13 May 2026 IFA Roundtable

This provides the text of written questions that were posed, and summaries of CRA oral responses, at the CRA Roundtable held on May 13, 2026 at the International Fiscal Association (Canadian Chapter) conference in Calgary. The presenter from the Income Tax Rulings Directorate was:

Yves Moreno, Director, International Division

The questions were orally presented by Marc André Gaudreau Duval (Davies) and Jennifer Hanna (McLeod). We have employed our own titles.

Q.1 S. 84(2) re dissent payments by Amalco

If subsection 84(2) applies to deem a corporation to have paid a dividend on the shares of a particular class, all shareholders of that particular class of shares will be deemed to receive a dividend in proportion to their shareholdings, such that withholding tax will apply in respect of all non-resident shareholders that hold shares of the particular class.

Assume that a Canadian resident corporation is amalgamated with another Canadian resident corporation. In accordance with a dissenter’s statutory right to receive fair value for their shares under the applicable corporate law, a payment is made by the newly amalgamated corporation to a shareholder who has dissented from the amalgamation (“Dissent Payment”).

In light of the Federal Court of Appeal’s decision in Foix et al. v. The King, 2023 FCA 38, should the Dissent Payment be considered a distribution or appropriation in any manner whatever, to or for the benefit of the shareholders of any class of stock, such that subsection 84(2) will deem the corporation to pay a dividend equal to the amount by which the Dissent Payment exceeds the reduction of the PUC of that class of shares?

Assume for this purpose that there has been a winding-up, discontinuance or reorganization of the predecessor corporation’s business.

Preliminary Response

As general background, CRA has a longstanding position that s. 84(3) would not apply such that the payment would give rise to capital gains treatment.

Turning to s. 84(2), the relevant conditions are either that there is a distribution “in any matter whatever” or that there is a discontinuance, reorganization, or winding up of the business of the corporation. The phrase "in any manner whatever" was interpreted by the Foix decision of the Federal Court of Appeal: “These far-reaching words are anchored in history as they have always been part of this provision, and they faithfully reflect its anti-avoidance purpose.”

This perspective is important to applying s. 84(2) to any orchestrated attempt to receive favourable tax treatment when extracting surpluses. An overly literal interpretation would undermine the provision’s anti-avoidance objectives.

Payments to dissenting shareholders are governed by statute. Shareholders are generally entitled to receive payments under certain circumstances, such as when a shareholder dissents from a decision to amalgamate. From that perspective, CRA would not generally view such payments as falling under s. 84(2) where the shareholder dissents to an amalgamation and receives a compensation payment based on the statutory right to dissent rather than a negotiated amount.

However, there might be circumstances where s. 84(2) could apply to such payments. If, after considering all relevant facts and circumstances, it is determined that applying s. 84(2) is necessary to give effect to the provision’s underlying anti-avoidance purpose, then it may be invoked.

Written Response

13 May 2026 IFA Roundtable - Written Response, Q.1

Q.2 Crypto re s. 95(3)(b) “goods” exception

Background

• A corporation resident in Canada (“Canco”) carries on a cryptocurrency trading business in Canada.
• Cryptocurrencies are intangible, or, for civil law purposes, incorporeal property.
• A wholly owned foreign affiliate of Canco (“FA”) provides investment management and trading execution services to Canco in relation to its cryptocurrency trading business under an investment services agreement.
• The consideration paid by Canco to FA for these services is consistent with Canadian transfer pricing rules in section 247 of the Act and is deductible in computing Canco’s income from its cryptocurrency trading business in Canada.

For the purposes of paragraph 95(2)(b), paragraph 95(3)(b) provides that “services” does not include “services performed in connection with the purchase or sale of goods”.

Questions

At the 2022 IFA Roundtable, CRA stated that “goods” in paragraph 95(3)(b) refers to tangible moveable property, with the result that services connected to the sale of real property were not within the carve out. Please comment on the following:

• Do “goods” in paragraph 95(3)(b) include cryptocurrencies?
• If so, in these circumstances, are the investment management and trading execution services provided by FA properly characterized as “services performed in connection with the purchase or sale of goods” within the meaning of paragraph 95(3)(b), such that paragraph 95(2)(b) would not recharacterize FA’s income from those services as income from a business other than an active business?

Preliminary Response

A similar question was asked at the IFA 2022 Roundtable regarding the exception in s. 95(3)(b) and respecting services rendered in connection with the sale of real estate or immovable property. CRA stated that those services would not meet the conditions of this exception to s. 95(2)(b) on the basis that the word “goods” is limited to tangible movable property.

