,canada ,rev5ue ,ag5cy #a ,9come ,tax ,te*nical ,news ,numb] #ch ,septemb] #bb1 #bjjh ,9 ,? ,issue ,"qs pres5t$ at ! 3f];e ,s+le ,adm9i/r,n ( ,ont>io ,corporate ,tax ,9t]prov9cial ,tax ,plann+ ,>range;ts ,9come ,tax ,tr1t;t ( ,,gst ,3trol ( ,corpor,n ,[n$ 0,9come ,tru/-- ,impact ( ,*ange 9 ,tru/ees ,canadian ,3troll$ ,private ,corpor,n 7,,ccpc7 ,det]m9,n--,impact (! ,s$ona ,deci.n ,canada-,u4,s4 ,tr1ty's ,-pet5t ,au?or;y ,provi.n ,?9 ,capitaliz,n ,imp]ial ,oil &! ,tr1t;t ( ,=eign ,curr5cy ,loans #a  ,te*nical news a#a ,,sift ,rules--,transi;nal ,normal ,gr[? ,,sift ,5tities--,def9i;n ( 8,r1l ,e/ate ,9ve/;t ,tru/0 9 ,sec;n #abb.a ,p>agraph #bea7#e77b7--,3di;nal ,agree;ts ,,cra ,auditors' ,a3ess 6,audit ,"w+ ,pap]s ,=eign ,5t;y ,classific,n ,applic,n ( ,p>agraph #ie7#f77b7 ,p5.n ,fund ,corpor,ns ,"qs n pres5t$ at ! 3f];e ,applic,n ( ,subp>agraph #bab7#a77b77;vii7 ,employee ,/ock ,op;n ,deduc;n ,pur*ase ,price ,alloc,n = ,r5tal ,prop]ties ,subsec;n #gh7#d7--,liabil;y ,assum$ 0a ,?ird ,"py ,value ( ,-pany ,attributa# 6,vot+ ,non- ,"picipat+ ,%>es ,crit]ia = ,det]m9+ ,h$ge ,e6ective;s = ,tax ,purposes ,def9i;n ( 8,non-,portfolio ,e>n+s0 9 ,subsec;n #abb.a7#a7 #b  ,te*nical news b#a ,fil+ ,require;ts = ,t#ejac1 ,"pn]%ip ,9=m,n ,return ,transf] ( ,,gst/,,hst ,refunds 6,non- ,resid5t ,secur;y ,a3.ts ,anti-,4crim9,n ,provi.ns ,limit$ ,liabil;y ,-pany "u ! ,protocol ,! ,9come ,tax ,te*nical ,news is produc$ 0! ,legislative ,policy & ,regulatory ,a6airs ,bran*4 ,x is provid$ = 9=m,n purposes only & does n replace ! law4 ,if y h any -;ts or su7es;ns ab ! matt]s 4cuss$ 9 ? public,n1 pl1se s5d !m to3 ,9come ,tax ,rul+s ,directorate ,legislative ,policy & ,regulatory ,a6airs ,bran* ,canada ,rev5ue ,ag5cy ,ottawa ,,on ,k#a;,a #j;,l#e ,! ,9come ,tax ,te*nical ,news c 2 f.d on ! ,canada ,rev5ue ,ag5cy ,9t]net site at _+www.cra.gc.ca_: #c  ,te*nical news c#a ,? issue 3ta9s topics ( curr5t 9t]e/ t 7 prep>$ = 4cus.n at ! annual .,canadian .,tax .,f.d,n 3f];e held 9 ,montr1l f ,novemb] #be 6#bg1 #bjjg1 0,ri*>d ,montroy1 ,director ,g5]al1 ,legislative ,policy ,directorate1 & ,mickey ,s>az91 ,director1 ,f9ancial ,sector & ,exempt ,5tities ,divi.n (! ,9come ,tax ,rul+s ,directorate1 bo? directorates )9 ! ,legislative ,policy & ,regulatory ,a6airs ,bran* (! ,canada ,rev5ue ,ag5cy 7! 8,,cra074 ,un.s o!rwise /at$1 all /atutory ref];es "?\t ? ,9come ,tax ,te*nical ,news >e 6! ,9come ,tax ,act 7! 8,act074 #d  ,"qs pres5t$ at ! 3f];e d#a ,s+le adm9i/r,n ( ,ont>io corporate tax ,"q ,we h he>d t ! ,,cra w soon 2g9 6adm9i/] corporate 9come tax on 2half ( ,ont>io4 ,c y tell u m ab ?8 ,response ,? is an important 9itiative =! ,,cra2 ! ,,cra &! ,ont>io ,m9i/ry ( ,rev5ue >e "w+ tgr 6make ? happ5 &! busi;s -mun;y is supportive ( ? 9itiative4 ,! s+le adm9i/r,n ( corporate tax 9 ,ont>io 0! ,,cra w provide --------------------------------------#b significant b5efits = ,ont>io busi;ses1 9clud+ reduc$ -pli.e co/s4 ,ont>io's corporate taxpay]s w h "o s+le po9t ( 3tact = all _! corporate taxes4 ,? w m1n only "o set ( rules1 "o tax return1 "o audit1 & "o app1ls process4 ,full h>moniz,n (! prov9cial #e  ,"qs pres5t$ at ! 3f];e a#b & f$]al tax sy/ems w 2g9 9 ! #bjji tax,n ye>4 ,? m1ns t z ( ,febru>y #bjjh1 ! ,,cra w 2g9 6a3ept -b9$ f$]al-prov9cial 9/al;t pay;ts =! #bjji tax ye>4 ,z ( ,janu>y #bjji1 ,ont>io busi;ses w file a s+le ,t#b tax return )! ,,cra =! #bjji tax,n ye>4 ,h["e1 ! busi;s -mun;y did n want 6wait =! imple;t,n (! s+le tax return 9 #bjji 6/>t r1liz+ -pli.e co/ sav+s4 ,bo? ! f$]al & prov9cial gov]n;ts >e -mitt$ 6provid+ ! b5efits ( s+le adm9i/r,n 6,ont>io busi;ses z soon z possi#4 ,6d ?1 ! ,,cra has agre$ 6take on responsibil;y =! major;y ( ,ont>io's ,corpor,ns ,tax adm9i/rative func;ns = tax,n ye>s 5d+ prior 6#bjji4 ,z ( ,april #bjjh1 ! ,,cra w 2g9 6audit ,ont>io corporate tax returns1 & w assume responsibil;y = mo/ ( ,ont>io's objec;ns1 app1ls1 & rul+s func;ns4 #f  ,"qs pres5t$ at ! 3f];e b#b ,we w update ! web 9=m,n z (t5 z we c1 s make sure y visit x regul>ly 6make sure y're aw>e ( all ! *anges -+ )! h>moniz$ tax sy/em4 ,y c f9d x at _+www.cra.gc.ca/ctao_:4 ,9t]prov9cial tax plann+ >range;ts ,"q ,we "u/& t "s 9t]-prov9cial tax plann+ >range;ts h -e "u ! scrut9y (! prov9ces & ,,cra ov] ! la/ s"eal ye>s4 ,>e "! any curr5t >range;ts t h caus$ ! prov9ces & ,,cra fur!r 3c]n8 ,response ,,cra &! prov9ces h grt 3c]ns ) respect 6transac;ns "utak5 6erode prov9cial 9come tax bases1 "picul>ly >range;ts promot$ 0tax practi;n]s ": ! result is no or m9imum prov9cial 9come tax 2+ pd4 ,9 a4i;n 6! ,ont>io ,f9anc+ ,>range;t1 ! ,quebec ,tru6le >range;t1 : caus$ ,quebec 69troduce am5d;ts #g  ,"qs pres5t$ at ! 3f];e c#b 9 #bjjf e6ective #bjjb1 ,,cra has id5tifi$ ano!r >range;t ref]r$ 6z ! ;,q-,yes ,plan 7i4e41 ,qu@ebec ,ye> ,5d ,%u6le ,plan74 ,no rul+s h be5 reque/$ on any ( ^! >range;ts4 ,! ;,q-,yes ,plan facilitates ! avoid.e ( prov9cial tax on capital ga9s = bo? 9dividuals & corpor,ns 0roll+ prop]ty 6be sold 9 an >m's l5g? transac;n 6a new corpor,n1 select+ di6]5t ye> 5ds = f$]al & ,quebec purposes4 ,nom9al units 9 a ,quebec publicly trad$ limit$ "pn]%ip >e acquir$ 0! corpor,n1 : "pn]%ip has a di6]5t ye> 5d ?an t (! two select$ =! corpor,n4 ,) ?ree di6]5t ye> 5ds 9 play1 & "? ! use ( h[ taxa# 9come e>n$ 9 a prov9ce is calculat$ 9 sec;n #djj (! ,9come ,tax ,regul,ns 7! 8,regul,ns071 only a nom9al por;n (! ga9 gets report$4 #h  ,"qs pres5t$ at ! 3f];e d#b ,on 2half (! prov9ces ) : we h a ,tax ,collec;n ,agree;t1 ,,cra 9t5ds 6id5tify & *all5ge all abusive prov9cial tax avoid.e >range;ts4 ,,cra is "w+ closely )! prov9ces ( ,ont>io1 ,quebec & ,alb]ta 9 t reg>d4 ,9come tax tr1t;t ( ,,gst ,deductibil;y ( 9t]e/ & p5alties relat$ 6,gds & ,s]vices ,tax 7! 8,,gst07 or ,h>moniz$ ,sales ,tax 7! 8,,hst07 "u ! ,act4 ,"q #a ,wd an am.t ( 9t]e/ assess$ "u ,"p ,,ix (! ,excise ,tax ,act 7! 8,,eta071 af ,april #a1 #bjjg b relat+ 6a p]iod 2f t "t1 2 deducti# "u ! ,act8 ,3sid] ! foll[+ two examples4 ,example #a ,assume a ,canadian corporate taxpay] 7,canco7 )a ye>-5d ( ,decemb] #i  ,"qs pres5t$ at ! 3f];e e#b #ca1 #bjjg1 has rcvd a ,june #cj1 #bjjg ,,gst assess;t relat+ 6a ,,gst liabil;y \t/&+ =! #bjje ,,gst fil+ p]iod4 ,! 9t]e/ *>g$ 9 ! assess;t "u old p>agraph #bhj7#a77b7 (! ,,eta 7up 6,m>* #ca1 #bjjg7 is 4#aj4 ,! 9t]e/ *>g$ "u new subsec;n #bhj7#a7 (! ,,eta 7f ,april #a 6,june #cj1 #bjjg7 is 4#c4 ,is ! total 9t]e/ *>g$ ( 4#ac deducti# 9 ! taxpay]'s #bjjg tax,n ye>8 ,example #b ,assume t ,canco has rcvd a ,,gst assess;t dat$ ,june #cj1 #bjjh =a ,,gst liabil;y \t/&+ =a #bjje ,,gst fil+ p]iod4 ,! 9t]e/ *>g$ "u old p>agraph #bhj7#a77b7 (! ,,eta 7up 6,m>* #ca1 #bjjg7 --------------------------------------#c is 4#aj1 & 9t]e/ *>g$ "u new subsec;n #bhj7#a7 (! ,,eta 7f ,april #a 6,june #cj1 #bjjh7 is 4#ab4 #aj  ,"qs pres5t$ at ! 3f];e a#c ,is ! taxpay] a# 6deduct any (! 4#bb ( 9t]e/ assess$ 9 ! #bjjh tax,n ye>8 ,response #a ,prior 6! 9troduc;n (! curr5t v].n ( p>agraph #ah7#a77t71 an am.t pd or paya# z 9t]e/ "u ,"p ,,ix (! ,,eta t relat$ 6a ,,gst/,,hst liabil;y >is+ 9 ! c\rse ( e>n+ 9come f a busi;s or prop]ty 0 deducti#4 ,pursuant 6*anges 9troduc$ 0,budget #bjjf1 p>agraph #ah7#a77t7 n[ provides t 9 -put+ ! 