23 August 2023 Internal T.I. 2021-0882371I7 - Dividend payment and 94.1(1)(g) -- summary under C

A wholly-owned non-resident subsidiary (“CFA”) of Canco owned 50% of the common shares of a non-resident corporation (“FA”) which were assumed to constitute offshore investment fund property (“OIFP”). CFA received annual dividend distributions from the OIFP. Headquarters rejected Canco’s argument that a dividend paid by CFA to Canco generated a deduction pursuant to s. 94.1(1)(g) from the imputed income inclusion to Canco under the OIFP rules pursuant to s. 94.1(1)(f). The effect of C of the FAPI formula was that the OIFP rules generated FAPI to CFA, and Canco then picked up its share of such FAPI – and this combined operation of the FAPI and OIFP rules was not affected by dividends paid by FA to the CFA (inter-FA dividends are excluded form FAPI) nor was it affected by any dividends paid by CFA to Canco.