We have also reviewed the historical development of the provision. Initially in the 1974 Budget, the wording of the provision was “in respect of services performed in connection with the purchase for import or the sale for export of goods”. The references to import and export were absent from the enacted version. This historical context suggests that, when interpreting the provision, it is relevant to consider other legislation, such as the Customs Act and the Excise Tax Act.

The Customs Act states that “goods, for greater certainty, includes conveyances, animals, and any document in any form”. This definition aligns with the interpretation of "goods" as tangible movable property. Additionally, there are other exceptions in s. 95(3)(b), such as those related to transportation of persons or goods, which are also consistent with this interpretation.

One might argue that the inclusion of “tangible” in s. 95(3)(d) and its absence in s. 95(3)(b) signifies that para. (b) includes intangible property - but these paragraphs are drafted in different contexts. S. 95(3)(d) deals with the manufacturing and processing of property outside of Canada. In the context of the M&P credit rules, there are two tax decisions that discuss the meaning of the word “goods”. Both decisions (Canadian Wirevision and Allarcom) dealt with television or radio signals, which are intangible property. Canadian Wirevision stated (consistently with the above): “The signals were not ‘goods’ within the meaning of the relevant provisions of the Act since they were not tangible movable property.”

Therefore, being intangible property, cryptocurrencies are not "goods."

Consider also the context of s. 95(3)(b) as an exception to the s. 95(2)(b) charging provision. The objective of section 95(2) is to prevent Canadian base erosion through the outsourcing of services that could otherwise have been rendered in Canada, but are instead rendered by a foreign affiliate for fees that are deductible from Canadian income.

Keeping that background in mind while interpreting the exceptions in s. 95(3) including s. 95(3)(b), the above approach is consistent with a statement from the Department of Finance in a comfort letter dated September 14, 2001. Finance stated that it would recommend that the Minister enact an exception for the transmission of electronic signals or electricity. Finance stated that “[t]he provisions of s. 95(3)(a) do not offend s. 95(2)(b) as there is no erosion of the tax base or diversion of income from Canada if the services are required by their very nature to be performed outside of Canada”. Thus, Finance was referring to the transportation of persons or goods, which must by its very nature be performed outside of Canada, in marked contrast to services which could be performed in Canada.

For the reasons mentioned, including the perspective of purpose and policy, the services performed by a foreign affiliate of a Canadian parent company in connection with the purchase or sale of cryptocurrency would likely not fall within the exception in s. 95(3)(b).

[In response to a follow-up question as to goods which traditionally were in tangible form, such as books and musical records, but which now are mostly delivered in intangible form, he noted that some of the comments in Canadian Wirevision seemed to bear on this issue.]

Written Response

13 May 2026 IFA Roundtable - Written Response, Q.2

Q.3 No s. 116 certificate re s. 51 conversion

Technical Interpretations 9631575 and 2001-0070415, as well as paragraph 40 of IC72-17R6 state that although subsections 116(1) and (3) would not technically apply to a subsection 51(1) exchange because there is no “disposition” of the property, subsection 116(5) still applies to an “acquisition” of the taxable Canadian property (“TCP”). They indicate that the non-resident seller may request a certificate, and that the TSO may, at its discretion, require nominal security in order to issue a certificate of compliance.

In a submission dated January 24, 2025, the CBA and CPA “Joint Committee” recommended that the CRA adopt an administrative position to not require compliance with the section 116 procedures, where TCP is disposed of on a tax deferred basis pursuant to section 51.

Would the CRA consider the Joint Committee’s recommendation in this regard?

Preliminary Response

There are a number of elements in s. 116. Ss. 116(1) to (4) that deal with the issuance of the compliance certificate, and s. 116(5) requires remittance by the purchaser.

In order to engage the requirement for a compliance certificate, either before or after the redemption, exchange or other disposition, ss. 116(1) to (4) require that there indeed be a disposition. However, regarding s. 51(1), the means through which the rollover is achieved is by deeming an absence of a disposition. As this absence applies to s. 116, it can never apply to an s. 51(1) exchange.

S. 116(5) stipulates that the purchaser is required to withhold 25% of the “cost” (which is the full redemption proceeds or the exchange amount at its FMV). S. 116(5) imposes liability on the purchaser. Deeming provisions must be read narrowly to achieve their objective, and s. 51(1) deems that there is no disposition.