9come (a taxpay] f a busi;s or prop]ty1 no deduc;n % 2 made 9 respect (1 9t] alia1 any am.t pd or paya# z 9t]e/ "u ,"p ,,ix (! ,,eta = tax,n ye>s 2g9n+ ,april #bjjg or lat]4 ,z /at$ 9 \r response 6,"q #a 9 ,rul+s' docu;t #bjjg-jbcffd1 x is \r view t ! e6ective date ref];ed 9 ! -+ 96=ce 9=m,n relat+ 6! am5d;t 6p>agraph #ah7#a77t7 is applica# 6! ^w+ 8pd or paya#0 9 ! op5+ ^ws ( t provi.n #aa  ,"qs pres5t$ at ! 3f];e b#c s* t 9 ord] 6be deducti#1 ! 9t]e/ m/ h be5 8pd or paya#0 9 a ..tax,n ye> t -m;ed prior 6,april #a1 .#bjjg ,7emphasis a4$7'4 ,acly1 ": an am.t ( 9t]e/ "u ,"p ,,ix (! ,,eta is a3ru$ 9 a tax,n ye> t -m;ed on or af ,april #a1 #bjjg1 s* 9t]e/ w n 2 deducti# :e!r or n t a3ru$ 9t]e/ relates 6an am.t ( ,,gst/,,hst t [$ 9 respect (a ye> t -m;ed prior 6,april #a1 #bjjg4 ,example #a ,-;ts ,! 5tire 4#ac ( 9t]e/ is 8paya#0 9 a tax,n ye> t -m;ed prior 6,april #a1 #bjjg ev5 ?\< 4#c ( t 9t]e/ actu,y 2came paya# 9 a p]iod af ,m>* #ca1 #bjjg4 ,z s*1 ! 5tire 4#ac ( 9t]e/ assess$ 9 #bjjg wd 2 deducti#4 ,example #b ,-;ts ,s9ce a por;n (! 4#ab (! 9t]e/ 2comes 8paya#0 9 a tax,n ye> t -m;ed af #ab  ,"qs pres5t$ at ! 3f];e c#c ,april #a1 #bjjg 7i4e4 ! #bjjh tax,n ye>71 ! por;n ( 9t]e/ t 2came paya# dur+ ! p]iod f ,janu>y #a1 #bjjh 6,june #cj1 #bjjh wd n 2 deducti# = any tax,n ye>4 ,! fact t ! assess;t 0 n issu$ until ! taxpay]'s #bjjh tax,n ye> 7i4e4 a tax,n ye> t -m;ed af ,april #a1 #bjjg7 %d n result 9 ! -plete d5ial ( all ! 9t]e/ z x is cle> t "s (! 9t]e/ 7i4e4 ! 5tire 4#aj plus a por;n (! 4#ab7 wd h be5 paya# 9 a tax,n ye> t -m;ed prior 6,april #a1 #bjjg4 ,9 bo? examples1 6! ext5t t a deduc;n is n d5i$ 0p>agraph #ah7#a77t71 ! 9t]e/ is deducti# 9 ! tax,n ye> 9 : x a3ru$4 ,= adm9i/rative simplic;y1 h["e1 we wd p]mit a deduc;n 9 ! ye> ! 9t]e/ is assess$ or pd4 ,"q #b ,:at ab ! deductibil;y "u ! ,act (a p5alty assess$ "u ! ,,eta af #ac  ,"qs pres5t$ at ! 3f];e d#c ,april #a1 #bjjg1 b relat+ 6a p]iod 2f t "t8 ,response #b ,sec;n #fg.f d1ls )! deductibil;y ( f9es & p5alties t >e impos$ af ,m>* #bb1 #bjjd4 ,! sec;n /ates t 9 -put+ 9come1 no deduc;n % 2 made 9 respect ( any am.t t is a f9e or p5alty 7o!r ?an a prescrib$ f9e or p5alty7 impos$ "u a law (a c.try or (a political subdivi.n (a c.try 79clud+ a /ate1 prov9ce or t]ritory7 0any p]son or public body t has au?or;y 6impose ! f9e or p5alty4 ,draft p>agraph #gcji7a7 (! ,regul,ns provides t =! purposes ( sec;n #fg.f1 an am.t pd or paya# "u any ( p>agraphs #bhj7#a77a71 #bhj7#a.a77a7 & #bhj7#b77a7 (! ,,eta is a prescrib$ p5alty4 ,e6ective ,april #a1 #bjjg1 ! =ego+ provi.ns (! ,,eta 7 am5d$ 6remove ref];es 6^! p5alties4 ,z a result1 taxpay]s >e n subject 6^! #ad  ,"qs pres5t$ at ! 3f];e e#c p5alties = p]iods subsequ5t 6,m>* #ca1 #bjjg4 ,h["e1 a p5alty assess$ "u any ( p>agraphs #bhj7#a77a71 #bhj7#a.a77a7 & #bhj7#b77a7 (! ,,eta 9 respect (a p]iod 2f ,april #a1 #bjjg w 3t9ue 6be deducti# "u ! ,act provid$ ! "picul> p5alty 0 9curr$ 0! taxpay] =! purpose ( e>n+ 9come f a busi;s or prop]ty4 ,9 \r view1 ! p5alty1 : a3rues mon?ly1 is deducti# 9 ! ye> t 9cludes ea* s* mon?4 ,= adm9i/rative simplic;y1 we wd p]mit a deduc;n 9 ! ye> ! am.t is assess$ or pd4 --------------------------------------#d ,3trol ( corpor,n [n$ 09come tru/--,impact ( *ange 9 tru/ees ,"qs #a7 ,:at is ,,cra's view on ! impact on 3trol (a corpor,n t is [n$ 0an 9come tru/ :5 "! >e *anges 9 tru/ees (! tru/8 #ae  ,"qs pres5t$ at ! 3f];e a#d #b7 ,:5 an 9come tru/ is 9volv$1 %d "o look 6! unithold]s 9/1d (! tru/ees 6det]m9e 3trol (a corpor,n [n$ 0! tru/ 2c an 9come tru/ is simil> 6a public corpor,n 9 t]ms ( gov]n.e8 ,response ,9 a ,may #bjje te*nical 9t]pret,n 7#bjjd-jjhggfa;,e#e71 ! ,,cra 3clud$ t1 ": a tru/ holds su6ici5t vot+ %>es 63trol a corpor,n1 a *ange 9 any tru/ees (! tru/ cd tri7] an acquisi;n ( 3trol (! corpor,n4 ,z set \ 9 t 9t]pret,n1 ! te/ ( de jure 3trol 3templates ! [n]%ip ( %>es t give ! hold] ! abil;y 6elect a major;y ( directors4 ,": a tru/ is a %>ehold]1 case law has ref]r$ 6! tru/ees 9 assess+ corporate 3trol1 s9ce ! tru/ is n a legal 5t;y1 b a rel,n%ip 2t ! tru/ees &! b5efici>ies4 7,see ,m4,n4,r4 v4 ,3solidat$ ,hold+ ,-pany ,limit$1 #gb ,,dtc #fjjg 7,,scc774 ,": a tru/ has multiple tru/ees1 ! det]m9,n z 6: tru/ee or gr\p ( #af  ,"qs pres5t$ at ! 3f];e b#d tru/ees 3trols ! corpor,n c only 2 made af a review ( all ! p]t95t facts1 9clud+ ! t]ms (! tru/ 9/ru;t4 ,h["e1 9 ! abs;e ( evid;e 6! 3tr>y1 we wd 3sid] "! 6be a presump;n t all (! tru/ees wd 3/itute a gr\p t 3trols ! corpor,n4 ,z fur!r not$ 0! ,,cra 9 ,9come ,tax ,te*nical ,news ,no4 #cd1 we took ? view 2c we 2liev$ t ! fiduci>y oblig,n t ea* (! tru/ees wd h 6act 9 ! be/ 9t]e/s (! b5efici>ies (! tru/ wd make x unlikely t two tru/ees cd prop]ly act tgr 63trol a corpor,n1 6! exclu.n (a ?ird tru/ee4 ,t 2+ sd1 giv5 ! unique gov]n.e /ructure applica# 69come tru/s1 we wd ne$ 6review all ! facts (a "picul> case 9 ord] 6det]m9e :e!r ! posi;n /at$ 9 ! #bjje te*nical 9t]pret,n &! r,nale = t posi;n wd 2 applica# 6any "picul> 9come tru/4 #ag  ,canadian 3trol$ private c#d corpor,n 7,,ccpc7 det]m9,n-- ,impact (! s$ona deci.n ,"q ,:at >e ! ,,cra's curr5t views on ! tr1t;t ( employee /ock op;n "rs "u p>agraph #bea7#e77b7 (! ,act foll[+ ! deci.n 9 ,s$ona ,net"ws ,corpor,n v4 ,! ,que5 7#bjjg ,,fca #afi71 9 : ! ,f$]al ,c\rt ( ,app1l 7! 8,,fca07 3clud$ t all "rs "u p>agraph #bea7#e77b7 m/ 2 3sid]$ 9 ! det]m9,n ( ,canadian-3troll$ private corpor,n 7! 8,,ccpc07 /atus "u subsec;n #abe7#g71 r ?an ! selective det]m9,n ( 9dividual "rs8 ,response ,"! 7 two ma9 issues rais$ 9 ! ,s$ona app1l3 #a7 ,0 an agree;t 2t 8,,bmcc0 7a subsidi>y (a public corpor,n7 & 8,v5tures0 7a ,canadian-resid5t private corpor,n71 "u : ,v5tures 0 giv5 ! "r 6ex]cise ! vot+ "rs #ah  ,"qs pres5t$ at ! 3f];e d#d 9 respect ( ,,bmcc's %>es ( ,s$ona1 relevant 9 det]m9+ 3trol ( ,s$ona8 #b7 ,6:at ext5t 7 op;ns 6acquire tr1sury %>es ( ,s$ona t 7 held 0resid5ts & non-resid5ts ( ,canada 6be tak5 96a3.t 9 apply+ p>agraph #bea7#e77b7 & p>agraph 7b7 (! ,,ccpc def9i;n1 9 det]m9+ 3trol ( ,s$ona8 ,! ,,fca decid$1 9 respect (! f/ issue1 t ! agree;t 2t ,v5tures & ,,bmcc 0 n relevant 6! det]m9,n ( 3trol ( ,s$ona1 s* t1 )\t reg>d 6op;ns &! applic,n ( p>agraph #bea7#e77b71 ,s$ona wd 2 3troll$ 0! hypo!tical 8"picul> p]son0 ref]r$ 6in p>agraph 7b7 (! ,,ccpc def9i;n1 s* t ,s$ona 0 n a ,,ccpc4 ,hav+ decid$ ! f/ issue 9 ? way1 x 0 unnec =! ,,fca 63sid] ! second issue1 2+ ! impact ( p>agraph #bea7#e77b74 ,! c\rts h held on s"eal o3a.ns t p>agraph #bea7#e77b7 does n #ai  ,"qs pres5t$ at ! 3f];e e#d op]ate 6remove 3trol f ! p]son :o actu,y 3trols ! corpor,n1 z ! purpose ( p>agraph #bea7#e77b7 is 6wid5 ! no;n ( 3trol1 n re/rict x4 99#a ,acly1 ! -;ts (! ,,fca 9 respect ( p>agraph #bea7#e77b7 may 2 3sid]$ 6be obit] dicta4 99#a ,f]ronnex ,9c4 c4 ,,mrn1 ,7#aiia7' #a ,,ctc #bccj 7,,cci72 ,mac,donald ,drums ,manufactur+ ,corp4 c4 ,,mrn1 ,7#aiff7' #dj ,tax ,,abc #bgc2 ,economy ,home ,build]s ,ltd4 c4 ,,mrn1 ,7#aife7' #ch ,tax ,,abc #adh2 ,vik+ ,food ,products ,ltd4 c4 ,,mrn1 ,7#aifg7' ,,ctc #aja 7,c4,e*474 --------------------------------------#e ,x %d al 2 not$ t ! ,,fca did n explicitly hold t p>agraph #bea7#e77b7 m/ 2 appli$ 03sid]+ ! "rs held 0all p]sons2 ? 9t]pret,n (! provi.n is1 at mo/1 implicit 9 ! ,,fca's calcul,ns 9 p>agraph #bg ( xs r1sons = judg;t4 #bj  ,"qs pres5t$ at ! 3f];e a#e ,9 view (! abv1 ! ,,cra does n 2lieve t ! ,s$ona deci.n precludes x f apply+ p>agraph #bea7#e77b7 on a hold]-by- hold] basis1 ": s* an 9t]pret,n c 2 support$ hav+ reg>d 6! 