Subsection 5901(1)
Administrative Policy
27 September 1991 T.I. (Tax Window, No. 11, p. 13, ¶1513)
Unless some part of the international shipping business of the foreign affiliate is actually carried on in the country in which the foreign...
2 July 1991 T.I. (Tax Window, No. 5, p. 15, ¶1326)
Where a non-resident subsidiary of a Canadian corporation which owns or charters vessels to engage in international traffic and maintains a...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 250 - Subsection 250(6) | 4 | |
| Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(c) | 72 |
Subsection 5901(1.1)
Administrative Policy
30 October 2014 External T.I. 2013-0488881E5 - Upstream Loan
The Reg. 5901(1.1) election is treated as being applicable for a s. 90(9)(a) notional dividend received by Canco. See detailed summary of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | no double inclusion following FA creditor wind-up | 60 |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(3) | notional s. 40(3) gain does not generate surplus | 70 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(6) | no double inclusion following FA creditor wind-up or for 2nd loan in series | 121 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(9) | notional election and double taxation issues | 1332 |
| Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(a) | 90-day rule unavailable | 28 |
| Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) | notional Reg. 5901(2)(b) election | 31 |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Underlying Foreign Tax | notional UFT disproportionate election | 37 |
Subsection 5901(2)
Paragraph 5901(2)(a)
Administrative Policy
30 October 2014 External T.I. 2013-0488881E5 - Upstream Loan
The "90-day" rule does not apply to a s. 90(9)(a) notional dividend received by Canco. See detailed summary of Scenario 1 under s. 90(9).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | no double inclusion following FA creditor wind-up | 60 |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(3) | notional s. 40(3) gain does not generate surplus | 70 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(6) | no double inclusion following FA creditor wind-up or for 2nd loan in series | 121 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(9) | notional election and double taxation issues | 1332 |
| Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(1.1) | notional Reg. 5901(1.1) election | 30 |
| Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) | notional Reg. 5901(2)(b) election | 31 |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Underlying Foreign Tax | notional UFT disproportionate election | 37 |
1 April 2011 External T.I. 2008-0297541E5 - Ss. 5901(2) and the Timing of Dividends
FA2, which had no exempt or taxable surplus at the beginning of 2008 but will have exempt surplus of $100 at the end of 2008, is wholly owned by...
15 January 1992 T.I. 9115295
FA1's only source of income in 1991 is the FA2 and FA3 dividends, described below, received from its wholly-owned subsidiaries, FA2 and FA3, and...
Articles
Susan McKilligan, "The 90-Day Rule and Mergers or Liquidations of Foreign Affiliates", International Tax (Wolters Kluwer CCH), October 2017, No. 96, p. 10
Survivor merger or liquidation of CFA after generating exempt earnings in current year (p. 10)
A foreign affiliate (Parent) owns all of the...
Paragraph 5901(2)(b)
Administrative Policy
11 October 2019 APFF Roundtable Q. 8, 2019-0821311C6 F - APFF 2019 Q.8: Surplus Documentation
The 2019 IFA Conference (2019-0798761C6) dealt with the situation where Canco does not prepare detailed calculations of its various surplus and...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 230 - Subsection 230(1) | taxpayer must prepare adequate records to support surplus computations | 194 |
2016 Ruling 2016-0630761R3 - Transfer of Shares
A foreign affiliate (New FA) of a Canadian corporation (ACo) transferred all the shares of FA1 to a Canadian-resident subsidiary (BCo) of ACo in...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 93 - Subsection 93(1.11) | transfer of an FA with exempt earnings by FA Holdco to Can Subco required to occur at less than the shares’ FMV | 548 |
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | no conferral of benefit where CRA required sideways transfer to occur at less than FMV | 221 |
21 April 2015 Internal T.I. 2014-0560811I7 - FACL carryback Surplus & PAS election
In 2010, CFA paid the "2010 Dividend" to its 100% parent ("Canco"). On audit, CRA identified that CFA had realized a capital gain (giving rise to...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.2) | no relief for late-filed Reg. 5901(2)(b) election | 54 |
| Tax Topics - Income Tax Regulations - Regulation 5903.1 - Subsection 5903.1(1) | FACL carryback from transitional year | 154 |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Net Earnings | surplus pools are not to be retroactively adjusted for a FACL carryback | 171 |
| Tax Topics - Income Tax Regulations - Regulation 600 | no relief for late-filed Reg. 5901(2)(b) election | 54 |
30 October 2014 External T.I. 2013-0488881E5 - Upstream Loan
The Reg. 5901(2)(b) election is treated as being applicable for a s. 90(9)(a) notional dividend received by Canco. See detailed summary of...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(28) | no double inclusion following FA creditor wind-up | 60 |
| Tax Topics - Income Tax Act - Section 40 - Subsection 40(3) | notional s. 40(3) gain does not generate surplus | 70 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(6) | no double inclusion following FA creditor wind-up or for 2nd loan in series | 121 |
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(9) | notional election and double taxation issues | 1332 |
| Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(1.1) | notional Reg. 5901(1.1) election | 30 |
| Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(a) | 90-day rule unavailable | 28 |
| Tax Topics - Income Tax Regulations - Regulation 5907 - Subsection 5907(1) - Underlying Foreign Tax | notional UFT disproportionate election | 37 |
Articles
Tim Fraser, Jim Samuel, "The Preacquisition Surplus Election: More Than Meets the Eye?", Canadian Tax Journal (2021) 69:2, 595 - 627
Election can be used to bypass untaxed taxable or hybrid surplus (p. 608)
- The election may be beneficial where a CRIC has received a dividend...