Historically, the position was that there would nonetheless still be a purchaser but, on closer examination, the “purchaser” referred to in s. 116(5) is not merely someone who acquires it, but (as defined in s. 116(3)) is someone to whom property is disposed of. If s. 51(1) applies to a transaction, then there is no disposition and, therefore, no purchaser.

Therefore, CRA has changed its position, and concluded that, now, no remittance is required pursuant to s. 116(5) on an s. 51(1) exchange. The previous position in Information Circular 72-17R6, para. 40 will be amended accordingly.

Turning to the last question regarding the Joint Committee recommending relief regarding rollover exchanges, the Joint Committee letter also covered s. 85 rollovers. The mechanism at work there is different: the rollover is achieved through adjusting the proceeds of disposition. We understand that the Department of Finance also received a copy of the Joint Committee's letter and is aware of the issue.

Written Response

13 May 2026 IFA Roundtable - Written Response, Q.3

Q.4 Double remittances under ss. 116 and 215

Background

• A corporation resident in Canada (the “Purchaser”) redeems shares held by a non-resident of Canada (the “Vendor”).
• A dividend is deemed to have been paid by the Purchaser and received by the Vendor pursuant to subsection 84(3).
• In accordance with subsection 212(2), the deemed dividend is subject to Part XIII withholding tax (25% absent treaty reduction).
• The redeemed shares constitute TCP such that section 116 applies and the resulting gain on the disposition is not exempt from taxation pursuant to any bilateral tax treaty.
• The Vendor applied for a certificate under subsection 116(2); however, the certificate has not yet been issued at the time the shares are redeemed.
• Subsection 116(5) imposes on the Purchaser the obligation to remit 25% of any amount by which the Purchaser’s cost exceeds the certificate limit (which is effectively nil where no certificate has been provided).
• The amount required to be remitted under subsection 116(5) is computed by reference to the Purchaser’s cost. It is not reduced by the amount of any deemed dividend under subsection 84(3). CRA Views 2010-0387151E5 states that in the absence of a certificate, the Purchaser is required to remit both Part XIII tax pursuant to subsection 212(2) as well as an amount under subsection 116(5), leading to duplicative remittances.
• While it does not provide relief from subsection 116(5), CRA View 9406027 states that, where a disposition results in no capital gain, there is no Part I tax liability, nor avoidance series, the acceptable security under paragraph 116(2)(b) may be nil.

Questions

• Are there any updates or changes regarding CRA’s policy for administrative relief for this hypothetical situation?
• If the answer to the above is No, to what extent would paragraph 248(28)(a) provide relief for this hypothetical situation?
• Would CRA recommend to Finance that proper changes be made to address this duplicative remittance scenario?

Preliminary Response

There are a number of elements to s. 116.

First, it calls for a remittance where a certificate is requested, and the amount of the remittance may depend on whether the certificate is requested before or after the disposition. Second, s. 116(5) may also require the purchaser to remit.

Where a corporation resident in Canada redeems shares held by a non-resident, and those shares are TCP, a number of things will occur. First, s. 84(3) might, depending on the amount of the PUC, result in virtually all of the redemption proceeds being a deemed dividend, and thereby engage the application of Part XIII, thus requiring 25% withholding (subject to any treaty reduction).

However, where there is a disposition of the share, as occurs when it is redeemed, this satisfies that condition for the application of s. 116, so that there also is a required s. 116 remittance of 25%. Crucially, there is no carve-out for a deemed divided, such as that found in s. 54 – “proceeds of disposition” – (j). Thus, there effectively is a direct “drive through” of the redemption proceeds to Part XIII tax even though s. 116 is also engaged.

There also is no carve-out in s. 116(5), which essentially calls for remittance on the full proceeds of redemption, again including the portion (which might be substantially all) that is a deemed dividend including for Part XIII purposes. From that perspective, there thus is a required element of double remittance.

Turning now to the s. 248(28) question, the above situation is one of double remittance, not double taxation. S. 116 is not a charging provision: it provides a collection procedure to secure payment of tax before the money leaves the country, so that such amounts are not unlocked until CRA has had a chance to examine the transaction to satisfy itself that the tax indeed was paid, with the applicable refunds then occurring. Thus, refunds can be made at the end of the day when the whole process is complete and, at that point, there now is no double taxation. However, there may be such double remittance during the interim period.