3text &! purpose (! provi.ns 9 "q4 ,canada-,u4,s4 tr1ty's -pet5t au?or;y provi.n ,! ,canada-,unit$ ,/ates ,9come ,tax ,3v5;n 7#aihj7 7! 8,3v5;n07 at ,>ticle ,,iv1 p>agraph #d1 provides t ": 8an e/ate1 tru/ or o!r p]son 7o!r ?an an 9dividual or a -pany7 is a resid5t ( bo? ,3tract+ ,/ates1 ! -pet5t au?orities (! ,/ates % 0mutual agree;t 5d1vor 6settle ! "q & 6det]m9e ! mode ( applic,n (! ,3v5;n 6s* p]son40 ,"q #a ,c ! ,,cra provide guid.e on ! crit]ia us$ 6det]m9e ! resid;e ( an e/ate or tru/ "u ? provi.n8 #ba  ,"qs pres5t$ at ! 3f];e b#e ,response #a ,z /at$ 9 ,>ticle ,i (! ,3v5;n1 ! ,3v5;n is g5],y applica# 6p]sons :o >e resid5ts ( ei ,canada or ! ,unit$ ,/ates1 or bo? ,canada &! ,unit$ ,/ates4 ,": a p]son is 3sid]$ a resid5t ( bo? ,3tract+ ,/ates1 ,>ticle ,,iv w g5],y provide a me*anism 6attempt 6resolve ! "q ( dual resid;e s t ! p]son c 2 3sid]$ a resid5t ( "o (! ,3tract+ ,/ates4 ,": ! p]son is a tru/ or an e/ate1 x is ,,cra's posi;n t ! tie-br1k] rules 9 p>agraph #b ( ,>ticle ,,iv (! ,3v5;n d n apply4 ,9 det]m9+ :e!r a tru/ or e/ate is a resid5t ( ,canada = purposes (! ,act1 ! ,,cra w g5],y apply ! crit]ia describ$ 9 ,9t]pret,n ,bullet9 ,,it-#ddg1 ,resid;e (a ,tru/ or ,e/ate4 ,z /at$ "!91 x is g5],y ,,cra's view t ! resid;e (a tru/ or e/ate 9 ,canada1 or 9 a "picul> prov9ce or t]ritory )9 ,canada1 #bb  ,"qs pres5t$ at ! 3f];e c#e is a "q ( fact 6be det]m9$ ac 6! circum/.es 9 ea* case4 ,h["e1 9 ! abs;e ( express /atutory direc;n1 a tru/ or e/ate w g5],y 2 3sid]$ 6reside ": ! tru/ee1 executor1 adm9i/rator1 heir or o!r legal repres5tative :o manages ! tru/ or 3trols ! tru/ assets resides4 ,": ! tru/ or e/ate is al 3sid]$ a resid5t (! ,unit$ ,/ates "u xs dome/ic law1 & "!by resid5t ( bo? ,3tract+ ,/ates = purposes (! ,3v5;n1 ! -pet5t au?or;y = ,canada w 3sid] all ! surr.d+ facts on a case-by-case basis 6det]m9e ! /r5g? (! tru/'s ties 6,canada relative 6! ,unit$ ,/ates4 ,9 a4i;n 6! factors li/$ 9 ,,it-#ddg1 "s (! factors ! -pet5t au?or;y = ,canada may 3sid] >e ! resid;e (! settlor1 ! resid;e (! b5efici>ies1 ! loc,n (! tru/ prop]ty1 ! r1son ! tru/ 0 e/abli%$ 9 a "picul> jurisdic;n1 etc4 ,? is n 9t5d$ 6be an exhau/ive li/ z ea* case may 2 negotiat$ di6]5tly & #bc  ,"qs pres5t$ at ! 3f];e d#e w>rant di6]5t 3sid],ns bas$ on xs "picul> fact situ,n4 ,"q #b ,has ! ,,cra made any det]m9,ns "u ? provi.n (! ,3v5;n 9 ! pa/8 ,response #b ,! -pet5t au?or;y = ,canada has rcvd v few reque/s 6negotiate ! "q ( dual resid;e (a tru/ or e/ate )! -pet5t au?or;y =! ,unit$ ,/ates "u ? provi.n (! ,3v5;n4 ,h["e1 z a result ( propos$ legislative *anges 6sec;n #id1 ! -pet5t au?or;y = ,canada has rec5tly rcvd a numb] ( reque/s seek+ xs views on ! "q ( dual resid;e4 ,"q #c ,on ,octob] #bi1 #bjjg1 ! ,h\se ( ,-mons pass$ ,bill ;,c-#aj1 : is a repr9t ( ,bill ;,c-#cc (! previ\s p>lia;t>y ses.n4 ,bill ;,c-#aj proposes 6am5d 9t] alia sec;n #id4 ,is x possi# 6rely on ,>ticle #bd  ,"qs pres5t$ at ! 3f];e e#e ,,iv7#d7 (! ,3v5;n ": a ,u4,s4 tru/ is deem$ 6be a resid5t ( ,canada "u ! propos$ provi.ns ( subsec;n #id7#c7 7! 8propos$ sec;n #id078 ,response #c ,al? ? "q is premature at ? "t1 &! ,,cra w g5],y n -;t on propos$ legisl,n1 we recognize ? issue may a6ect s"eal taxpay]s & 2 v important = !m & _! repres5tatives 9 plann+ _! a6airs4 ,acly1 we appreciate ! opportun;y 6expla9 ! ,canadian -pet5t au?or;y's posi;n on ? issue1 assum+ --------------------------------------#f ! propos$ am5d;ts 6sec;n #id >e adopt$ z propos$ 9 ,bill ;,c-#aj4 ,! reque/s rcvd 6date on ? subject f taxpay]s h result$ 9 ! ,canadian -pet5t au?or;y 3duct+ ext5sive 3sult,ns ) o!r ,,cra /akehold]s & (ficials (! ,de"p;t ( ,f9.e4 ,4cus.ns 2t repres5tatives (! -pet5t au?or;y = bo? ,canada &! ,unit$ ,/ates h #be  ,"qs pres5t$ at ! 3f];e a#f al be5 held 6expla9 ,canada's 3c]ns 9 ^! situ,ns4 ,z y may recall1 ! #aiii ,budget ,spee* docu;ts specific,y a4ress$ ! use 0,canadian resid5ts ( non-resid5t tru/s 6e>n 9come4 ,a prim>y 3c]n 0 t s* >range;ts cd result 9 ! def]ral or avoid.e ( ,canadian tax on 9come t wd o!rwise 2 taxa# 9 ,canada4 ,9de$1 x 0 not$ t a f1ture ( ^! >range;ts 0 64guise ! fact t ! non-resid5t tru/ _h a ,canadian b5efici>y & t a numb] ( =eign jurisdic;ns _h modifi$ _! tru/ laws 6(f] grt flexibil;y 9 rel,n 6! design,n ( tru/ b5efici>ies-- e6ectively mak+ ! curr5t rules 9 sec;n #id di6icult 6apply4 ,we "u/& ! propos$ am5d;ts 6sec;n #id attempt 6d1l ) ^! di6iculties4 ,": a tru/ is deem$ 6be a resid5t ( ,canada pursuant 6propos$ sec;n #id1 x is ! ,,cra's posi;n t s* a tru/ #bf  ,"qs pres5t$ at ! 3f];e b#f is al a resid5t ( ,canada = purposes (! relevant 9come tax tr1ty1 s* z1 9 ? case1 p>agraph #a ( ,>ticle ,,iv (! ,3v5;n4 ,": s* a tru/ is al 3sid]$ a resid5t (! o!r c.try pursuant 6xs dome/ic tax legisl,n1 ! tru/ may 2 3sid]$ a resid5t ( bo? ,3tract+ ,/ates & may reque/ -pet5t au?or;y assi/.e pursuant 6p>agraph #d ( ,>ticle ,,iv (! ,3v5;n 65d1v\r 6settle ! "q & det]m9e ! mode ( applic,n (! ,3v5;n4 ,9 t 3text1 x is g5],y ! ,canadian -pet5t au?or;y's posi;n t x wd n 2 appropriate 6c$e ,canadian resid;e ( tru/s subject 6propos$ sec;n #id 9 ! 3text ( negoti,ns )! -pet5t au?or;y (! o!r ,3tract+ ,/ate4 ,! ,canadian -pet5t au?or;y's policy reflects ! view t ! te/ = resid5cy "u propos$ sec;n #id is nei 9f]ior nor subord9ate 6o!r te/s ( resid5cy4 ,simil>ly1 we "u/& t ! -pet5t au?or;y =! o!r ,3tract+ ,/ate may 2 equ,y reluctant 6c$e ! resid;e (a tru/ x o!rwise #bg  ,"qs pres5t$ at ! 3f];e c#f 3sid]s resid5t 9 xs jurisdic;n4 ,fur!rmore1 giv5 t propos$ sec;n #id anticipates provid+ full relief =! =eign taxes pd 0! tru/1 if any1 we "u/& ! propos$ legisl,n does n 3template ! o!r c.try giv+ up xs "r 6tax ! tru/'s 9come f non-,canadian s\rces4 ,acly1 x is ! ,canadian -pet5t au?or;y's posi;n t ! negoti,n ( ^! cases )a view 6settle ! "q ( dual resid;e w g5],y n 2 possi# or advisa#1 "picul>ly ": bo? -pet5t au?orities >e "kn1 m broadly1 6be at an impasse on ! matt]4 ,9 t respect1 we note t ? provi.n (! ,3v5;n does n require ! -pet5t au?orities 6-e 6a -mon "u/&+4 ,! provi.n 3templates t ! result may 2 dual resid;e =a tru/ ": ! c.tries _c settle ! "q4 ,9 fact1 z m5;n$ abv1 ! ,3v5;n specific,y provides t x applies 6p]sons :o >e resid5ts ( "o or bo? (! ,3tract+ ,/ates4 ,! fact t ! #bh  ,"qs pres5t$ at ! 3f];e d#f -pet5t au?orities >e "u no oblig,n 6settle ! "q is al 3si/5t )! provi.ns ( ,>ticle ,,xxvi (! ,3v5;n 7,mutual ,agree;t ,proc$ure7 &! ,-;t>y on ,>ticle #be 7,mutual ,agree;t ,proc$ure7 (! ,,oecd ,model ,3v5;n1 : bo? use v simil> ^w+ 6p>agraph #d ( ,>ticle ,,iv (! ,3v5;n4 ,x %d 2 not$ al t ,>ticle #b (! fif? ,protocol 6! ,3v5;n1 sign$ on ,septemb] #ba1 #bjjg1 w add simil> provi.ns 6p>agraph #c ( ,>ticle ,,iv1 ":by ! -pet5t au?orities (! ,3tract+ ,/ates % 5d1v\r 6settle ! "q ( dual resid;e ( c]ta9 corpor,ns 0mutual agree;t & det]m9e ! mode ( applic,n (! ,3v5;n4 ,! la/ s5t;e ( p>agraph #c7b7 ( ,>ticle ,,iv specific,y ac"kl$ges t ! -pet5t au?orities may n 2 a# 6-e 6a -mon "u/&+ on ! "q ( dual resid;e4 ,^! provi.ns %d 2 3tra/$ ) p>agraph #b7d7 ( ,>ticle ,,iv (! ,3v5;n1 : specific,y provides t ! -pet5t au?orities % settle ! "q ( dual resid;e 9 ! #bi  ,"qs pres5t$ at ! 