2020-0864031I7 Application of subparagraph 95(2)(a)(i)

Principal Issues: Does subparagraph 95(2)(a)(i) apply to the income of a foreign affiliate (FA5 Subco) that has a debt portfolio business?

Position: Based on the information that we were provided, it appears that subparagraph 95(2)(a)(i) applies for a portion of the relevant taxation years.

Reasons: It depends if the conditions of subparagraph 95(2)(a)(i) are met, namely on whether the activities of FA5 Subco's debt portfolio business are "directly related" to the activities of the debt portfolio business of another foreign affiliate (FA4) or of a partnership of which that foreign affiliate is a qualifying member (LP). FA4 has two businesses: a service business and a debt portfolio business. The activities of FA5 Subco's debt portfolio business are not directly related to the activities of FA4's service business but they may be directly related to the activities of either FA4's debt portfolio business or to LP's debt portfolio business.

Author: Grondin, Yves
Section: 95(2)(a)(i); 95(1) "investment business"; 95(2)(b)(i)

                                                                               April 18, 2023

Rita Ziftsoglou                                                        Income Tax Rulings Directorate
Large Files Case Manager                                     International Division
International and Large Business Directorate        Yves Grondin
XXXXXXXXXX

                                                                                2020-086403

Application of subparagraph 95(2)(a)(i)

This letter is in response to your request for a technical interpretation from September 15, 2020, wherein you requested our views on the application of subparagraph 95(2)(a)(i) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1, as amended (the “Act”), in respect of income earned by a foreign affiliate from a debt portfolio business.

Unless otherwise stated, all references to a statute are to the Act, and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated. The singular should be read as plural and vice versa, where the circumstances so require.

Facts

1) XXXXXXXXXX (“Parentco”) is a taxable Canadian corporation, as defined in subsection 89(1).

2) XXXXXXXXXX(“Canco”) is a taxable Canadian corporation for the purposes of the Act. It is a holding corporation.

3) Parentco indirectly (through other Canadian subsidiaries) owns all of the issued shares of Canco.

4) Canco directly owns all of the issued shares of XXXXXXXXXX. (“FA1”), a corporation non-resident of Canada and a resident of the United States (“Foreign Country”) for the purposes of the Act and the Canada-U.S. Tax Treaty (the “Treaty”). FA1 is a foreign affiliate (“FA”) and controlled foreign affiliate (“CFA”), as defined in subsection 95(1), of Canco;

5) XXXXXXXXXX (“FA2”) is a corporation non-resident of Canada and a resident of Foreign Country for the purposes of the Act and the Treaty with Foreign Country. FA2 is a FA and CFA of Canco in which Canco has a qualifying interest, pursuant to paragraph 95(2)(m). FA2 is a holding corporation.

6) FA2 directly owns all of the issued shares of XXXXXXXXXX. (“FA3”), a corporation non-resident of Canada and a resident of Foreign Country for the purposes of the Act. FA3 is a FA and CFA of Canco in which Canco has a qualifying interest. FA3 is a holding corporation. FA3 directly owns all of the shares of XXXXXXXXXX (“FA4”), XXXXXXXXXX. (“FA5”), XXXXXXXXXX (“FA6”), corporations non-residents of Canada and resident of Foreign Country for the purposes of the Act and the Treaty with Foreign Country.

7) FA4 is a FA and CFA of Canco in which Canco has a qualifying interest. FA4 owns:

a) debt portfolios which were acquired around the middle of the 2013 taxation year or after through two bare trusts, XXXXXXXXXX (the “FA4 Bare Trusts”); the FA4 Bare Trusts were established about half way through the 2013 taxation year.

b) a 99% limited partnership interest in XXXXXXXXXX (“LP”), a limited partnership formed in Foreign Country.

8) LP is a limited partnership formed in Foreign Country around the middle of the 2013 taxation year. A few months after the middle of the 2013 taxation year through the end of the taxation year and in the 2014 taxation year, LP has owned debt portfolios which it holds through several bare trusts, XXXXXXXXXX (the “LP Bare Trusts”). LP has no employees. All of its activities are performed by employees of FA4. LP employs the equivalent of more than five employees full time, taking into consideration the services provided by the employees of FA4. The compensation for the services performed by FA4’s employees is paid annually by LP to FA4 either within the year or within a reasonable time after the end of the year.

