When the associated CCPCs of the taxpayer report their Canadian tax results in Canadian dollars, and the taxpayer reports its Canadian tax results in its elected functional currency, how will the taxable capital employed in Canada (“TCEC”) of the associated corporations for expenditure limit purposes be converted into the functional currency? CRA concluded:
The day the TCEC of the associated corporation is considered to “arise” for the purposes of determining the conversion rate according to paragraph 261(5)(c) is the last day of the taxation year of the associated corporation for which it is computed because that is the day when the amount of the TCEC is determined pursuant to section 181.2 (hence when an amount relevant to computing the Taxpayer’s Canadian tax results is created).