3f];e e#f case (a natural p]son4 ,? is fur!r reflect$ 9 ! ,diplomatic ,notes ex*ang$ 9 3nec;n )! fif? ,protocol 6! ,3v5;n 7,annex ;,a 6! ,3v5;n71 : recognizes t b9d+ >bitr,n % 2 us$ 6det]m9e ,>ticle ,,iv resid;e issues b only 9sof> z x relates 6! resid;e (a natural p]son4 --------------------------------------#g ,"q #d ,is x al possi# 6rely on ? provi.n (! ,3v5;n ": a ,u4,s4 tru/ is deem$ 6be a resid5t ( ,canada "u ! provi.ns ( curr5t subsec;n #id7#a78 ,response #d ,z m5;n$1 ! -pet5t au?or;y = ,canada has rcvd v few reque/s = assi/.e ) respect 6tru/s fall+ )9 ! ambit ( curr5t sec;n #id4 ,h["e1 z a g5]al rule1 giv5 ! simil>ities 2t bo? regimes1 we see no obvi\s r1son :y ! posi;n \tl9$ abv ) respect 6propos$ sec;n #id wd n al 2 applica# 6cases ": curr5t sec;n #id applies4 #cj  ,"qs pres5t$ at ! 3f];e a#g ,"q #e ,c ! ,,cra provide an example (a 8mode ( applic,n08 ,response #e ,we 2lieve t det]m9+ ! 8mode ( applic,n0 (! ,3v5;n c proce$ not)/&+ a failure 6settle ! "q ( resid5cy4 ,9 t 3text1 x is ! ,canadian -pet5t au?or;y's posi;n t ! ,3v5;n %d 2 appli$ 6a tru/ subject 6sec;n #id s z 6avoid any unexpect$ d\# tax,n4 ,acly1 once 9come tax returns h be5 fil$ 9 ,canada1 ! ,canadian -pet5t au?or;y w a3ept reque/s f tru/s subject 6sec;n #id seek+ relief f d\# tax,n & 3sid] provid+ unilat]al relief or 5t]+ 96negoti,ns )! -pet5t au?or;y (! o!r ,3tract+ ,/ate )a view 6avoid+ any result+ d\# tax,n4 #ca  ,?9 capitaliz,n b#g ,"q ,h[ does ! ,,cra 9t]pret ! t]m 82g9n+ (a cal5d> mon?0 9 subp>agraph #ah7#d77a77;ii7 :5 calculat+ equ;y = purposes (! ?9 capitaliz,n rules 9 a situ,n ": a corpor,n is newly 9corporat$8 ,response ,,cra's posi;n is t ! t]m 82g9n+ (a cal5d> mon?0 m1ns ! e>lie/ mo;t on ! f/ "d (! mon?4 ,s9ce ! -m;e;t (! f/ fiscal p]iod (a corpor,n takes place at ! "t ( xs 9corpor,n =! purposes ( subp>agraph #ah7#d77a77;ii71 we >e prep>$ 6a3ept t 9 ! 3text (a corpor,n t is newly 9corporat$1 ! t]m 82g9n+ (a cal5d> mon?0 m1ns ! date ( 9corpor,n4 #cb  ,imp]ial oil &! tr1t;t ( c#g =eign curr5cy loans ,"q ,9 xs deci.n 9 ,imp]ial ,oil1 ! ,supreme ,c\rt ( ,canada makes ! /ate;t1 9 obit]1 t 8)\t a 3v].n ( curr5cy1 ! m]e repay;t ( pr9cipal--! v ?+ t 0 borr[$--_c yield a pr(it or loss04 ,does ,,cra agree ) ? view (! ,supreme ,c\rt or ext5d xs applic,n 6situ,ns ":1 = example1 ,u4,s4 doll> denom9at$ loans >e repd ) newly borr[$ ,u4,s4 doll>s or ,u4,s4 doll>s g5]at$ 0! op],ns (! corporate gr\p s* t "! is no =eign ex*ange ga9 or loss on repay;t (! orig9al loan8 ,response ,al? we agree )! ratio decid5di (! ,supreme ,c\rt ( ,canada 9 >riv+ at xs deci.n1 2c ! abv /ate;t is obit]1 ,,cra is n b.d 0! /ate;t4 ,acly1 ": ,u4,s4 doll> denom9at$ loans >e repd ) newly borr[$ ,u4,s4 doll>s or ,u4,s4 doll>s g5]at$ 0! op],ns (! #cc  ,"qs pres5t$ at ! 3f];e d#g corporate gr\p & "! has be5 a fluctu,n 9 ! value (! ,u4,s4 doll> relative 6! ,canadian doll> s9ce ! "t ! m"oy 0 borr[$1 a taxpay] w 2 3sid]$ 6h 8made a ga90 or 8su/a9$ a loss01 = purposes ( subsec;n #ci7#b71 at ! "t ( repay;t ( "p or all (! =eign curr5cy denom9at$ capital debt oblig,n4 ,,sift rules--,transi;nal normal gr[? ,"q ,:at >e ! 3sequ;es ( exce$+ safe h>b\r limit ": x c 2 demon/rat$ t ! gr[? is 8normal0 9 ! circum/.es8 ,response ,"u ! new specifi$ 9ve/;t fl[-"? 7! 8,,sift07 legisl,n1 ! ,,sift tru/ & ,,sift "pn]%ip def9i;ns >e susp5d$ 9 _! applic,n 6qualify+ 5tities until ! 5d (a specifi$ transi;nal p]iod4 #cd  ,"qs pres5t$ at ! 3f];e #h ,det]m9+ ! l5g? ( an 5t;y's transi;nal p]iod requires t m1n+ 2 giv5 6! expres.n 8exce$s normal gr[?04 ,2c ! language 8exce$s normal gr[?0 is f.d 9 ! ,act1 ? process is necess>ily a process ( /atutory 9t]pret,n4 ,! m1n+ asc]ta9$ "? t process %d1 "!=e1 )/& ! scrut9y ( e/abli%$ pr9ciples = 9t]pret+ fiscal legisl,n4 ,t sd1 ! ,act expressly directs t ! det]m9,n ( :e!r a qualify+ 5t;y exce$s normal gr[? 2 made 0ref];e 6! ,guidel9es4 ,"!=e1 we d n a3$e 6! view t1 9 det]m9+ :e!r an 5t;y exce$s normal gr[? = purposes (! transi;nal rules1 an \tcome z det]m9$ 0ref];e 6! ,guidel9es c 2 set aside1 & reg>d 2 made 6"s o!r set ( crit]ia4 ,s* an approa* wd r5d] m1n+.s ! direc;n 6use ! ,guidel9es4 ,! /atutory direc;n 6apply ! ,guidel9es 9 det]m9+ :e!r an 5t;y exce$s normal gr[? is an 9vit,n 6de"p f :at"e ! ord9>y m1n+ ( t #ce  ,"qs pres5t$ at ! 3f];e a#h expres.n may be1 & 6give a4$ weid we (f] ! foll[+ a4i;nal -;ts4 ,! purpose (! ,,sift tax,n regime appe>s 6be 65sure a level play+ field am;g fl[-"? 5tities1 corpor,ns1 & _! respective 9ve/ors4 ,9 \r view1 ! provi.n ( transi;nal relief 9 apply+ ! ,,sift tru/ & ,,sift "pn]%ip def9i;ns 0 n 9t5d$ 6all[ =a de"pure f ! level play+ field pr9ciple4 ,! purpose (! transi;nal relief 9/1d appe>s 6h be5 6provide = an ord]ly transi;n--= o!rwise a6ect$ fl[-"? /ructures 9 place on ,oct #ca1 #bjjf--96! regime ( corporate-type tax,n "u ! ,,sift tax,n rules4 #cf  ,"qs pres5t$ at ! 3f];e b#h ,any results f apply+ ! ,guidel9es %d 2 3si/5t )! purpose ( provid+ an ord]ly transi;n1 :ile at ! same "t reconcil$ 6! broad] legislative objective ( level+ ! play+ ! field am;g fl[-"? 5tities1 corpor,ns1 & _! respective 9ve/ors4 ,transi;nal relief (a qualify+ 5t;y 5ds at ! e>lie/ on ! f/ "d1 af ,decemb] #ae1 #bjjf1 on : ! 5t;y exce$s normal gr[? z det]m9$ 0! ,guidel9es4 ,z a result1 ! ,,sift tru/ & ,,sift "pn]%ip def9i;ns w 2g9 apply+ 6a qualify+ 5t;y = xs tax,n ye> t 9cludes ! "d on : x f/ exce$s normal gr[?4 #cg  ,,sift 5tities--,def9i;n ( c#h 8r1l e/ate 9ve/;t tru/0 9 sec;n #abb.a ,"q ,! rev5ue te/s 9 ! def9i;n ( 8r1l e/ate 9ve/;t tru/0 78,,reit07 d n 9clude 9come e>n$ z a b5efici>y (a tru/4 ,does 9come (! tru/ reta9 xs "uly+ "* :5 e>n$ 0a b5efici>y (! tru/ = purposes (! ,,reit rev5ue te/s 9 ! def9i;n ( ,,reit 9 subsec;n #abb.a7#a78 ,response ,no4 ,subsec;n #ajh7#e7 provides t 9come allocat$ 6a b5efici>y 0a tru/ is 89come (! b5efici>y =! ye> f a prop]ty t is an 9t]e/ 9 ! tru/ & n f any o!r s\rce0 except z o!rwise provid$ "u ,"p ,i (! ,act4 ,no?+ 9 sec;n #abb.a c.t]acts ! e6ect ( subsec;n #ajh7#e74 ,z a result1 :5 a tru/ t meets ! 3di;ns 9 p>agraphs 7a7 to 7c7 (! def9i;n ( 8,,sift tru/0 9 subsec;n #abb.a7#a7 is xf a b5efici>y ( #ch  ,"qs pres5t$ at ! 3f];e d#h ano!r tru/ &! sole s\rce ( 9come (! f/ tru/ is ! 9come allocat$ 6x f ! second tru/1 ! f/ tru/ w n qualify z a ,,reit z def9$ 9 subsec;n #abb.a7#a7 ev5 ?\< ! second tru/ e>ns at l1/ #ie@3p ( xs 9come f ! r5t ( r1l or immovea# prop]ties4 ,9 -+ 6? 3clu.n1 we recognize t ! def9i;n ( 8r1l or immovea# prop]ty0 9 subsec;n #abb.a7#a7 9cludes a secur;y t is x xf a ,,reit2 h["e1 we >e una# 63clude t ! 9come allocat$ 6a b5efici>y f a tru/ t is a ,,reit cd qualify z 8r5t f r1l or immovea# prop]ty0 z def9$ 9 subsec;n #abb.a7#a74 ,! gd news is t we h rec5tly rcvd a writt5 reque/ =a te*nical 9t]pret,n on ? issue t 9cludes a te*nical analysis (! provi.ns not$ abv & we >e curr5tly 3sid]+ ! issue fur!r4 #ci  ,p>agraph #bea7#e77b7-- e#h ,3di;nal agree;ts ,new subsec;n #bdi7#c.a7 tri7]s an a4i;nal tax,n ye>-5d at ! "t a corpor,n 2comes a ,,ccpc or c1ses 6h ? /atus 7subject 6! abil;y 6avoid s* a tax,n ye> 0elect+ "u subsec;n #hi7#aa7 9 ! case ( c1s+ 6be a ,,ccpc74 --------------------------------------#i ,! ^w+ ( p>agraph #bea7#e77b7 is extremely broad & w cause a corpor,n 6c1se 6be a ,,ccpc1 = example1 if a non- resid5t has a future 3t+5t "r 6acquire %>es t wd give x major;y [n]%ip4 ,canadian corpor,ns 3troll$ 0,,sift's cd 2 ,,ccpc's if !y >e n 3troll$ by1 or ! major;y ( _! %>es >e n [n$ 9 a7regate 0a -b9,n (1 non-resid5ts or public corpor,ns4 ,9 _m transac;ns1 ,,sift's h 5t]$ 96agree;ts 6sell _! subsidi>ies at a future date1 = example1 6non-resid5ts4 ,h["e1 ! agree;ts >e subject 6a 3di;n prec$5t 7: _c 2 waiv$7 t ! #dj  ,"qs pres5t$ at ! 