Now, turning to the specific question, there may be a remittance pursuant to s. 116 before or after the disposition, when the certificate is requested. In that regard, there is an existing CRA position (in IC72-17R6, para. 70) in respect of deemed dividends that arise under s. 212.1. Where there is a disposition to a corporation and there is a resulting s. 212.1 deemed dividend, that position is that the amount of the required remittance under s. 116(2) or (4) will not apply to the base on which the s. 212.1 remittance was computed, i.e., it will not apply to the deemed dividend portion of the proceeds - so as to eliminate the double-remittance. This position previously applied to s. 212.1, but is now extended. Accordingly, the Circular will be amended to extend this position to s. 84(3).

S. 116(5) provides that the remittance for the purchaser is 25% of the cost, unless the amount is reduced by virtue of the issuance of the certificate. The remittance must be made 30 days after the end of the month of the redemption. If the certificate is not issued by the end of that window, then there is the required double remittance (to the extent of the overlap) since the 25% s. 116 remittance applies to the full redemption proceeds, including the portion that resulted in the dividend on which Part XIII tax was remitted.

In that respect, it would be good practice to request the certificate early, wherever possible. This gives additional time before the disposition, and before the 30-day period expires, for CRA to process the request. CRA acknowledges the burden on taxpayers when the window is exceeded, so that the certificate is issued thereafter. The CRA is actively working on improving the processing time for issuing s. 116 certificates.

Meanwhile, CRA may, upon request, confirm in writing that it will not apply penalties and interest that would otherwise arise from a failure to remit under s. 116(5), provided that the purchaser holds the amount required in a fiduciary capacity until CRA completes its review and advises of the amount required to be remitted. Once the process is completed, everything should fall into place.

Finance is aware of the interaction (or lack thereof) between Part XIII and s. 116. Discussions are ongoing.

Written Response

13 May 2026 IFA Roundtable - Written Response, Q.4

Q.5 FX where partial forgiveness

Q. 11 at the 2009 APFF CRA roundtable (2009-0327061C6) commented on how a gain or loss should be computed for purposes of subsection 39(2) on a repayment of the balance of a U.S. dollar denominated debt, where monthly payments are made reducing the principal throughout the period preceding the ultimate full repayment.

CRA document 2010-0386881E5 commented on the computation of a foreign exchange gain or loss where a U.S. dollar denominated debt is fully forgiven.

These documents do not address how a gain or loss is computed for purposes of subsection 39(2) where a foreign currency denominated debt is partly repaid, with the remaining principal amount being forgiven.

For the purposes of this question, assume the following: ◦ Taxpayer borrows US$1M (the “Debt”). ◦ On maturity, US$0.3M of the principal amount is repaid and the remaining principal amount of US$0.7M is forgiven. ◦ On the issuance date, the U.S. dollar to Canadian dollar exchange rate is US$1 to CAD$1.25. ◦ On the maturity date, either: ◦◦ (i) the U.S. dollar appreciates (US$1.00 is equal to CAD$1.50); or ◦◦ (ii) the U.S. dollar depreciates (US$1.00 is equal to CAD$1.00).

Based on the Federal Court of Appeal decision in The Queen v. Agnico-Eagle Mines Limited a taxpayer’s gain or loss under subsection 39(2) requires a comparison of the following amounts converted into Canadian currency using the applicable foreign currency exchange rate on the date upon which each such amount arose:

• (i) the amount of foreign currency received by the taxpayer upon the issuance of the indebtedness (the “Issuance Amount”); and
• (ii) the amount of foreign currency paid by the taxpayer upon the repayment of such indebtedness (the “Repayment Amount”).

How is the gain or loss under subsection 39(2) determined where the principal amount of the Debt is only partly repaid and the remaining principal amount forgiven?

Preliminary Response

The seminal decision here is the Agnico decision, where the Court determined how a gain or loss is to be computed under s. 39(2). S. 39(2) provides that where there is a gain or loss resulting from fluctuations in the foreign currency compared to the Canadian dollar, the gain or loss is viewed as being from the disposition of the foreign currency. In Agnico, the issue was how to determine the amount of that gain or loss.

The Court came up with a formula that can be summarized as A – B: where A is the issuance (i.e., borrowing) amount; and B is the repayment moment. The Court indicated that the amounts that were borrowed and repaid in foreign currency must be converted to Canadian dollars, using the respective spot rates on the two dates. Application of the A – B formula then results in a gain or loss.

Agnico did not consider what would happen in the context of a debt forgiveness, given the facts in that case. There are a number of CRA positions where CRA stated that, in the context of forgiveness, there would be no foreign exchange gain or loss because there is no transaction that would result in realizing a gain or loss; and that s. 80 would be the applicable provision for determining the tax consequences of the debt forgiveness.

