Prod Co, a wholly owned subsidiary of M Co and a "qualified corporation," produces a Canadian film or video production ("CFVP") at a cost of $1,900,000 that is eligible for the s. 125.4(3) credit. M Co funded Prod Co through a loan, which will only be repaid if the production generates revenue, and is not expected to be repaid.
After noting that the loan was assistance for the purposes of s. 12(1)(x) and the definition thereof in s. 125.4(1), and reduced Prod Co's "labour expenditure" s. 125.4(3), the Directorate considered whether there would be such assistance if M Co instead invested the sum in shares of Prod Co, and stated:
[I]f, in order to partially finance a production, Prod Co issues shares of a class of its capital stock to its parent company M Co, the latter acquires … rights in Prod Co through the shares issued to it for the purposes of subparagraph 12(1)(x)(viii) … [and] the acquisition of those shares does not constitute an amount of assistance to Prod Co for the purposes of section 125.4.