3f];e a#i ,,sift's unit hold]s m/ vote 9 fav\r ( s* transac;n1 giv5 t ! tru/ees d n h au?or;y 6"utake s* a significant transac;n )\t ! 3curr;e (! unit hold]s4 ,typic,y1 ! unit hold] vote 7& !n clos+ (! transac;n7 w o3ur two mon?s af ! 9itial agree;t is sign$ due 6! "t requir$ 6prep>e a circul>1 mail x 6! unit hold]s & provide =a requir$ delay 9 hold+ a unit hold] meet+4 ,"q ,9 ? circum/.e1 is ! "r "u ! agree;t t is subject 6a 3di;n prec$5t a "r t is describ$ 9 p>agraph #bea7#e77b78 ,response ,a 8"r0 describ$ 9 p>agraph #bea7#e77b7 0! phrase 8a "r "u a 3tract1 9 equ;y or o!rwise1 ei immly or 9 ! future & ei absolutely or 3t+5tly0 has be5 giv5 a v broad m1n+ 0! c\rts 99#b4 ,x is \r view t ": ! 5title;t (a "py 6acquire ! %>es (a corpor,n [n$ 0! v5dor is subject #da  ,"qs pres5t$ at ! 3f];e b#i 6a 3di;n1 ! "py has a 3t+5t "r 6acquire ! %>es &1 "!=e1 "o 6: p>agraph #bea7#e77b7 applies4 99#b ,see1 = example1 ,lusita ,hold+s ,limit$ v4 ,! ,que51 #hb ,,dtc #fbig 7,,fctd7 ,7approv$ #hd ,,dtc #fcdf 7,,fca77' ": ,mahoney1 ,j4 describ$ ! phrase 8in equ;y or o!rwise0 z ref]r+ back 6& describ+ ! 8"r0 ref]r$ 6in t p>agraph1 r ?an modify+ & describ+ ! type ( 83tract0 6: p>agraph #bea7#e77b7 cd apply4 ,,cra auditors' a3ess 6audit "w+ pap]s ,"q ,c y give u ! /atus ( ,,cra policy review8 ,response ,! ,,cra 3t9ues 6collaborate )! ,,cica ,task ,=ce on ,auditor ,"w+ ,pap]s & ,3fid5tial;y1 &) o!r /akehold]s4 #db  ,"qs pres5t$ at ! 3f];e c#i ,a policy is 2+ draft$ & w 2 circulat$ = -;ts4 ,=eign 5t;y classific,n ,s9ce ! 9troduc;n ( ,,it-#cdc;,r 9 #aigg1 ,,cra has *ang$ xs posi;n reg>d+ ! signific.e (! sep>ate legal 5t;y /atus 9 ! classific,n ( =eign 5tities4 ,sep>ate legal 5t;y /atus is / 3sid]$ a 4t9ctive f1ture ( corpor,ns1 b x is n a f1ture ( corpor,ns al"o4 ,! fact t an 5t;y is a sep>ate legal 5t;y is n 9 xf det]m9ative ( xs /atus = tax purposes4 ,"q ,: k9ds ( 5tities h be5 3sid]$ 0,,cra & h be5 classifi$ z corpor,ns :5 us+ ! new approa* foll[$ 0,,cra8 ,response ,us+ ! new approa*1 we h 3sid]$ ! "*i/ics ( ,poli% ,,llc's1 ,,us ,,llc's1 ;,s ,corpor,ns & ,fr5* 8soci@et@es par actions #dc  ,"qs pres5t$ at ! 3f];e d#i simplifi@ees0 & we h 3clud$ t ^! 5tities >e corpor,ns = ,canadian tax purposes4 ,! ,briti% ,columbia ,supreme ,c\rt r1*$ ! same 3clu.n ) respect 6,,llc's 9 ! case (a ,nevada ,,llc 9 ,bolid5 ,we/m9 ,limit$ & ,,nvi ,m9+ ,ltd4 v4 ,h] ,maje/y ! ,que51 #bjjg-,,ptc-,,bc-#d4 ,! ,c\rt1 3sid]+ t a ,nevada ,,llc _h num]\s hallm>ks (a corpor,n 7s* z limit$ liabil;y1 sep>ate legal p]son1 issu.e ( %>es ( "s sort ?\< (a di6]5t "n1 "r = t sep>ate legal p]son 6d1l ) prop]ty1 63tract1 6sue1 6rcv grants or privileges 9 xs [n "n71 _h decid$ t ! ,nevada ,,llc 0 a corpor,n "u ,briti% ,columbia tax,n /atutes & 0 satisfi$ t x 0 ! case = f$]al 9come tax purposes4 ,we _c alw r1* a g5]al posi;n =a "picul> =eign 5t;y4 ,9 c]ta9 situ,ns1 we h r1*$ a 3clu.n af an #dd  ,"qs pres5t$ at ! 3f];e e#i analysis n only (! =eign legisl,n "u : an 5t;y 0 =m$ b al (! agree;ts l >ticles ( 9corpor,n & 3tracts 2t ! "pies t gov]n$ x4 ,= example1 af analyz+ ! =eign legisl,n &! agree;ts relat$ 6_! cre,n1 we 3clud$ t ! ,dut* coop]ative1 ! ,*il1n ,special 3tractual m9+ -pany &! ,*9ese-,=eign ,3tractual ,jo9t ,v5ture 7 corpor,ns = f$]al 9come tax purposes4 -------------------------------------#aj ,we h exam9$ o!r k9ds ( 5tities t we did n 3sid] z 2+ corpor,ns = f$]al 9come tax purposes s* z ,,drupa's1 ,,drulpa's1 an ,au/ralian limit$ "pn]%ip &! ,fr5* 8soci@et@es en nom collectif04 ,^? 7 3sid]$ 6be "pn]%ips4 ,! ,paki/an associ,n ( p]sons review$ 0 f.d 6be a "pn]%ip bas$ on ! =eign legisl,n &! agree;ts & facts relat$ 6t "picul> situ,n4 ,! ,g]man ,9ve/;t ,funds &! ,au/rian ,f.d,n t we h exam9$ 7 3sid]$ 6be tru/s af hav+ #de  ,"qs pres5t$ at ! 3f];e a#aj review$ ! =eign legisl,n &! relevant agree;ts4 ,\r approa* rema9s z /at$ la/ ye>1 t is1 6det]m9e ! /atus ( an 5t;y = ,canadian tax purposes1 we g5],y foll[ ! two-/ep approa* describ$ 2l3 #a7 ,det]m9e ! "*i/ics (! =eign busi;s associ,n "u =eign -m]cial law2 #b7 ,-p>e ^! "*i/ics ) ^? ( recogniz$ categories ( busi;s associ,ns "u ,canadian -m]cial law 9 ord] 6classify ! =eign busi;s associ,n "u "o ( ^? categories4 ,ev5 if we 3sid] all ! "*i/ics ( an 5t;y1 ! mo/ important attributes >e ! nature (! rel,n%ip 2t ! v>i\s "pies &! "rs & oblig,ns (! "pies "u ! applica# laws & agree;ts4 #df  ,applic,n ( p>agraph b#aj #ie7#f77b7 ,9 an e>li] draft ( ,9come ,tax ,te*nical ,news ,no4 #cf 7! 8,,ittn07 t _h limit$ 4tribu;n1 ! ,,cra id5tifi$ c]ta9 situ,ns z (f5sive f ! p>agraph #ie7#f77b7 p]spective4 ,"s (! situ,ns 9 ! draft 7 n a4ress$ 9 ! (ficial rel1se on ,july #bg1 #bjjg 7e4g4 8d\# dips0 ": "! has be5 a ref9anc+ (! =eign ,opco's debt &! imple;t,n ( c]ta9 =eign hold+ -panies74 ,"q #a7 ,c we assume 0_! omis.n t ,,cra has *ang$ xs view & 3clud$ t !y >e n (f5sive8 #b7 ,9 a4i;n1 ! e>li] draft 9clud$ a p>agraph t specific,y a4ress$ 8s]ies ( transac;ns0 f a p>agraph #ie7#f77b7 p]spective4 ,t p>agraph did n make x 96! f9al v].n4 ,:at >e ! implic,ns8 #dg  ,"qs pres5t$ at ! 3f];e c#aj ,response ,! draft rel1se (! ,,ittn su7e/$ t ,,cra wd re/rict ! applic,n ( p>agraph #ie7#f77b7 6^? cases ": ! policy 9t5t ( "o or m provi.ns (! ,act is o!rwise fru/rat$ or circumv5t$4 ,! ,,cra is n[ (! view p>agraph #ie7#f77b7 has no s* limit,n & t ! only 3sid],n 9 ! applic,n ( t provi.n is :e!r x c r1sonably 2 3sid]$ t ! pr9cipal purpose =! acquisi;n or 4posi;n ref]r$ 6is 6p]mit a p]son 6avoid1 reduce or def] ! pay;t ( tax4 ,facts 7 a4$ 6! examples 9 ! (ficial rel1se 6attempt 6%[ t ! ,,cra 3sid]s ! p>agraph #ie7#f77b7 analysis 6be g5],y limit$ 6quantify+ ! tax b5efit & -p>+ x 6! pot5tial a7regate direct & 9direct non-tax b5efits4 ,"s examples f.d 9 ! draft v].n 7 elim9at$ 2c !y 7 3sid]$ redundant :ile o!rs 7 elim9at$ 2c x 0 3sid]$ unr1sona# 6try 6assume facts >.d ! example 9 ord] 6make #dh  ,"qs pres5t$ at ! 3f];e d#aj ! p>agraph #ie7#f77b7 analysis4 ,! ,,cra wd 2 pl1s$ 63sid] ! applic,n ( p>agraph #ie7#f77b7 6propos$ transac;ns t >e 4simil> 6^? set \ 9 ! (ficial rel1se 9 ! 3text ( an adv.e rul+ reque/4 ,9 ref];e 6! 8s]ies0 issue1 z 9dicat$ 9 ! publi%$ v].n (! ,,ittn1 ,,cra is (! view t ! pr9cipal purpose ( an acquisi;n or 4posi;n is 6be det]m9$ f all ! facts & circum/.es surr.d+ t transac;n4 ,we see no?+ 9 ! subsec;n t wd re/rict u f look+ at any o!r transac;ns 6det]m9e ! pr9cipal purpose ( an acquisi;n or 4posi;n ": s* acquisi;n or 4posi;n is "p (a s]ies ( transac;ns4 ,p5.n fund corpor,ns ,x is uncle> z 6:e!r ! quantitative limit,ns apply at ! level (a p5.n fund r1l e/ate corpor,n1 describ$ 9 #di  ,"qs pres5t$ at ! 3f];e e#aj subp>agraph #adi7#a77o4#b77;ii71 or a p5.n fund 9ve/;t corpor,n1 describ$ 9 subp>agraph #adi7#a77o4#b77;iii74 ,= example1 9 ! case (a p5.n fund r1l e/ate corpor,n1 subclause #adi7#a77o4#b77;ii77,a77,,ii7 0 a4$ 0a ,te*nical ,bill 9 #bjja1 e6ective = tax,n ye>s t 5d af #bjjj1 t exp&s ! scope (! def9i;n (a r1l e/ate corpor,n s z 6p]mit a corpor,n 69ve/ xs funds 9 a "pn]%ip t limits xs activities 9 ! mann] describ$4 -------------------------------------#aa ,h["e1 subclause #adi7#a77o4#b77;ii77,b7 0 n am5d$ 9 a way t wd make x cle> t ! 