What happens then if there is a “hybrid” repayment and partial debt forgiveness? On adapting the Agnico formula (A – B) to this example: there is A, the issuance proceeds of $US1,000.000; and B, the repayment amount of US$300,000. But that does not deal with the forgiven portion. How is that adjusted? It is adjusted by removing from variable A the amount that was forgiven - which reduces A down to US$300,000. B is the same amount – so that the conversion rates can now be applied, using the spot rates at the two times.

In the first scenario, there is a capital gain of $75,000 (1.25*$300,000 – $300,000). In the second scenario, there is a loss of $75,000 (1.25*$300,000 – 1.5*$300,000).

Thus, in the hybrid scenario, s. 39(2) and s. 80 each apply to their respective portions of the indebtedness.

That is one type of adjustment, but others might be required in other circumstances, as this response is not comprehensive. The above formula is limited to circumstances where there is partial forgiveness. There might be other circumstances requiring further adjustments to the formula to determine the gain or loss under s. 39(2). The amount of the repayment would not typically exceed the issuance amount, but there might be circumstances where the debt is issued at a discount or premium, with required adjustments to variable B.

It is important to observe what is in fact occurring in order to make the necessary adjustments. The above answer only addresses the partial forgiveness variation on the Agnico formula.

Written Response

13 May 2026 IFA Roundtable - Written Response, Q.5

Q.6 US dividend withholding tax on capital gain

This question was submitted by STEP Canada for the STEP CRA Roundtable at the upcoming 2026 STEP Canada National Conference. At CRA’s request, STEP Canada has agreed that the question be presented at the 2026 IFA Annual Conference.

• A Canadian corporation (“CanCo”) owns all the shares of a U.S. corporation (“USCo”), a US resident for purposes of the Act and the Canada-U.S. Tax Convention.
• USCo repurchases some of the shares (the “Repurchased Shares”) owned by CanCo.
• The proceeds from the repurchase (the “Repurchase Proceeds”) are deemed to be a dividend under the U.S. Internal Revenue Code, on which a 5% U.S. withholding tax is imposed. CanCo does not elect under subsection 93(1). (CanCo is not treated as having received a dividend from USCo, and realizes a capital gain.)
• May CanCo claim a foreign tax credit pursuant to subsection 126(1) for the U.S. withholding tax paid on the Repurchase Proceeds received from the disposition of the Repurchased Shares?

Preliminary Response

This response was prepared to a question to be posed at the upcoming June 2026 STEP Conference; however, STEP agreed to CRA’s request that it answer the question in advance at this IFA conference instead.

There are two conditions for a foreign tax credit. First, there must be “qualifying income” from a source in a country. Second, it must not be a foreign tax that “can reasonably be regarded as having been paid by the taxpayer in respect of income from a share of the capital stock of a foreign affiliate of the taxpayer.”

Here, US withholding tax applies to what is a deemed dividend for US purposes. First, is that US tax imposed on income from a source in the US? Looking at the Canada-US treaty, there is a direct connection, established under Art. XXIV(2)(a). That provision begins with the words “subject to the provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in the [the US].” The above-quoted s. 126(1) language (via the “qualifying incomes” definition) references income “from sources” in the US. The Treaty refers to “income … arising in the United States,” which is quite a close match to this s. 126(1) language. The Treaty provides a number of presumptions and rules (particularly, the rule in X(3) indicating that a dividend includes "income that is subjected to the same treatment as income from shares" under the U.S. law) that, combined with s. 126(1), lead to a conclusion that the first condition would be met.

Looking now at the second condition, whether the income can reasonably be regarded as having been paid in respect of income on a share, the wording “in respect of” is broad, and the provision as a whole imposes a reasonability test. One of the objectives of that provision is to prevent double-deductions – a taxpayer should not claim a deduction under s. 113 and also a foreign tax credit under s. 126(1) for the same US tax payment. How could that happen? If the US tax is based on earnings and profits, and those earnings are also captured in a surplus account in Canada, thereby supporting a s. 113 deduction, there would be a resulting double benefit, and CRA would deny the deduction under those circumstances.

Determinations are made on a case-by-case basis. Bear in mind also that s. 245(4) will typically prevent a double-deduction.

