27 June 2008 External T.I. 2007-0247551E5 - FAPI and Part XIII Tax -- summary under Subsection 91(5)

A partnership (FP) between two CFAs of Canco received dividends (the “Foreign Dividends”) from a non-resident subsidiary of FP (NRco) and on-paid those dividends to its two CFA members. CRA stated that since NRco was not a foreign affiliate of Canco for FAPI purposes and NRco instead was a CFA of FP for FAPI purposes, the dividends from NRco were not excluded under the A - para. (b) FAPI exclusion. However, FP was entitled to an offsetting deduction under s. 91(5) and Reg. 5900(3). Furthermore, there was “no net dividend income to CFA1 and CFA2 with respect to the Foreign Dividends after the subsection 91(5) deduction by FP.”