9ve/;t 9 a "pn]%ip is n subject 6! quantitative limit,ns prescrib$ 0! ,,pbsa or a simil> law (a prov9ce4 ,= example1 ! ,,pbsa & _m prov9cial /atutes limit a p5.n fund 6n m ?an #aj@3p (! book value ( xs assets 9 any "o 9ve/;t4 ,9 ,quebec1 "! is div]sific,n require;t ) no simil> fix$ quantitative limit,n4 #ej  ,"qs pres5t$ at ! 3f];e a#aa ,"q #a ,? l1ds 6! "q :e!r an 9ve/;t 0a p5.n fund r1l e/ate corpor,n 9 units (a "pn]%ip is limit$ 6#aj@3p (! book value (! ov]all assets (! p5.n fund corpor,n 7or "s o!r level ( div]sific,n1 b cle>ly n #ajj@3p74 ,response #a ,p>agraph #adi7#a77o4#b7 exempts c]ta9 types ( p5.n corpor,ns f tax "u ,"p ,i (! ,act1 provid$ c]ta9 3di;ns >e satisfi$4 ,! 3di;ns t m/ 2 satisfi$ relate1 9 g5]al1 6! [n]%ip &! activities (a p5.n corpor,n1 z well z ! 9ve/;ts t may 2 made 0a p5.n corpor,n4 ,subp>agraph #adi7#a77o4#b77;ii7 li/s1 9t] alia1 3di;ns 3c]n+ ! activities & 9ve/;ts (a p5.n r1l e/ate corpor,n t m/ 2 satisfi$ = purposes ( p>agraph #adi7#a77o4#b74 ,subclause #di7#a77o4#b77;ii77,a77,,ii7 requires t a p5.n r1l e/ate corpor,n #ea  ,"qs pres5t$ at ! 3f];e b#aa limit xs activities 69ve/+ xs funds 9 a "pn]%ip t limits xs activities 6acquir+1 hold+1 ma9ta9+1 improv+1 l1s+ or manag+ capital prop]ty t is r1l prop]ty or an 9t]e/ 9 r1l prop]ty [n$ 0! "pn]%ip4 ,clause #adi7#a77o4#b77;ii77,b7 provides t a p5.n r1l e/ate corpor,n make no 9ve/;ts o!r ?an 9 r1l prop]ty or an 9t]e/ "!9 or 9ve/;ts t a p5.n plan is p]mitt$ 6make "u ! ,p5.n ,b5efits ,/&>ds ,act1 #aihe 7! 8,,pbsa07 or a simil> law (a prov9ce4 ,x is ! ,,cra's posi;n t ! quantitative limit,ns set \ 9 ! ,,pbsa or 9 a simil> law (a prov9ce d apply 9 ! applic,n ( ? clause4 ,9 \r view1 ea* (! 3di;ns 3ta9$ 9 clauses #adi7#a77o4#b77;ii77,a71 7,b7 & 7,c7 m/ 2 satisfi$ 9 ord] =a p5.n corpor,n 6satisfy ! provi.ns ( subp>agraph #adi7#a77o4#b77;ii74 #eb  ,"qs pres5t$ at ! 3f];e c#aa ,h["e1 ! issue 3c]n+ ! require;ts ( clause #adi77o4#b77;ii77,b7 &! applic,n (! 9ve/;t re/ric;ns "u ! ,,pbsa or a simil> law (a prov9ce 6a p5.n r1l e/ate corpor,n t 9ve/s 9 a "pn]%ip describ$ 9 clause #adi7#a77o4#b77;ii77,b7 is pres5tly "u review4 ,we w provide fur!r 9=m,n 3c]n+ ? issue once we h -plet$ \r review4 ,"q #b ,simil>ly1 is x ! view ( ,,cra t 9ve/;ts (a p5.n fund 9ve/;t corpor,n1 regulat$ 0subp>agraph #adi7#a77o4#b77;iii71 >e subject 6a simil> quantitative limit,n at ! level (! corpor,n xf8 ,response #b ,p>agraph #adi7#a77o4#b7 exempts c]ta9 types ( p5.n corpor,ns f tax "u ,"p ,i (! ,act1 provid$ c]ta9 3di;ns >e satisfi$4 ,! 3di;ns t m/ 2 satisfi$ relate1 9 g5]al1 6! [n]%ip &! #ec  ,"qs pres5t$ at ! 3f];e d#aa activities (a p5.n corpor,n1 z well z ! 9ve/;ts t may 2 made 0a p5.n corpor,n4 ,subp>agraph #adi7#a77o4#b77;iii7 li/s ! 3di;ns 3c]n+ ! p]missi# 9ve/;ts (a corpor,n ref]r$ 6z a p5.n 9ve/;t corpor,n = purposes ( p>agraph #adi7#a77o4#b74 ,! pream# 6subp>agraph #adi7#a77o4#b77;iii7 provides t a p5.n 9ve/;t corpor,n make no 9ve/;ts o!r ?an 9ve/;ts t a p5.n fund or plan is p]mitt$ 6make "u ! ,,pbsa or a simil> law (a prov9ce & x is ! ,,cra's posi;n t ! quantitative limit,ns set \ 9 ! ,,pbsa or a simil> law (a prov9ce d apply4 ,9 \r view1 a p5.n 9ve/;t corpor,n m/ satisfy bo? ! pream# 6subp>agraph #adi7#a77o4#b77;iii7 & all (! 3di;ns 9 clauses #adi7#a77o4#b77;iii77,a71 7,b7 & 7,c74 #ed  ,"qs n pres5t$ at ! 3f];e e#aa ,applic,n ( subp>agraph #bab7#a77b77;vii7 ,"q ,:at w 2 ! ,,cra adm9i/rative posi;n on ! applic,n ( propos$ subp>agraph #bab7#a77b77;vii7 d1l+ ) )hold+ on cross bord] 9t]e/ pay;ts if ,bill ;,c-#bh does n rcv ,royal ,ass5t 2f ,janu>y #a1 #bjjh8 ,response ,! ,,cra wd proce$ ) imple;t,n (! ,"p ,,xiii )hold+ tax exemp;n1 9 a3ord.e ) xs pa/ practice on ! adm9i/r,n ( draft legisl,n4 -------------------------------------#ab ,h["e1 if ! ,gov]n;t is def1t$ specific,y 9 respect 6,bill ;,c-#bh1 ! ,,cra wd n imple;t ! ,"p ,,xiii )hold+ tax exemp;n4 ,we c provide assur.es t1 if ! proposal is n 5act$1 "! w 2 no #ee  ,"qs n pres5t$ a#ab p5alties & 9t]e/ = ^? :o *oose 6n )hold1 z l;g z !y 7 act+ 9 gd fai?4 ,employee /ock op;n deduc;n ,"q ,g5],y1 ,royalty & ,9come ,tru/s >e expect$ 6make regul> 4tribu;ns 6unit hold]s on a mon?ly or qu>t]ly basis &1 !oretic,y1 ! value (a unit %d decr1se 0! am.t ( ^! 4tribu;ns s* t op;ns 6acquire units w al !oretic,y decr1se 9 value at ! "t a 4tribu;n is made4 ,h["e1 due 6o!r m>ket 9flu;es1 if "! is no direct evid;e (a visi# m>ket price decl9e t co9cides )a 4tribu;n & ex]cise price reduc;n1 :at is ! crit]ia (a fair m>ket value reduc;n t ! ,,cra wd a3ept 6all[ an ex]cise price reduc;n = purposes ( propos$ subsec;ns #aaj7#a.g7 & 7#a.h78 ,response ,propos$ subsec;n #aaj7#a.g7 is 9t5d$ 65sure t an employee :o ex]cises #ef  ,"qs n pres5t$ b#ab an employee secur;y op;n w 2 5titl$ 6a deduc;n "u p>agraph #aaj7#a77d7 ": "! has be5 a reduc;n 9 ! ex]cise price paya# 0! employee "u ! op;n &! 3di;ns 9 propos$ subsec;n #aaj7#a.h7 h be5 satisfi$4 ,ess5ti,y1 propos$ subsec;n #aaj7#a.h7 provides t propos$ subsec;n #aaj7#a.g7 w apply if ! employee wd n o!rwise h qualifi$ =! deduc;n "u p>agraph #aaj7#a77d7 if ! op;n _h be5 ex]cis$ immly af ! reduc;n 9 ! ex]cise price _h be5 made4 ,propos$ subsec;n #aaj7#a.h7 fur!r provides t subsec;n #g7#a.d7 wd 2 satisfi$1 at ! "t (! ex]cise1 _h ! reduc;n 9 ! ex]cise price be5 e6ect$ "? an ex*ange ( op;ns4 ,! applic,n (! provi.ns ( subsec;n #g7#a.d7 g5],y requires ! det]m9,n (! fair m>ket value (! securities t wd 2 acquir$ if ! op;ns 7 ex]cis$ immly 2f & af ! 4posi;n ( op;ns4 ,decl9e 9 fair m>ket value is a matt] ( #eg  ,"qs n pres5t$ c#ab profes.nal op9ion bas$ on obs]va# factors 9 an economic 5viron;t4 ,z ) any valu,n assign;t1 fair m>ket value is det]m9$ 0"utak+ appropriate due dilig;e proc$ures 9 a3ord.e ) g5],y a3ept$ valu,n pr9ciples & p]=m+ ! appropriate calcul,ns l1d+ 6a valu,n op9ion4 ,3sequ5tly1 evid;e is ga!r$ 0us+ appropriate due dilig;e proc$ures & s* proc$ures >e det]m9$ on a case- by-case basis4 ,"!=e1 ! obs]va# facts ( ea* case %d 2 3sid]$ :5 det]m9+ :e!r or n a 4tribu;n has negatively a6ect$ ! fair m>ket value ( units 9 det]m9+ :e!r or n an ex]cise price reduc;n is w>rant$4 ,! ,h1dqu>t]s ,valu,n ,sec;n ( ,,cra (f]s a pre-valu,n 5quiry s]vice ! m&ate ( : is 6provide -=t on a propos$ transac;n z 6! appropriate scope ( review1 me?odology 6be employ$1 ele;ts 6be 3sid]$1 & proc$ures 6be foll[$ 9 a valu,n assign;t4 ,s* s]vices w n #eh  ,"qs n pres5t$ d#ab 9clude express+ any k9d ( op9ion on ! valu,n 3clu.n xf or provid+ -;t>y on ! valu,n or appraisal 3clu.ns prep>$ 0a taxpay]4 ,all reque/s %d 2 made 9 writ+ & a4ress$ 6! ,manag] (! ,valu,n ,s]vices ,sec;n4 ,pur*ase price alloc,n = r5tal prop]ties ,"q ,if a pur*as] 9 a r1l e/ate transac;n foll[s ! new a3.t+ guidel9es requir+ ! alloc,n (a por;n (! pur*ase price 6be allocat$ 69tangi# assets bas$ on ! op]at+ l1ses 9 place &! probabil;y (! l1ses 2+ renew$ 7,,eic #adj & ,,cica ,h&book #aeha71 w ! ,,cra view ! pur*as] z hav+ pur*as$ &! v5dor z hav+ 4pos$ ( 9tangi#s z well z l&1 build+1 & equip;t z "p (! total pur*ase price8 ,response ,:5 d1l+ ) r1l e/ate transac;ns1 ! ,,cra w g5],y n view ! pur*as] z #ei  ,"qs n pres5t$ e#ab hav+ pur*as$1 nor ! v5dor z hav+ sold1 eligi# capital prop]ty = tax purposes z a result ( an a3.t+ require;t 7,,eic #adj & ,,cica ,h&book #aeha7 6allocate a por;n (! pur*ase price 69tangi# assets4 ,! ,,cra w 3t9ue 6review asset values report$ f agree;ts ( r1l e/ate pur*ases & sales & may apply revis$ values 6bo? ! pur*as] &! sell] if ! report$ values >e unr1sona#4 -------------------------------------#ac ,subsec;n #gh7#d7--,liabil;y assum$ 0?ird "py ,subsec;n #gh7#d7 deems c]ta9 remun],n1 : rema9s unpd #ahj "ds af ! 