Canco held 100% of LLC2 through a US partnership (USP) and had an indirect 37% interest in USOpco. Having s. 95(2)(a)(ii)(B) deem the interest received by LLC2 from USOpco in 2011 and 2012 to be active business income for purposes of being excluded from the computation of USP’s foreign accrual property income (FAPI) turned on USP having a qualifying interest (QI) in USOpco. Since s. 95(2)(m) did not apply (USP did not own USOpco shares) nor did s. 95(2)(n) (USP was not a corporation), having such a QI turned on the coming-into-force (CIF) provision for ss. 93.1(5) and (6) (which otherwise applied only to the 2013 and subsequent taxation years) applying on the basis of the taxpayer (USP) having “elected[ed] in writing” and timely “file[d] the election with the Minister” to have ss. 93.1(5) and (6) apply to the earlier years. In rejecting Canco’s position that USP (which otherwise never made the election), should be treated as having made the election by virtue of Canco not reporting any FAPI of USP from the interest, the Directorate indicated that:
- Canco’s filing position did not constitute notice to CRA that the election was made.
- No extension for making the election could be allowed under s. 220(3.2), as the CIF provision was not listed in Reg. 600.
- It was “Rulings’ view that allowing subsection 220(2.1) to waive a taxpayer’s requirement to file an election not listed in Regulation 600 would negate the specific intention of Parliament in limiting late elections to only those that are prescribed in [Reg.] 600” – and, in any event, the CIF provision was not a provision of the Act itself, as required by s. 220(2.1).