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Alternatives for testing for economic substance include: introducing a sole or dominant purpose test (under which, for example, “[w]here a taxpayer has no bona fide commercial or other non-tax purpose (or almost no such purpose), the relevant transactions could be considered to be sufficiently lacking in economic substance” determining whether a transaction has the potential for pre-tax profit after taking into account the costs of the transaction, which might then be compared to the tax savings determining whether the transfers of rights and assumptions of obligations under the transaction affected the economic positions of the participants in the transaction (so that "[i]f the economic exposure of the participants to a transaction is not materially affected by the transfers of rights and obligations under the transaction, then the transaction can be said to be lacking in economic substance” assessing whether the legal form of the transactions differs significantly from the accounting treatment of the transactions Alternatives for utilizing the concept of economic substance include: Reworking the avoidance transaction test, so that “where a transaction resulting in a tax benefit is primarily tax motivated but not entirely (or almost entirely) tax motivated, the current scheme would continue to apply (i.e., the transaction will be subject to the GAAR unless the current misuse or abuse exception is met)” – but “where such a transaction or series is entirely (or almost entirely) tax motivated” under an economic substance test, different tax consequences would apply, “for example, the misuse or abuse exception could be made unavailable or the misuse or abuse burden could be reversed” An interpretive rule could provide in the GAAR context that “tax benefits are intended to be conferred only in the context of transactions with economic substance” – although it would be necessary to "ensure that transactions which appear to lack economic substance but are not objectionable from a policy perspective” are excepted More simply, the misuse or abuse test could be amended by adding an explicit requirement to take into account the economic substance of the relevant transactions Transactions could be deemed to be abusive where they lack economic substance or the misuse or abuse exception could become unavailable where the economic substance test is failed, although, again, there would need to be an exception for transactions that were not objectionable on policy grounds Alternatively, where transactions lacked economic substance, “the misuse or abuse exception would apply only where the taxpayer clearly demonstrates that the use made by the taxpayer of the provisions relied upon to obtain the tax benefit was specifically contemplated and intended by Parliament.” ...

Topic Descriptor 15 June 2022 STEP Roundtable Q. 1, 2021-0922021C6- 104(21.2) Designation Income Tax Act- 101-110- Section 104- Subsection 104(21.2) formula in s. 104(21.2) requires a pro rata allocation of the QSBC portion of trust capital gains to the beneficiaries to whom capital gains are allocated 15 June 2022 STEP Roundtable Q. 2, 2022-0926761C6- 104(4)(a)(ii.1) Election Income Tax Act- 101-110- Section 104- Subsection 104(4)- Paragraph 104(4)(a)- Subparagraph 104(4)(a)(ii.1) CRA will accept that an election is filed with a return even if the return is filed late 15 June 2022 STEP Roundtable Q. 3, 2022-0924801C6- Electing Contributor and Electing Trust Income Tax Act- Section 94- Subsection 94(1)- Electing Trust election can be filed with a late-filed return Income Tax Act- Section 94- Subsection 94(1)- Electing Contributor election must be filed by filing-due date even if return itself is filed late 15 June 2022 STEP Roundtable Q. 4, 2022-0929911C6- Death and Tax Payment over 10 Years Income Tax Act- Section 159- Subsection 159(5) CRA