9) FA5 is a FA and CFA of Canco in which Canco has a qualifying interest. FA5 is a holding corporation. FA5 owns a 1% general partnership interest in LP and owns directly and indirectly several CFA, XXXXXXXXXX (the “FA5 Subsidiaries”) that are non-residents of Canada and residents of Foreign Country for the purposes of the Act and the Treaty with Foreign Country. The FA5 Subsidiaries have no employees of their own.

10) XXXXXXXXXX (“FA5 Subco”) is one of the FA5 Subsidiaries and is a non-resident of Canada and resident of Foreign Country for the purposes of the Act and the Treaty with Foreign Country. FA5 Subco is a FA and CFA of Canco in which Canco has a qualifying interest. FA5 Subco has no employees.

11) The business of LP, FA4, FA5 Subco and the other FA5 Subsidiaries consists mainly of acquiring, owning and collecting portfolios of debt receivables across the delinquency spectrum (“the debt portfolio business”). All of the debt portfolio businesses of LP, FA4 and FA5 Subco and the other FA5 Subsidiaries are considered to be money lending businesses, under the definition of “lending of money” in subsection 95(1) and are not principally conducted with persons with whom they are not dealing at arm’s length.

12) For legal protection and regulatory obligations, employees and portfolios of FA4, FA5 Subco and the other FA5 Subsidiaries needed to be split into separate entities.

13) FA4 has more than 100 employees who manage and operate the activities of FA3, FA4, FA5, FA5 Subco and the other FA5 Subsidiaries, FA6 and LP (the “Foreign Group”). For state tax efficiency, and for legal risk protection, employees of the Foreign Group except for one person are housed in FA4. All activities required to acquire, own and collect portfolios are performed by employees of FA4. XXXXXXXXXX. Administrative support for legal, finance, accounting and other functions is also provided by employees of FA4.

14) All of the employees that work for FA4, FA5, FA5 Subco and the other FA5 Subsidiaries work from the same location except for XXXXXXXXXX of FA5 who works in a different location.

15) In addition to the debt portfolio business, FA4 provided management and administration services without any markup to LP, FA5 Subco and other FAs of the group after around the middle of the 2013 taxation year and in 2014. Prior to around the middle of the 2013 taxation year, FA4’s main activities was to provide management and administration services without any markup to FA5 Subco and other FAs in the group.

16) All entities of the Foreign Group have the same year end:

XXXXXXXXXX.

Questions

For the 2013 and 2014 Taxation Years, we have been asked by the Compliance Program Branch of the CRA (“CPB”) to comment on the following questions:

1. Does FA4 carry on more than one business?

2. What is the meaning of the expression “throughout the period” in the definition of “investment business” in subsection 95(1) and how does it apply to FA4’s debt portfolio business?

3. Pursuant to the test under clause 95(2)(a)(i)(A), can the income from property earned by FA5 Subco “reasonably be considered to be directly related” to the active business activities carried on by FA4?

4. Would clause 95(2)(b)(i)(B) apply to the income earned by FA4 from the services that it renders to FA5 Subco?

Our Comments

1. Does FA4 carry on more than one business?

As discussed in paragraph 2 of Archived IT-206R, Separate Businesses, whether the carrying on of two or more simultaneous business operations is the same business is dependent upon the degree of interconnection, interlacing or interdependence and the extent of the unity embracing the business operations. Paragraphs 3 of Archived IT-206R indicates some of the factors that can be considered in order to make that determination. For example, one factor would be whether the two operations have the same: processes, products, customers, services offered to customers, types of inventories, employees, machinery and equipment. Another factor to consider is whether one operation exists primarily to supply the other.

We understand that in facts described above, CPB is of the view that FA4 has two separate businesses: one is a debt portfolio business and the second one is a business of providing services to other foreign affiliates of the group. Based on the factors described above, we acknowledge that there is indeed some support that FA4 might be carrying two businesses as the customers of the debt portfolio business (which are essentially arm’s length customers) appear to be different from the customers of the management and administrative service business (which are essentially other foreign affiliates). We understand that the services being provided by FA4 are mostly to other foreign affiliates and are thus not principally services rendered to FA4’s own debt portfolio business.