5d (! tax,n ye> 9 : x 0 a3ru$1 6be an exp5se 9 ! tax,n ye> 9 : x is pd4 ,h["e1 ! deductibil;y ( remun],n is uncle> ": subsec;n #gh7#d7 applies 6a non-3t+5t liabil;y a3ru$ 0a -pany 70;,a ,co07 : liabil;y is assum$ 0ano!r -pany #fj  ,"qs n pres5t$ a#ac 78;,b ,co07 z "p (! 3sid],n pd =! pur*ase ( ,a ,co's busi;s 79clud+ xs employees74 ,"q ,9 ? sc5>io1 does ! ,,cra 3cur t ! deductibil;y (! exp5se = ,a ,co o3urs 9 ! ye> ! pay;t is made 0;,b ,co 7i4e41 ! ye> 9 : ! remun],n is taxa# 6! employee7s778 ,response ,9 ? sc5>io1 ! deductibil;y (! exp5se = ,a ,co o3urs 9 ! ye> ! pay;t is made 0;,b ,co4 ,h["e1 ;,b ,co is n 5titl$ 6deduct pay;ts 6employees repres5t+ remun],n e>n$ :ile s* employees 7 employ$ 0,a ,co4 #fa  ,value ( -pany attributa# b#ac 6vot+ non-"picipat+ %>es ,"q ,:at is ! ,,cra's posi;n on ! value (a private -pany t is attributa# 6vot+ non-"picipat+ %>es8 ,response ,! ,,cra does n h an e/abli%$ posi;n on valu+ di6]5t types ( prop]ty4 ,9=m,n ,circul> #hi-c 7,,ic #hi-c71 ,policy ,/ate;t on ,busi;s ,equ;y ,valu,ns1 \tl9es ! valu,n pr9ciples & policies t ,,cra g5],y 3sid]s & foll[s 9 ! valu,n ( securities & 9tangi# prop]ty ( closely held corpor,ns = 9come tax purposes4 ,,ic #hi-c 4cusses1 9 g5]al t]ms1 ! approa*es applica# 6closely held or private corpor,ns1 recogniz+ t ! facts & circum/.es ( ea* case w 2 det]m9ative ( fair m>ket value4 ,! valuator m/ use r1sona# judg;t & #fb  ,"qs n pres5t$ c#ac objectiv;y 9 ! selec;n & analysis (! relevant facts ( ea* case4 ,=! abv-not$ r1sons1 x is n ! 9t5;n (! ,,cra 6write a policy or /ate a =mal posi;n reg>d+ ? issue4 ,:5 we value di6]5t classes ( %>es 9 a -pany1 we g5],y det]m9e ! 8en bloc0 fair m>ket value & !n allocate ! value 6ea* class 9 isol,n4 ,! fair m>ket value ( ea* class ( %>es m/ 2 det]m9$ on xs [n m]its ac 6! 9dividual "rs & re/ric;ns ( ea* class4 ,9 o!r ^ws1 we 3sid] :at a hypo!tical >m's l5g? pur*as] wd 2 will+ 6pay =a "picul> class ( %>es bas$ on ! "rs1 re/ric;ns & 3di;ns1 : ultimately a6ect ! economic b5efits 6be deriv$ f [n]%ip4 ,giv5 ! abv1 "! may 2 _m factors1 : mie n aw>e ( any case law t d1ls specific,y )! alloc,n ( value #fc  ,"qs n pres5t$ d#ac am;g/ v>i\s classes ( %>es ": vot+ "rs 7 sep>at$ f "picip,n4 ,x is ! op9ion (! ,,cra t a hypo!tical pur*as] wd 2 will+ 6pay "s am.t =! vot+ 3trol (a -pany4 ,x is di6icult 6asc]ta9 :at a pure vot+ "r wd 2 wor?4 ,h["e1 ! answ] 6? "q w dep5d ^u facts & circum/.es ( ea* case4 ,crit]ia = det]m9+ h$ge e6ective;s = tax purposes ,= a3.t+ purposes1 h$ge e6ective;s is ! ext5t 6: *anges 9 ! fair value or ca% fl[s (a h$g$ item1 relat+ 6a risk 2+ h$g$ & >is+ dur+ ! t]m (a h$g$ rel,n%ip1 >e (fset 0*anges 9 ! fair value or ca% fl[s (! correspond+ h$g+ item4 ,guid.e on h$ge a3.t+ c 2 f.d 9 ,,cica ,h&book ,sec;n #chfe4 #fd  ,"qs n pres5t$ e#ac ,"q ,c ! ,,cra provide guid.e on ! crit]ia 6evaluate ! e6ective;s (a h$ge = tax purpose8 ,response 8,h$ge0 is n a def9$ t]m 9 ! ,act4 ,! e6ective;s (a h$ge = tax purposes1 i4e41 :e!r a f9ancial 9/ru;t 3/itutes a h$ge1 is relevant 6! -put,n ( pr(it4 ,z ! ,supreme ,c\rt ( ,canada /at$ 9 ,c&]el ,ltd ;v ,! ,que51 #ih ,,dtc #fajj 78,c&]el071 ! det]m9,n ( pr(it is a -------------------------------------#ad "q ( law4 ,a3.t+ /&>ds >e n law4 ,well-a3ept$ busi;s pr9ciples1 : 9clude b >e n limit$ 6! =mal codific,n f.d 9 g5],y a3ept$ a3.t+ pr9ciples 78,,gaap071 >e n rules ( law b 9t]pretive aids4 ,! ,,cra w take 963sid],n h[ ! taxpay] reports "u ! new a3.t+ /&>ds z "p ( \r review (! taxpay]'s det]m9,n ( pr(it "u ,,gaap4 #fe  ,"qs n pres5t$ a#ad ,acly1 ! new a3.t+ /&>ds1 : 9clude guid.e on h$ge a3.t+ 9 ,,cica ,h&book ,sec;n #chfe1 wd n cause ! ,,cra 6*ange h[ x 9t]prets & applies ! ,act ) respect 6:e!r a f9ancial 9/ru;t 3/itutes a h$ge = tax purposes4 ,! c\rts 7,e*o ,bay ,m9es ,ltd v4 ,! ,que51 #ib ,,dtc #fdcg1 ,salada ,foods ,ltd v4 ,! ,que51 #gd ,,dtc #faga1 ,ont>io 7,m9i/] ( ,f9.e7 v4 ,plac] ,dome ,canada ,limit$1 #bjjf ,,scc #bj7 h 3firm$ t :e!r an activ;y 3/itutes h$g+ dep5ds on su6ici5t 9t]- 3nec;n or 9tegr,n )! "uly+ transac;n4 ,ag1 z ! ,supreme ,c\rt /at$ 9 ,c&]el1 ultimately1 x is ! law t det]m9es h[ ! ,,cra 9t]prets & applies ! ,act4 #ff  ,def9i;n ( 8non-portfolio b#ad e>n+s0 9 subsec;n #abb.a7#a7 ,"qs #a7 ,:e!r ! t]m 89come0 is net 9come af deduct+ all am.ts t >e directly tracea# 6a "picul> s\rce ( 9come8 #b7 ,h[ >e exp5ses t >e n directly tracea# 6a "picul> s\rce ( 9come allocat$ 9 det]m9+ 8non-portfolio e>n+s08 ,= 9/.e1 if a ,,sift ,tru/ has gross 9come f bo? non-portfolio prop]ties & f o!r prop]ties h[ >e deduc;ns t >e n directly tracea# 6a "picul> s\rce ( 9come 7= example portfolio co/s1 audit+ fees etc47 tr1t$ 9 det]m9+ non-portfolio e>n+s8 #c7 ,f9,y1 z describ$ 9 p>agraph #e ( ,9t]pret,n ,bullet9 ,,it-#ebd1 ": exp5ses p]ta9 69come t is a taxa# divid5d rcvd 0a ,,sift ,tru/1 may ! ,,sift ,tru/ allocate ^! exp5ses ag/ o!r type ( 9come8 #fg  ,"qs n pres5t$ c#ad ,response ,"u ! ,act1 ! 9come (a tru/ is g5],y det]m9$ ! same way z ! 9come ( any 9dividual & is g5],y subject 6tax "u ,"p ,i (! ,act4 ,! t]m 89come0 z us$ 9 ! def9i;n ( 8non-portfolio e>n+s0 9 subsec;n #abb.a7#a7 is 9t]pret$ 9 a3ord.e )! ord9>y rules ( 3/ruc;n4 ,subsec;n #d7#a7 provides z foll[s3 8,=! purposes ( ? ,act1 7a7 a taxpay]'s 9come or loss =a tax,n ye> f an (fice1 employ;t1 busi;s1 prop]ty or o!r s\rce1 or f s\rces 9 a "picul> place1 is ! taxpay]'s 9come or loss1 z ! case may be1 -put$ 9 a3ord.e ) ? ,act '''0 ,3sequ5tly1 9 a3ord.e ) subsec;n #d7#a71 only deduc;ns t may r1sonably 2 3sid]$ 6be :olly applica# 6a s\rce or 6a s\rce 9 a "picul> place & #fh  ,"qs n pres5t$ d#ad any o!r deduc;ns z may r1sonably 2 reg>d$ z applica# "!to may 2 claim$ ag/ ! 9come f s* s\rce4 ,acly1 a ,,sift tru/'s 9come f a busi;s c>ri$ on 0x 9 ,canada or f a non-portfolio prop]ty is ! net 9come deriv$ f s* busi;s or s* non-portfolio prop]ty -put$ 9 a3ord.e ) sec;n #d4 ,subject 6! specific excep;ns 3ta9$ 9 subsec;ns #d7#b71 all deduc;ns t >e :olly applica# to1 &/or s* "p ( any o!r deduc;ns 7= example1 g5]al or ov]h1d exp5ses7 t >e r1sonably reg>d$ z applica# 6a specific s\rce >e deduct$ 9 -put+ ! 9come f t specific s\rce 9 a3ord.e ) subsec;n #d7#a74 ,f9,y1 z m5;n$ 9 p>agraph #e ( ,,it-#ebd3 8,in a case ": "! is only "o b5efici>y or ": all b5efici>ies %>e pro-rata 9 ea* type ( 9come1 ! tru/ may deduct1 6! grte/ ext5t #fi  ,"qs n pres5t$ e#ad possi#1 exp5ses ag/ 9come o!r ?an taxa# divid5ds 9 ord] 6obta9 ! maximum possi# fl[-"? (! divid5d tax cr$it 6s* b5efici>y or b5efici>ies1 provid$ t an alloc,n (! exp5ses 9 ? mann] is n 3tr>y 6tru/ law or ! tru/ agree;t4 ,h["e1 9 a case ": all b5efici>ies d n %>e pro-rata 9 ea* type ( 9come1 exp5ses t cle>ly p]ta9 6! divid5d 9come m/ 2 deduct$ ag/ s* 9come prior 6xs 2+ designat$ 6! b5efici>ies40 -------------------------------------#ae ,x does n appe> nec 6modify ? posi;n at ? "t4 ,fil+ require;ts = ,t#ejac1 ,"pn]%ip 9=m,n return ,"q ,:at is ! ,,cra's posi;n reg>d+ "pn]%ips ) five or few] "pn]s ": "o or m "pn]s is a corpor,n or tru/8 #gj  ,"qs n pres5t$ a#ae ,response ,"pn]%ips ) five or few] memb]s "?