Principal Issues:
1. Whether the loss consolidation arrangement is permissible under our current administrative policy?
2. Whether an additional cost amount can be created in a loss consolidation arrangement within an affiliated group ?
3. Where the loss from the disposition of a share of a corporation by a corporate taxpayer is denied under paragraph 40(3.6)(a), whether such loss can be added back to the ACB of the taxpayer's remaining shares in the corporation under paragraph 40(3.6)(b) when such loss is resulted from the deemed dividend on the cancellation of the share which is deductible by the dividend recipient corporate taxpayer under subsection 112(1) ?
4. Where shares of a corporation have a high ACB (to the holder of the shares) and a low PUC and the corporation purchases the shares for cancellation by issuing an interest bearing note to the holder, whether the interest paid or payable by the corporation on the note is deductible by the corporation?
Position:
1. Provided that the loss consolidation arrangement is within an affiliated group, the answer is yes.
2. No.
3. No.
4. No.
Reasons:
1. As stated above.