Although the determination of whether one or two business exist is mainly a question of facts, it seems that some of the factors described above do indeed suggest that FA4 had two separate businesses during the relevant taxation years.

2. What is the meaning of the expression “throughout the period” in the definition of “investment business” in subsection 95(1) and how does it apply to FA4’s debt portfolio business?

An “investment business”, as defined in subsection 95(1), means, in general, a business carried on by a foreign affiliate the principal purpose of which is to derive income from property, income from the insurance or reinsurance of risks, income from the factoring of trade accounts receivable, or profits from the disposition of investment property, unless it is established that the business, throughout the period in the taxation years during which it was carried on by the affiliate, meets the requirements of an exclusion that is set out under paragraphs (a) and (b) of that definition.

Paragraphs (a) and (b) of the “investment business” definition provides an exclusion, namely, for a foreign affiliate that has a lending of money business (such as FA4) that is conducted principally with arm's length persons, provided that the foreign affiliate, or a partnership in which the affiliate is a qualifying member, employs more than five employees full time in the active conduct of the business or employs the equivalent of more than five employees in the active conduct of the business, taking into account only services provided by the employees of the affiliate and services provided outside Canada by employees of qualifying employers.

To the extent that FA4’s debt portfolio business only started in the 2013 taxation year, the “throughout the period in the taxation year during which the business was carried on by the foreign affiliate” test under the “investment business” definition would start at the time that FA4 started to carry on its debt portfolio business around the middle of the 2013 taxation year. We understand, from the facts described above, that FA4’s debt portfolio business met the exclusion described under paragraphs (a) and (b) of the definition of “investment business” at subsection 95(1) from around the middle of the 2013 Taxation Year to its end and throughout the 2014 Taxation Year.

The equivalent to more than five employees test allows that the services be provided by employees on a part-time or full-time basis as long as the duties performed and the time spent are equivalent to that which would have been performed or spent in the active conduct of the business by more than five employees who were employed full time in the active conduct of the business. (footnote 1)

3. Pursuant to the test under clause 95(2)(a)(i)(A), can the income from property earned by FA5 Subco “reasonably be considered to be directly related” to the active business activities carried on by FA4 or LP?

a) General comments on subparagraph 95(2)(a)(i)

Paragraph 95(2)(a) generally provides that in computing the income from an active business of a particular foreign affiliate, in respect of which the taxpayer has a qualifying interest or that is a controlled foreign affiliate of the taxpayer, income from sources in a country other than Canada that would otherwise be income from property can be included in the affiliate’s active business income, provided that certain conditions are met, including those that are described in subparagraph 95(2)(a)(i). The test under subparagraph 95(2)(a)(i) applies to each of the FA5 Subsidiaries individually, but for the purpose of simplifying this analysis, the test will only be applied to FA5 Subco.

In general terms, subclause 95(2)(a)(i)(A)(I) provides that income from property derived from the activities of a particular foreign affiliate (e.g., FA5 Subco) of the taxpayer, in respect of which the taxpayer has a qualifying interest throughout the year, that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by another foreign affiliate (e.g., FA4), in respect of which the taxpayer also has a qualifying interest, can be re-characterized as active business income of the particular foreign affiliate.

For taxation years of a foreign affiliate that begin after July 12, 2013, pursuant to subclause 95(2)(a)(i)(A)(IV), income from property derived from the activities of a particular foreign affiliate (e.g., FA5 Subco) of the taxpayer, in respect of which the taxpayer has a qualifying interest throughout the year, that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by a partnership (e.g., LP) of which another foreign affiliate (e.g., FA4) of the taxpayer (e.g., Canco) is a qualifying member can be re-characterized as active business income of the particular foreign affiliate, provided that the taxpayer has a qualifying interest in this other foreign affiliate.

If subclause 95(2)(a)(i)(A)(I) or (IV) applies, the requirement in clause 95(2)(a)(i)(B) must also be met, in order for the income from a foreign affiliate that would otherwise be from property to be re-characterized as active business income. Clause 95(2)(a)(i)(B) provides that the amount that would otherwise be income from property (e.g., the income of FA5 Subco) would have to be included in computing the amount prescribed to be the earnings or loss, from an active business carried on in a country other than Canada of the other foreign affiliate (e.g., FA4), if the income were earned by it (“the prescribed active business earnings requirement”).

