5-9305
Dear sirs:
This is in reply to your letter dated December 18, 1989, wherein you requested our opinion regarding the definition of "excluded property" contained in paragraph 95(1)(a.1) of the Income Tax Act ("Act").
You are unclear as to this Department's interpretation of the term "excluded property" where property is held by a foreign affiliate for use in an active business of another foreign affiliate or an arm's length party.
Specifically, you have posed the following fact situations:
Fact Situation 1
24(1)1
QUESTION 2
24(1)
The words in subparagraph 95(1)(a.1)(i) of the Act clearly require that, to meet the definition, the foreign affiliate which owns the property must be the same foreign affiliate which is using the property principally for the purpose of gaining or producing income from an active business. In your scenario
24(1)
Fact Situation 2
(an extension of fact situation one).
24(1)
24(1)
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch