{"id":1291,"date":"2014-10-27T15:29:05","date_gmt":"2014-10-27T15:29:05","guid":{"rendered":"https:\/\/thor.ca\/\/blog\/?p=1291"},"modified":"2014-10-27T15:29:05","modified_gmt":"2014-10-27T15:29:05","slug":"cra-reverses-two-prior-positions-in-foreign-affiliate-context","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2014\/10\/cra-reverses-two-prior-positions-in-foreign-affiliate-context\/","title":{"rendered":"CRA reverses two prior positions in foreign affiliate context"},"content":{"rendered":"

The CRA recently reversed two prior positions in the foreign affiliate context: one on the redemption of preferred shares in a controlled foreign affiliate, the other on the recharacterization rule in s. 95(2)(a)(ii)(D).<\/p>\n

    \n
  1. In 2014-0528361E5<\/a>, the CRA reversed its prior statement in 2012-0439741I7. The CRA (now) agrees that a premium realized by a Canadian parent company (Canco) on the redemption of mandatory redeemable preference shares held in its controlled foreign affiliate results in proceeds of disposition, and not a dividend. Canco may change this result by filing an election under s. 93(1), so as to convert a capital gain into a deemed dividend. Such election can be useful where the deemed dividend would be considered paid from underlying exempt surplus, which is essentially tax free to Canco (s. 113(1)(a)).<\/li>\n
  2. In 2014-0519801I7<\/a>, the CRA reversed \u2013 without explanation \u2013 its prior position in 2013-0496841I7<\/a>. In the latter document, the CRA concluded that s. 95(2)(a)(ii)(D) did not apply to a complex restructuring so as to convert interest income into active business income (in respect of a purchase note). Although not clear from 2014-0519801I7, the CRA may have reversed this prior position based on the words \u201cdirectly or indirectly\u201d in s. 95(2)(a)(ii).<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

    The CRA recently reversed two prior positions in the foreign affiliate context: one on the redemption of preferred shares in a controlled foreign affiliate, the other on the recharacterization rule in s. 95(2)(a)(ii)(D).<\/p>\n

      \n
    1. In 2014-0528361E5<\/a>, the CRA reversed<\/li>\n<\/ol>\n

      …<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-1291","post","type-post","status-publish","format-standard","hentry","category-corporate-tax"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1291","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=1291"}],"version-history":[{"count":0,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/1291\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=1291"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=1291"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=1291"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}