For subparagraph 95(2)(a)(i) to apply, one of the conditions is that the income earned by the particular foreign affiliate otherwise be income from property. To the extent that subparagraph 95(2)(a)(i) doesn’t apply, the income earned by FA5 Subco would be income from an investment business and thus income from property, pursuant to the definitions of “investment business” and “income from property” in subsection 95(1), since FA5 Subco is in the debt portfolio business and does not have more than five full time employees.

For subparagraph 95(2)(a)(i) to apply, the taxpayer must also either have a qualifying interest in the foreign affiliate (e.g., FA5 Subco) or the affiliate must be a controlled foreign affiliate of the taxpayer. The taxpayer must also have a qualifying interest in the foreign affiliate that has the active business (e.g., FA4) or, for taxation years of a foreign affiliate that begin after July 12, 2013, a qualifying interest in the partnership (e.g., LP) that carries on the active business.

Under the facts described above, since more than 50% of the voting shares of FA4 and FA5 Subco are indirectly owned by Canco, FA5 Subco should be considered to be a “controlled foreign affiliate”, as that term is defined in subsection 95(1). Canco also has a “qualifying interest” in FA4 and FA5 Subco, pursuant to paragraph 95(2)(m), since it indirectly owns not less 10% of the issued and outstanding voting shares of these companies and it indirectly owns not less than 10% of the fair market value of the issued and outstanding shares of FA4 and FA5 Subco. Since FA4 owns, individually, at least 1% and, on a combined basis, at least 10% of the total of the fair market value of all of the partnership interests in LP, FA4 should be considered to be a “qualifying member” of the partnership under subparagraph 95(2)(o)(ii).

As further discussed below, in order for clause 95(2)(a)(i)(A) to apply, the income from property earned by FA5 Subco must “reasonably be considered to be directly related” to the active business activities carried on by FA4 of either its service business or its debt portfolio business.

b) Are the activities of FA5 Subco directly related to FA4’s service business for the 2013 Taxation Years?

In order for the income earned by FA5 Subco to be re-characterised as active business income under clause 95(2)(a)(i)(A), the income from property earned by FA5 Subco must be derived from activities that can “reasonably be considered to be directly related” (the “directly related test”) to an active business carried on by FA4 (as mentioned above, this test applies to each of the FA5 Subsidiaries individually, but for the purpose of simplifying this analysis, the test will only be applied to FA5 Subco).

In the facts described above, the activities of FA5 Subco do not appear to meet the directly related test, as it relates to FA4’s service business, since FA5 Subco can be viewed as a customer of FA4’s services whose activities are not directly related to those of its service provider. Generally, the activities of a customer are detached from the activities of a service provider and one would not necessarily view them as directly related with the active business activities of the service provider, even if the customer depends on these services in carrying on its business.

The February 1995 explanatory notes to subparagraph 95(2)(a)(i), as it read then, generally describe the objective of that provision as “directed at cases where the business activities of a single foreign active business are conducted in more than one [entity]”. The same notes indicate that it is also directed at cases where the income of one entity is “derived from assets that are at risk in a foreign active business carried on by [another entity]”. The notes further indicate that “assets will be considered to be at risk in a business where the permanent removal of such assets would have a destabilizing effect on the business.”

In the current case, the assets employed or at risk criteria described above would not be met since the assets of FA5 Subco are not at risk or employed in support of the service business of FA4. The single active business criteria described above would also not be met because it cannot be said that the debt portfolio business of FA5 Subco is the same as FA4’s service business. Based on the above, subparagraph 95(2)(a)(i) should not apply to the first half of the 2013 taxation year, since FA4 did not meet the directly related test for that part of the taxation year and FA4 only had a service business for that portion of the 2013 Taxation Year.

c) Are the activities of FA5 Subco directly related to FA4’s debt portfolio business for the 2013 and 2014 Taxation Years?

