A return-of-capital distribution by the foreign affiliate of a Canadian corporation of eligible capital property (in this case, intellectual property with an unlimited life) gave rise, for purposes of applying the eligible capital expenditure definition to the Canadian shareholder, to an expenditure incurred by it equal to the FMV of the property at the time of distribution. CRA then stated:
[W]e understand that there is no gain realized by the foreign affiliate on the disposition. Thus, it is not necessary for us to consider whether Variable A.1 can apply in these circumstances.