does not have rigid guidelines as to what is “acceptable security” 15 June 2022 STEP Roundtable Q. 5, 2022-0928231C6- Trust and Debt Forgiveness Income Tax Act- Section 80- Subsection 80(1)- Forgiven Amount- Element B- Paragraph B(a) s. 80 may not apply where a trust distributes a debt, owing by a beneficiary, to the beneficiary 15 June 2022 STEP Roundtable Q. 6, 2022-0928191C6- Acquisition of control Income Tax Act- Section 256- Subsection 256(7)- Paragraph 256(7)(a)- Subparagraph 256(7)(a)(i)- Clause 256(7)(a)(i)(A) application of s. 256(7)(a)(i)(A) where trustee is replaced by related trustee Income Tax Act- Section 251.2- Subsection 251.2(2)- Paragraph 251.2(2)(a) rebuttable presumption that all the trustees of a trust form a control group 15 June 2022 STEP Roundtable Q. 7, 2022-0928291C6- paragraph 88(1)(d.3) Income Tax Act- 101-110- Section 104- Subsection 104(4)- Paragraph 104(4)(a.4) deemed disposition under s. 104(4)(a.4) is not itself sufficient to access s. 88(1)(d.3) regarding a subsidiary of the trust Income Tax Act- Section 88- Subsection 88(1)- Paragraph 88(1)(d.3) alter ego trust could use s. 88(1)(d.3) for post-mortem bump if trust deed directed the post-mortem transfer of subsidiary’s shares to new parent 15 June 2022 STEP Roundtable Q. 8, 2022-0928251C6- TOSI and multiple businesses Income Tax Act- Section 120.4- Subsection 120.4(1)- Excluded Business individual’s contributions to a business are considered substantial if they are integral to its success Income Tax Act- Section 120.4- Subsection 120.4(1.1)- Paragraph 120.4(1.1)(a) splitting long hours between many companies may oust s. 120.4(1.1)(a) 15 June 2022 STEP Roundtable Q. 9, 2022-0929391C6- Section 43.1- Life Estate Income Tax Act- Section 43.1 application of s. 43.1 where a remainder realty interest is transferred to personal trust and there is a subsequent life interest surrender 15 June 2022 STEP Roundtable Q. 10, 2022-0929361C6- Taxation Year-end of a GRE Income Tax Act- Section 249- Subsection 249(1)- Paragraph 249(1)(b) GRE's taxation year ends when it is wound up 15 June 2022 STEP Roundtable Q. 11, 2022-0929331C6- Joint Spousal or Common-law Partner Trust Income Tax Act- Section 75- Subsection 75(2) s. 75(2) does not apply to 2nd-generation income Income Tax Act- Section 73- Subsection 73(1.01)- Paragraph 73(1.01)(c)- Subparagraph 73(1.01)(c)(iii) once a joint spousal etc. trust is established, the s. 73(1) rollover applies to non-jointly contributed property of a spouse 15 June 2022 STEP Roundtable Q. 12, 2022-0929321C6- Sale to Alter Ego Trust Income Tax Act- Section 73- Subsection 73(1) the s. 73(1) rollover can apply to a sale for cash proceeds at a gain over ACB 15 June 2022 STEP Roundtable Q. 13, 2022-0929381C6- 164(6) – Amending Deceased’s Final T1 Return Income Tax Act- Section 164- Subsection 164(3) commencement of refund interest where loss transferred from GRE to terminal return Income Tax Act- Section 164- Subsection 164(6)- Paragraph 164(6)(e) s. 164(6) amendment must be made through filing an amended return, not a T1 Adjustment Request 15 June 2022 STEP Roundtable Q. 14, 2022-0930221C6- Info on new T3 EFILE process Income Tax Act- Section 150- Subsection 150(1)- Paragraph 150(1)(c) now efiling T3 returns 15 June 2022 STEP Roundtable Q. 15, 2022-0927531C6- Meaning of Habitual Abode in Canadian Tax Treaties 15 June 2022 STEP Roundtable Q. 16, 2022-0927601C6- Foreign Entity Classification of a Foundation Income Tax Act- 101-110- Section 104- Subsection 104(1) the classification of civil law foundation is determined on a case-by-case basis 15 June 2022 STEP Roundtable Q. 17, 2022-0929511C6- Deceased Taxpayer and Stock Options Income Tax Act- 101-110- Section 110- Subsection 110(1)- Paragraph 110(1)(d) s. 110(1)(d) deduction can now apply to stock option benefits realized on death 15 June 2022 STEP Roundtable Q. 18, 2022-0924791C6- McNeeley et al v. ...