We understand from the facts described above that, around the middle of the 2013 Taxation Year, FA4 started to carry on a debt portfolio business through the FA4 Bare Trusts and the LP. Since FA4 and the LP each had more than five full-time employees (or the equivalent of more than five full-time employees, as provided in subparagraph (c)(ii) of the “investment business” definition in subsection 95(1)) for their debt portfolio businesses, they should be considered to be active businesses, under the definition of “active business” and paragraphs (a) and (b) of the “investment business” definition in subsection 95(1). It is thus relevant to determine if the activities of FA5 Subco are directly related to FA4’s debt portfolio business.

As indicated above, for the 2013 and 2014 Taxation Years, in order for the income earned by FA5 Subco to be re-characterised as active business income, under clause 95(2)(a)(i)(A), the income from property earned by FA5 Subco must be derived from activities that can “reasonably be considered to be directly related” to an active business carried on by FA4.

Given that FA4 and FA5 Subco both are carrying on debt portfolio business activities, it is possible that they would be seen as having a single active business, if they were merged. As indicated above, whether the carrying on of two or more simultaneous business operations are the same business is dependent upon the degree of interconnection, interlacing or interdependence and the extent of the unity embracing the business operations. In order for the activities of FA5 Subco to be directly related to the activities of the debt portfolio business of FA4, it is not sufficient that these activities be similar, the activities of FA5 Subco “must be dependent upon and would not have taken place but for” the debt portfolio business activities taking place in FA4 (see the 1995 explanatory notes to subparagraph 95(2)(a)(i)). The activities of FA5 Subco must therefore be “reasonably attributable” to the debt portfolio activities of FA4 (see Home Oil Co Ltd v MNR [1955] SCR 733, p. 736).

For the 2013 Taxation Year, FA4’s debt portfolio active business activities would include the activities of the debt portfolio business of the FA4 Bare Trusts, since the FA4 Bare Trusts are considered to be agents of their beneficiary. It also includes the activities of the LP, since the partners are considered to be carrying on the business of the partnership pursuant to the reasoning in paragraphs 16 to 18 of the Robinson (Trustee of) v. R., [1998] 1 C.T.C. 272 (FCA) case (among others - see CRA Documents 2005-0120751E5 and 2014-0558661I7). As discussed above, LP and the FA4 Bare Trusts are not carrying on investment businesses since they have more than five employees and thus should qualify as active businesses.

For the 2014 Taxation Year, FA4’s debt portfolio active business activities would only include the FA4 Bare Trusts’s debt portfolio business, since subparagraph 95(2)(a)(i) was modified, to include a directly related test that specifically involves partnerships in subclauses 95(2)(a)(i)(A)(III) and (IV) for taxation years of a foreign affiliate that begin after July 12, 2013.

Based on the facts that we have, it would seem that the directly related test is met in respect of the debt portfolio activities of FA5 Subco and the debt portfolio activities of FA4 since FA4 and FA5 Subco are integrated activities that require the services of employees that have similar expertise, and they carry on the same type of debt portfolio business. Furthermore, the prescribed active business earnings requirement, in clause 95(2)(a)(i)(B) discussed above, would also appear to be met, since the income of FA5 Subco would be included in computing the amount prescribed to be the earnings or loss of FA4, from an active business carried on in a country other than Canada, if the income were earned by FA4.

d) For the 2014 taxation year end, are the activities of FA5 Subco directly related to LP’s debt portfolio business?

As previously stated, 95(2)(a)(i) was modified, for taxation years of a FA that begin after July 12, 2013, to include a directly related test that involves partnerships, in subclauses 95(2)(a)(i)(A)(III) and (IV). In order for the income earned by FA5 Subco to be re-characterised as active business income, under subclause 95(2)(a)(i)(A)(IV), the income that would otherwise be from property earned by FA5 Subco must be derived from activities that can “reasonably be considered to be directly related” to the activities of the debt portfolio business carried on by the LP. As mentioned above, since LP had more than five full-time employees (or the equivalent of more than five full-time employees) for its debt portfolio businesses, that business would be considered to be an active businesses, under the definition of “active business” and paragraphs (a) and (b) of the “investment business” definition in subsection 95(1). It is thus relevant to determine if the activities of FA5 Subco are directly related to LP’s debt portfolio business.