\t ! 5tire fiscal p]iod1 n"o ( : is ano!r "pn]%ip1 >e n requir$ 6file a ,t#ejac1 ,"pn]%ip ,9=m,n ,return1 = t fiscal p]iod4 ,we >e 3sid]+ a *ange 6\r adm9i/rative policy 6require a ,t#ejac = ea* fiscal p]iod (a "pn]%ip t has "o or m "pn]s t is a corpor,n or a tru/4 ,h["e1 we >e / 9 ! process ( review+ ? posi;n & any *ange w 2 appli$ prospectively4 ,transf] ( ,,gst/,,hst refunds 6non-resid5t secur;y a3.ts ,"q ,h[ >e non-resid5t secur;y am.ts det]m9$ & :y >e ,,gst/,,hst refunds 2+ transf]r$ 6^! a3.ts8 ,has ! adm9i/r,n ( ^! a3.ts *ang$8 #ga  ,"qs n pres5t$ b#ae ,response ,"u subsec;n #bdj7#f7 (! ,,eta1 non- resid5ts :o regi/] =! ,,gst/,,hst m/ provide & ma9ta9 adequate secur;y )! ,,cra un.s !y h a p]man5t e/abli%;t 9 ,canada4 ,! t]m 8p]man5t e/abli%;t0 is qualifi$ 9 ? subsec;n 6exclude a fix$ place ( busi;s ( ano!r p]son :o acts 9 ,canada on 2half (a non-resid5t4 ,"!=e1 a non-resid5t p]son may 2 exempt$ f provid+ secur;y only if ! non-resid5t makes supplies "? xs [n fix$ place ( busi;s 9 ,canada4 ,! non-resid5t secur;y helps 65sure t a non-resid5t p]son pays or remits all am.ts due "u ,"p ,,ix (! ,,eta4 ,9 cases1 ": a regi/rant has no assets 9 ,canada t ! ,,cra c seize if ! regi/rant defaults on xs tax remitt.e oblig,ns1 !n ! ,,cra has ! secur;y 6: x c resort = pay;t4 #gb  ,"qs n pres5t$ c#ae ,! 9itial secur;y requir$ at "t ( ,,gst/,,hst regi/r,n is set at #ej@3p (! e/imat$ net tax 7positive or negative7 (! non-resid5t =! #ab-mon? p]iod foll[+ regi/r,n4 ,subsequ5tly1 ! secur;y requir$ is equal 6#ej@3p (! net tax dur+ ! p]son's previ\s #ab- mon? p]iod4 ,non-resid5ts ) annual taxa# supplies 9 ,canada 2l 4#ajj1jjj 79clud+ z]o rat$ supplies7 .& ^: annual net tax 7remitta# or refunda#7 is less ?an 4#cjjj >e n requir$ 6po/ secur;y4 ,! ,,gst/,,hst secur;y require;t = o!r non-resid5ts is curr5tly set at a m9imum ( 4#e1jjj &a maximum ( 4#a million4 ,! ,,cra typic,y reviews ! am.t ( secur;y held = ea* non-resid5t annu,y4 ,a regi/rant w g5],y only 2 ask$ 69cr1se ! am.t ( secur;y ":1 #gc  ,"qs n pres5t$ d#ae 7a7 if ! total am.t ( secur;y requir$ is 4#be1jjj or less &! a4i;nal am.t is m ?an 4#b1ejj1 or 7b7 if ! total am.t ( secur;y requir$ exce$s 4#be1jjj &! a4i;nal am.t is m ?an 4#e1jjj4 ,9 cases ": an 9cr1se is requir$ 9 ! am.t ( secur;y held =a "picul> non resid5t1 ! ,,cra issues a notice 6t p]son 9dicat+ ! a4i;nal am.t requir$ & advises t any ,,gst/,,hst am.ts may 2 )held4 ,if ? 9cr1s$ am.t ( secur;y is n rcvd 0! ,,cra )9 a r1sona# p]iod ( "t1 ! process+ sy/em is 9/ruct$ 6automatic,y transf] any ,,gst/,,hst am.ts [+ 6t p]son 6! secur;y a3.t until ! a4i;nal secur;y require;t has be5 met4 ,? automatic set-(f proc$ure 2gan 9 ,april #bjjg )! imple;t,n (! ,,gst/,,hst program 96! ,/&>diz$ ,a3.t+ sy/em4 ,dur+ imple;t,n1 secur;y a3.t require;ts 7 recalculat$ & automatic set-(fs 7 />t$ ": ! #gd  ,"qs n pres5t$ e#ae am.ts held 7 9su6ici5t4 ,"! 7 al "s 9itial sy/em issues 3c]n+ non-resid5ts ) p]man5t e/abli%;t 9 ,canada1 h["e1 ^! issues h be5 id5tifi$ & resolv$4 ,non-resid5ts want+ 64cuss _! secur;y a3.t require;ts %d 3tact ! tax s]vices (fice 9dicat$ = !m at ! foll[+ l9k _+http://www.cra-arc.gc.ca/contact/_& gsthstnonres-e.html_: on ! ,,cra website4 -------------------------------------#af ,anti-4crim9,n provi.ns ,"q ,! anti-4crim9,n provi.ns h be5 ext5d$ 6cov] 8n,nals0 :o _c 2 subject$ 6m burd5"s 8require;ts0 ?an resid5ts ( ,canada4 ,w ? m1n t ! -pli.e proc$ures 9 sec;n #aaf w n 2 applica# = ,u4,s4 n,nals 4pos+ ( taxa# ,canadian prop]ty8 ,if n1 :y n8 #ge  ,"qs n pres5t$ a#af ,response ,p>agraph #a ( ,>ticle ,,xxv (! ,canada-,u4,s4 ,tax ,3v5;n provides t a citiz5 (a ,3tract+ ,/ate :o is a resid5t (! o!r ,/ate _c 2 subject 9 t o!r ,/ate 6any tax,n or require;t 3nect$ "!) : is m burd5"s ?an ! tax,n or 3nect$ require;ts 6: citiz5s (! o!r ,/ate 9 ! same circum/.es >e or may 2 subject$4 ,9 ess;e1 p>agraph #a ( ,>ticle ,,xxv 5sures t a citiz5 (a ,3tract+ ,/ate 7e4g41 ! ,u4,s47 :o is a resid5t (! o!r ,/ate 7e4g41 ,canada7 is tr1t$ 9 ! same mann] z a resid5t citiz5 ( t o!r ,/ate4 ,? ,>ticle does n require ei ,/ate 6tr1t resid5ts & non-resid5ts 9 ! same mann]4 ,! ,fif? ,protocol am5ds ,>ticle ,,xxv 6sub/itute ! t]m 8n,nal0 = 8citiz540 ,! am5d;t broad5s ! applic,n ( ,>ticle ,,xxv s9ce a n,nal1 unlike a citiz51 9cludes a legal p]son o!r ?an an 9dividual4 ,h["e1 ! am5d;t does #gf  ,"qs n pres5t$ b#af n *ange ! basic require;t t1 6obta9 relief "u ,>ticle ,,xxv1 a n,nal ( "o ,/ate m/ 2 9 ! same circum/.es z a n,nal (! o!r ,/ate4 ,9 ? respect1 a ,u4,s4 n,nal is n 9 ! same circum/.es z a ,canada resid5t n,nal un.s ! ,u4,s4 n,nal is resid5t 9 ,canada4 ,sec;n #aaf does n apply 6,u4,s4 n,nals or ,canadian n,nals :o >e resid5t 9 ,canada4 ,simil>ly1 sec;n #aaf applies 6,canadian n,nals & ,u4,s4 n,nals :o >e n resid5t 9 ,canada4 ,9 ei case1 ,u4,s4 n,nals & ,canadian n,nals >e tr1t$ 9 ! same mann]4 ,?us1 sec;n #aaf does n subject ,u4,s4 n,nals 6m burd5"s require;ts ?an ,canadian n,nals 9 ! same circum/.es4 ,acly1 ! am5d;t 6,>ticle ,,xxv 6ext5d ! protec;n ( ? ,>ticle to 8n,nals0 (! ,3tract+ ,/ate w n a6ect ! applic,n ( sec;n #aaf4 #gg  ,limit$ liabil;y -pany "u c#af ! protocol ,assume a ,u4,s4 limit$ liabil;y -pany 78,,llc07 is #ajj@3p [n$ 0,mr4 ;,x1 a ,u4,s4 resid5t 9dividual4 ,! ,,llc has n elect$ 6be tr1t$ z a corpor,n "u ! ,u4,s4 8*eck-!-box0 regul,ns &1 3sequ5tly1 is tr1t$ z a 4reg>d$ 5t;y = ,u4,s4 tax purposes4 ,mr4 ;,x wd 2 ! b5eficial [n] (! divid5d if he [n$ ! %>es (! ,canadian corpor,n directly4 ,"q ,if ! ,,llc [ns all (! %>es (a ,canadian corpor,n &! ,canadian corpor,n pays a divid5d 6! ,,llc1 :at rate ( ,canadian )hold+ tax w apply 6! divid5d pay;t "u ! propos$ fif? ,protocol 6! ,canada-,u4,s4 ,9come ,tax ,3v5;n 7! 8,3v5;n078 ,response ,! ,,cra has exam9$ s"eal /ate limit$ liabil;y -pany /atutes1 b n all4 ,we assume t ! ,,llc 9 ? example wd #gh  ,"qs n pres5t$ d#af 3/itute a corpor,n = ,canadian 9come tax purposes4 ,subp>agraph #b7b7 ( ,>ticle ,x 7,divid5ds7 (! ,3v5;n provides t divid5ds pd 0a resid5t ( "o ,3tract+ ,/ate may 2 tax$ 0! ,/ate ( s\rce at #ae@3p if pd 6a resid5t 7o!r ?an a -pany describ$ 9 subp>agraph 7a77 (! o!r ,3tract+ ,/ate :o is ! b5eficial [n] ( s* divid5ds4 ,propos$ p>agraph #f ( ,>ticle ,,iv 7,resid;e7 (! ,3v5;n provides3 8,an am.t ( 9come1 pr(it or ga9 % 2 3sid]$ 6be deriv$ 0a p]son :o is a resid5t (a ,3tract+ ,/ate ":3 7a7 ,! p]son is 3sid]$ "u ! tax,n law ( t ,/ate 6h deriv$ ! am.t "? an 5t;y 7o!r ?an an 5t;y t is a resid5t (! o!r ,3tract+ ,/ate72 & 7b7 ,0r1son (! 5t;y 2+ tr1t$ z fisc,y transp>5t "u ! laws #gi  ,"qs n pres5t$ e#af (! f/-m5;n$ ,/ate1 ! tr1t;t (! am.t "u ! tax,n law ( t ,/ate is ! same z xs tr1t;t wd 2 if t am.t _h be5 deriv$ directly 0t p]son4 -------------------------------------#ag ,assum+ ,u4,s4 tax law wd 9 fact apply 63sid] ,mr4 ;,x 6h deriv$ ! divid5d "? ! ,,llc1 & t ,mr4 ;,x is tr1t$ = ,u4,s4 tax purposes z if he _h rcvd ! divid5d directly f ! ,canadian corpor,n1 we >e (! view t ! divid5d pd 6! ,,llc wd 2 subject 6! reduc$ rate ( #ae@3p 0virtue ( ,>ticle ,x & propos$ p>agraph #f ( ,>ticle ,,iv (! ,3v5;n4 ,propos$ p>agraph #f ( ,>ticle ,,iv (! ,3v5;n w h e6ect1 9 respect ( )hold+ taxes1 = am.ts pd or cr$it$ on or af ! f/ "d (! second mon? t 2g9s af ! date on : ! ,protocol 5t]s 96=ce4 #hj