Expense- Financing Expenditures premiums paid by Holdcos on policies of which their jointly-owned company (Opco) is the beneficiary are non-deductible capital expenditures even if reimbursed by the Opcos Income Tax Act- Section 9- Expense Reimbursement premiums paid by parent on a sub’s life insurance policies are non-deductible even if reimbursed on income account Income Tax Act- Section 246- Subsection 246(1) taxable benefit where 2 Holdcos pay premiums on life insurance policies of which their jointly-owned sub is beneficiary unless s. 246(2) applies 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 3, 2022-0943261C6 F- Average Exchange Rate Income Tax Act- Section 39- Subsection 39(1.1) use of average exchange rate under s. 39(1.1) is permitted Income Tax Act- Section 40- Subsection 40(1)- Paragraph 40(1)(a)- Subparagraph 40(1)(a)(i) use of average exchange rates for capital property dispositions not generally accommodated Income Tax Act- Section 261- Subsection 261(1)- Relevant Spot Rate circumscribed acceptance of using average exchange rates 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 4, 2022-0940941C6- Stop-loss Rules Income Tax Act- Section 53- Subsection 53(1)- Paragraph 53(1)(f) superficial loss allocated on a pooled basis to shares held at the end of the 61-day period by affiliated persons Income Tax Act- Section 54- Superficial Loss formula for prorating superficial loss is inapplicable where the number of shares held by affiliated persons has increased at the end of the 61-day period Income Tax Act- Section 40- Subsection 40(3.3) suspended loss rules engaged by shareholder, and shareholder’s RRSP acquiring and then holding identical shares during the 61-day period 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 5, 2022-0936301C6 F- Guarantee fee Income Tax Act- Section 20- Subsection 20(1)- Paragraph 20(1)(e.1) one-time fee to subsidiary for mortgaging its property as security for a bank loan to the shareholder would not qualify under s. 20(1)(e.1) Income Tax Act- Section 15- Subsection 15(1) no shareholder benefit where corporation receives a reasonable pledge (or “guarantee”) fee from its shareholder Income Tax Act- Section 248- Subsection 248(1)- Business guarantee or pledge fee is from a service and, therefore, is from an undertaking of any kind whatever Income Tax Act- Section 20- Subsection 20(1)- Paragraph 20(1)(e) one-time fee to subsidiary for mortgaging its property as security for a bank loan to the shareholder could qualify under s. 20(1)(e) 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 6, 2022-0936311C6 F- Illness insurance policy used as collateral Income Tax Act- Section 20- Subsection 20(1)- Paragraph 20(1)(e.1) critical illness insurance policy premiums on policy assigned to lender cannot be deducted under s. 20(1)(e.1) 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 7, 2022-0938221C6 F- Régime d'accession à la propriété (RAP)- rembours Income Tax Act- Section 146.01- Subsection 146.01(1)- HBP Balance HBP balance not reduced until s. 146.01(3) repayment is made and prescribed form filed Income Tax Act- Section 146.01- Subsection 146.01(1)- Regular Eligible Amount- Paragraph (i) an HBP balance is not reduced at the beginning of the year of a contribution repayment by the repayment amount until the repayment is made 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 8, 2022-0940961C6 F- RRIF- successive deaths Income Tax Act- Section 146.3- Subsection 146.3(6.2) s. 146.3(6.2) reduction unavailable where surviving spouse dies before payment made out of deceased's RRIF Income Tax Act- Section 146.3- Subsection 146.3(1)- Designated Benefit spouse of a deceased RRIF annuitant must be still alive at the time of a payment out of the RRIF in order for the designated benefit rules to apply 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 9, 2022-0940951C6 F- FRB créée par testament après 2015 Income Tax Act- Section 118.1- Subsection 118.1(5)- Paragraph 118.1(5)(b) gift of capital interest in charitable remainder trust is considered to be made by GRE when such interest vests in the charity Income Tax Act- Section 118.1- Subsection 118.1(5.1) a gift by will of a capital interest in a charitable remainder trust can be claimed only by the GRE, not the deceased 7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 10, 2022-0938301C6 F- Rebate on purchase of GIC Income Tax Act- Section 54- Adjusted Cost Base broker-waived commission included in cost of GIC Income Tax Act- Section 12- Subsection 12(1)- Paragraph 12(1)(x) broker’s waiver of commission could be an inducement payment ...

