A controlled foreign affiliate acquires a building, for continuous use in its active business, from a third party by issuing a note (or assuming debt). Would s. 95(2)(i) apply to the subsequent settlement of the indebtedness? CRA responded:
[P]aragraph 95(2)(i) would apply if the CFA had acquired the building from a third party by issuing a note.
…[T]he phrase "a debt of the debtor all or substantially all of the proceeds from which were used to acquire property" in paragraph 95(2)(i) can be interpreted…so as to include an amount payable for property acquired to the extent that all or substantially all of the amount payable was incurred to acquire excluded property.
…[G]enerally, examples where paragraph 95(2)(i) may apply would include an amount outstanding on account of the purchase price, a note issued, or a debt assumed for the acquisition of excluded property by a foreign affiliate.