After noting that the s. 123.4(2) deduction is determined by applying the general rate reduction percentage for the year to the corporation’s “full rate taxable income” for the year, CRA stated: Where a corporation is a CCPC, full rate taxable income is determined under paragraph (b) of that definition … [and] is its taxable income subject to tax under subsection 123(1) reduced by, inter alia, its aggregate investment income as defined in subsection 129(4). ... There is no provision … that allows a charitable deduction to be taken into account in computing a corporation's aggregate investment income ...

CRA referred to the statement in Canadian Wirevision that “goods … is used in the common parlance of merchandise or wares, or, to put it in legal jargon, tangible moveable property” and to various dictionary definitions generally referencing “all tangible, moveable, personal property intended for sale,” Furthermore, CRA’s view that residential condominiums, being real estate, are not “goods” under s. 95(3)(b) was consistent with the balance of the wording of s. 95(3) – for instance s. 95(3)(a) excluded the transportation of goods. ...

. … [I]f there are very few transactions (e.g. annual, semi-annual or quarterly payments), the use of the applicable daily exchange rates will be required. As a general rule, the CRA will not accept the conversion of a gain or loss on the disposition of a capital property using an average exchange rate. … Consequently, the daily exchange rate for the particular dates should be used to determine, in Canadian dollars, the adjusted cost base ("ACB") of such property and any proceeds of disposition from its disposition. ...

What amount is added to the capital dividend account (CDA) of the corporation if the non-taxable portion of the trust’s capital gains is paid out to other beneficiaries – and when does the addition occur? ... The ½ distributed that was the non-taxable portion of the trust’s capital gains, would be added to the corporation’s CDA, net of any applicable amount of the corporation’s allowable capital losses. ...