Topic Descriptor 3 December 2024 CTF Roundtable Q. 1, 2024-1038181C6- Safe Income and Preferred Shares Income Tax Act- Section 55- Subsection 55(2.1)- Paragraph 55(2.1)(c) safe income of preferred shares issued on a s. 85 share-for-share exchange matches the safe income of the exchanged shares, and subsequently participates based on its dividend rate 3 December 2024 CTF Roundtable Q. 2, 2024-1038191C6- Subsection 55(2) and Intra-Corporate Dividends Income Tax Act- Section 55- Subsection 55(2.1)- Paragraph 55(2.1)(b) CRA continues to be prepared to issue rulings dealing with the s. 55(2.1)(b) purpose tests 3 December 2024 CTF Roundtable Q. 3, 2024-1038151C6- Notifiable Transactions Income Tax Act- Section 212- Subsection 212(3.1) s. 212(3.1) generally inapplicable where immediate funder receives only common shares financing from ultimate funder Income Tax Act- Section 237.4- Subsection 237.4(4)- Paragraph 237.4(4)(b) B2B reporting engaged where loan from immediate NR parent (funded in turn in part with debt from ultimate parent) bears reduced (10%) withholding 3 December 2024 CTF Roundtable Q. 4, 2024-1038161C6- EIFEL and the Excluded Entity Exception Income Tax Act- Section 18.2- Subsection 18.2(1)- Excluded Entity- Paragraph (c)- Subparagraph (c)(i) 90% not applied as a strict threshold for determining “substantially all” 3 December 2024 CTF Roundtable Q. 5, 2024-1038171C6- EIFEL and ATI Calculation where Taxpayer has Non-Capital Losses Income Tax Act- Section 18.2- Subsection 18.2(1)- Adjusted Taxable Income- A- D- Paragraph D(b) not permitting taxable income to be negative in the ATI formula is producing anomalous results 3 December 2024 CTF Roundtable Q. 6, 2024-1038251C6- EIFEL- Pre-Regime Election and Amalgamations and Liquidations Income Tax Act- Section 87- Subsection 87(2.1)- Paragraph 87(2.1)(a.1) continuity treatment extends to the use of pre-regime capacity 3 December 2024 CTF Roundtable Q. 7, 2024-1038221C6- Post-Mortem Pipeline Bump Planning Income Tax Act- Section 88- Subsection 88(1)- Paragraph 88(1)(c)- Subparagraph 88(1)(c)(vi)- Clause 88(1)(c)(vi)(B)- Subclause 88(1)(c)(vi)(B)(I) estate beneficiary not considered to acquire 10% interest in estate company prior to deemed s. 88(1)(d.2) and (d.3) acquisition Income Tax Act- Section 88- Subsection 88(1)- Paragraph 88(1)(d.2) an 11% estate beneficiary becomes a specified shareholder of the deceased’s corp. concurrently with its deemed acquisition under ss. 88(1)(d.2) and (d.3) 3 December 2024 CTF Roundtable Q. 8, 2024-1038201C6- Application of paragraph 55(2)(b) Income Tax Act- Section 55- Subsection 55(2)- Paragraph 55(2)(b) s. 55(2)(b) interpreted so as to avoid circularity 3 December 2024 CTF Roundtable Q. 9, 2024-1038271C6- Regulation 105 Income Tax Regulations- Regulation 105- Subsection 105(1) Reg. 105 applies amounts paid to a non-resident for services rendered in Canada even where those services have been subcontracted to a Canadian resident 3 December 2024 CTF Roundtable Q. 10, 2024-1038231C6- Intergenerational Business Transfers Income Tax Act- Section 84.1- Subsection 84.1(2.31)- Paragraph 84.1(2.31)(a) the prohibition against multiple use of the intergenerational transfer rules does not apply to simultaneous transfers 3 December 2024 CTF Roundtable Q. 11, 2024-1038241C6- Global Minimum Tax Act – Interpretation and Application of OECD Agreed Administrative Guidance Other Legislation/Constitution- Federal- Global Minimum Tax Act- Section 17- Subsection 17(6) CRA will administer s. 17(6) to push down taxes paid by indirect owner of reverse hybrid CE on income of the CE allocated to it, to the CE Other Legislation/Constitution- Federal- Global Minimum Tax Act- Section 3- Subsection 3(1) CRA will consult with Finance re potential amendments to catch up to OECD guidance in administering the GMTA 3 December 2024 CTF Roundtable Q. 12, 2024-1037751C6- Property flipping rules and corporate property transfers Income Tax Act- Section 12- Subsection 12(13)- Paragraph 12(13)(b) s. 12(13)(b) has no continuity rules for common reorganization transactions 3 December 2024 CTF Roundtable Q. 13, 2024-1038261C6- Standard Convertible Debentures and Part XIII Tax Income Tax Act- Section 212- Subsection 212(3)- Participating debt interest s. 214(7) excess received on the conversion of a standard convertible debenture generally is not participating interest Income Tax Act- Section 214- Subsection 214(7) FMV excess on conversion of a convertible debenture is deemed interest under s. 214(7) 3 December 2024 CTF Roundtable Q. 14, 2024-1037761C6- Availability of the Small Business Deduction Income Tax Act- Section 129- Subsection 129(4)- Income or Loss active business income includes income from property that (having regard to Ensite) is held principally for the purpose of producing active business income 3 December 2024 CTF Roundtable Q. 15, 2024-1030561C6- The Foix decision and hybrid sales Income Tax Act- Section 84- Subsection 84(2) Foix overruled a more restrictive approach to s. 84(2) in some earlier cases (and restricts Geransky) 3 December 2024 CTF Roundtable Q. 16, 2024-1038281C6- Indian Act Tax Exemption for Employment Income and Employees of a Limited Partnership Other Legislation/Constitution- Federal- Indian Act- Section 87 a partly owned LP of a 1st Nations band did not generate significant economic benefits to the reserve, its Indian employees were not exempted on off-reserve income ...

(k) of the “specified foreign property” definition in s. 233.3(1)), it will not be considered to be holding debt of a “foreign affiliate,” so that such debt will be required to be disclosed on the T1135 form. ...