Tina Korovilas, Drew Morier, "Non-Corporate Vehicles in the Foreign Affiliate Context", 2018 Conference Report (Canadian Tax Foundation), 20:1 – 114
QROC election intended to address unavailability of Reg. 5901(2)(b)(ii) election to partnerships
[A]lthough subsections 93.1(1) and (2) are meant...
Clara Pham, "Paying FA Dividends When Surplus Balances are Unclear", Canadian Tax Focus, Vol. 7, No. 1, February 2017, p. 2
Greater flexibility for subsequent surplus ascertainment if multiple dividends paid (p. 2)
Up-to-date figures on an FA's surplus pools may not be...
Geoffrey S. Turner, "June 2014 Election Deadlines for Retroactive Application of New Foreign Affiliate Reorganization Rules", CCH International Tax, No. 74, February 2014, p. 1.
Retroactive election (p. 3)
… Bill C-48 permits taxpayers to electively apply Regulation 5901(2)(b) (together as a package with subsections...
Geoffrey S. Turner, "New Foreign Affiliate Capital Distribution Elections: QROCs and Reg. 5901(2)(b) Dividends", CCH International Tax, No. 67, p. 1
From a group structure perspective, taxpayers may also wish to capitalize on the enhanced superiority of basis over surplus, by reorganizing...
Geoffrey S. Turner, "Upending the Surplus Ordering Rules: Implications of the New Regulation 5901(2)(b) Election", CCH Tax Topics, No. 2079, p. 1, 12 January 2012
Taxpayers may now hold their foreign affiliate groups under a "basis and surplus mixer" foreign affiliate holding company, and routinely use the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(2) | 0 |
Elaine Buzzell, "Distributions of Share Premium by Foreign Affiliates", Corporate Finance, Vol. XVII, No. 2, 2011, p. 1962
Includes comparison with previous comfort letter proposals.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 90 - Subsection 90(2) | 27 |
Subparagraph 5901(2)(b)(i)
Articles
Tim Fraser, Jim Samuel, "The Preacquisition Surplus Election: More Than Meets the Eye?", Canadian Tax Journal (2021) 69:2, 595 - 627
Whether the holding of an interest in the FA by an LP with unrelated CRICs or their FAs as members precludes making the election (pp....
Subparagraph 5901(2)(b)(ii)
Administrative Policy
15 September 2020 IFA Roundtable Q. 7, 2020-0853571C6 - Regulation 5901(2)(b) Pre-Acquisition Surplus Election
Canco1 owns 100% of the Class A shares, and a limited partnership (LP) with partners (including Canco 2) at arm’s length with Canco1 owns 100%...
Subsection 5901(2.2)
Administrative Policy
15 May 2019 IFA Roundtable Q. 9, 2019-0798761C6 - Surplus Documentation
Canco, did not prepare detailed calculation of its various surplus and underlying tax balances in respect of a wholly-owned subsidiary (FA) from...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 113 - Subsection 113(1) - Paragraph 113(1)(a) | CRA generally denies a s. 113(1) deduction where Canco has failed to prepare surplus accounts | 179 |