I-3 - Taxation Act

Section 127.13.1 Disposition versions

2010-10-27

127.13.1. The presumption in the second paragraph applies in respect of money (in this section referred to as “new borrowings”) that a controlled foreign affiliate of a particular corporation resident in Canada has borrowed from the particular corporation to the extent that the affiliate has used the new borrowings

(a)  to repay money (in this section referred to as “previous borrowings”) previously borrowed from any person or partnership, if

i.  the previous borrowings became owing after the last time at which the affiliate became a controlled foreign affiliate of the particular corporation, and

ii.  the previous borrowings were, at all times after they became owing, used for any of the purposes described in subparagraphs i and ii of paragraph a of section 127.13; or

(b)  to pay an amount owing (in this section referred to as the “unpaid purchase price”) by the affiliate for a property previously acquired from any person or partnership, if

i.  the property was acquired, and the unpaid purchase price became owing, by the affiliate after the last time at which it became a controlled foreign affiliate of the particular corporation,

ii.  the unpaid purchase price is in respect of the property, and

iii.  throughout the period that began when the unpaid purchase price became owing by the affiliate and ended when the unpaid purchase price was so paid, the property was used principally to earn income described in subparagraph i of paragraph a of section 127.13.

For the purposes of section 127.13, the new borrowings are deemed to have been used for the purposes for which the previous borrowings were used or were deemed by this paragraph to have been used, or to acquire the property in respect of which the unpaid purchase price was payable, as the case may be.

2010, c. 25, s. 15.