Written Response

13 May 2026 IFA Roundtable - Written Response, Q.6

Q.7 Mismatched cross-border taxation periods

Hypothetical Facts and Transactions

• A corporation resident in Canada (“Canadian Target”) owns all the outstanding shares of a corporation resident in the U.S.(“U.S. Target”). U.S. Target principally derives its value from U.S. real estate.
• As of January 1, Canadian Target is a CCPC. Canadian Target does not carry on business in the U.S.
• On May 1 at noon, an arm’s length corporation resident in the U.S. (“U.S. Buyer”) and its wholly-owned Canadian resident corporation (“U.S. Buyer Sub”) sign an agreement to respectively purchase the shares of U.S. Target and Canadian Target.
• The agreement entitles U.S. Buyer Sub to a right described in paragraph 251(5)(b).
• On November 30:
  • at 11:00 am, Canadian Target sells all of its shares of U.S. Target to U.S. Buyer, and realizes a capital gain.
  • at 11:06 am, U.S. Buyer Sub purchases all the shares of Canadian Target.

Income and Taxation Years in Canada

• Canadian Target and U.S. Target both use the calendar year as their financial year and as their taxation year.
• On May 1,
  
  1. Canadian Target loses its CCPC status (paragraph (a) of the definition in subsection 125(7) and paragraph 251(5)(b)).
  2. Canadian Target’s taxation year is deemed to end immediately before noon on that day (subsection 249(3.1)) (the “First Stub Year”), and
  3. a new taxation year starts at noon on May 1.
• On November 30 at 11:06 am, there is an acquisition of control of Canadian Target when U.S. Buyer Sub acquires all of its shares. Canadian Target elects under subsection 256(9), such that its taxation year beginning at noon on May 1 ends on November 30 immediately prior to the time of the acquisition of control (paragraphs 249(4)(a) and 251.2(2)(a))(the “Second Stub Year”).
• On December 31, Canadian Target reestablishes a calendar year-end, such that its taxation year beginning at 11:06 am on November 30 ends on December 31 (paragraphs 249(4)(a) and 249.1(1)(a)) (the “Third Stub Year”).
• Canadian Target’s three “stub” taxation years are as follows:
  • January 1 to May 1 at 11:59 am (First Stub Year);
  • May 1 at noon to November 30 at 11:05 am (Second Stub Year); and
  • November 30 at 11:06 am to December 31 (Third Stub Year).
• Before the Second Stub Year ends immediately prior to 11:06 am on November 30, Canadian Target realizes a capital gain on the disposition of the shares of U.S. Target to U.S. Buyer.

Income and Fiscal Period in the U.S.

• Canadian Target’s fiscal year in the U.S. runs from January 1 to December 31 (i.e., there is no stub year in the U.S.).
• The U.S. taxes Canadian Target in its U.S. fiscal year on the gain realized on the sale of the shares of U.S. Target to U.S. Buyer, because they principally derive their value from U.S. real estate.

Questions

• For a foreign tax credit (“FTC”) to be available to Canadian Target pursuant to subsection 126(1), the U.S. tax paid needs to be “for the year” in which the credit is claimed.
• Since all of the U.S. tax is attributable to the capital gain that occurred in the Second Stub Year, does the CRA agree that Canadian Target can claim a FTC in the Second Stub Year for the entire amount of U.S. tax? If not, how would that tax be prorated over other taxation years?

Income and Taxation Years in Canada

• Canadian Target’s three “stub” taxation years are as follows:
• January 1 to May 1 at 11:59 am (First Stub Year);
• May 1 at noon to November 30 at 11:05 am (Second Stub Year); and
• November 30 at 11:06 am to December 31 (Third Stub Year). 21

Preliminary Response

This is the fourth time CRA has been asked variations of the same question. We viewed this as an opportunity to step back and address this more comprehensively.

The problem arises where there is a mismatch in taxation periods between Canada and another jurisdiction. How do you allocate the correct portion of the foreign tax to the relevant Canadian taxation period? To do that, you essentially look at the amount of the income that drives US tax, and the equivalent income that drives Canadian tax, and the exercise then becomes one of trying to achieve a match.

To do that, the stream of income must be examined. If there is an even distribution of earnings throughout the year, then that would call for a daily proration. If the income is from a seasonal business, a more reasonable approach would be to match that season to the Canadian tax period. If the income comes from a single discrete event, the date of that event should determine the Canadian tax timing.

CRA expects consistency in the approaches used, although unusual income events (like an extraordinary lump-sum payment) may warrant an unusual approach. In such cases, it may be prudent to discuss the approach with CRA to ensure their acceptance.

This approach should be broadly applicable to other problems of this nature.

Written Response

13 May 2026 IFA Roundtable - Written Response, Q.7