Given that LP and FA5 Subco are both carrying on debt portfolio business activities, it is possible that they are part of integrated activities. In order for the activities of FA5 Subco to be directly related to the activities of the debt portfolio business of LP, the activities of FA5 Subco “must be dependent upon and would not have taken place but for” the debt portfolio business activities taking place in LP (see the 1995 explanatory notes to subparagraph 95(2)(a)(i)). The activities of FA5 Subco must therefore be “reasonably attributable” to the debt portfolio activities of LP (see Home Oil Co Ltd v MNR [1955] SCR 733, p. 736).

It is a question of fact whether the directly related test is met in respect of the activities of FA5 Subco and the debt portfolio activities of LP. Based on the facts that we have been provided, it seems that the directly related test is met since it would appear that the business activities of FA4 and FA5 Subco are fairly integrated, since they require the services of employees that have similar expertise, and they carry on similar debt portfolio businesses. Furthermore, the prescribed active business earnings requirement in clause 95(2)(a)(i)(B) discussed above, also appears to be met, since the income of FA5 Subco would be included in computing the amount prescribed to be the earnings or loss of FA4 from an active business carried on in a country other than Canada, if the income were earned by FA4.
.

4. Would clause 95(2)(b)(i)(B) apply to the income earned by FA4 from the services that it renders to FA5 Subco?

Clause 95(2)(b)(i)(B) ensures that the provision, by a foreign affiliate of a taxpayer, of services or of an undertaking to provide services is deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the amounts paid or payable in consideration for those services or for the undertaking to provide services are deductible, or can reasonably be considered to relate to an amount that is deductible, in computing the foreign accrual property income of a foreign affiliate of any taxpayer of whom the affiliate is a foreign affiliate, or another taxpayer who does not deal at arm's length with the affiliate, or any taxpayer of whom the affiliate is a foreign affiliate.

For example, clause 95(2)(b)(i)(B) ensures that, within a corporate group, income that would otherwise be income from an investment business of one foreign affiliate in the group (e.g., FA5 Subco) cannot be converted to active business income by the payment of fees to another foreign affiliate (e.g., FA4) in the group for services rendered to that investment business.

For the 2013 and 2014 Taxation Years, if the activities of FA5 Subco are directly related to the activities of the debt portfolio business of FA4 and subparagraph 95(2)(a)(i) applies to the income earned by FA5 Subco, clause 95(2)(b)(i)(B) would not apply to the income earned by FA4 from services rendered to FA5 Subco, since the amount would not be deductible from FA5 Subco’s foreign accrual property income.

As indicated above for the 2014 Taxation Year, subparagraph 95(2)(a)(i) was extended to include a “directly related test” that involves partnerships. As such, if the activities of FA5 Subco are directly related to the activities of the debt portfolio business of LP and subparagraph 95(2)(a)(i) applies to the income earned by FA5 Subco, clause 95(2)(b)(i)(B) would not apply to the income earned by FA4 from services rendered to FA5 Subco, since the amount would not be deductible from FA5 Subco’s foreign accrual property income.

If neither of these directly related tests are met and subparagraph 95(2)(a)(i) doesn’t apply to FA5 Subco’s income from its debt portfolio business, clause 95(2)(b)(i)(B) could then apply to the income from the services rendered by FA4 to FA5 Subco. As discussed above, subparagraph 95(2)(a)(i) is unlikely to apply for the first half of the 2013 Taxation Year, since FA4 did not meet the directly related test for that part of the taxation year. As a result, if FA5 Subco earns FAPI in the first half of 2013 Taxation Year, the income (if any) earned by FA4 from the services that it renders to FA5 Subco could be deemed to be income from a “business other than an active business” which is considered to be FAPI, under the definition of that term under subsection 95(1) for the first half of the 2013 taxation year.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.

We hope that the above comments are helpful to you.

Yves Grondin
Section Chief
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 See Question 4 of Wallace G. Conway, "The New Foreign Affiliate Provisions: The Department of Finance's Perspective," in Report of Proceedings of Forty-Seventh Tax Conference, 1995 Conference Report (Toronto: Canadian Tax Foundation, 1996) 40:1-7).

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