Case study 1
Tracing equity through a chain to test affiliate status
The client held shares in a holding company abroad, which in turn held the operating business. Nobody had asked whether the lower company was also an affiliate. We worked out the interest at each level, taking account of shares held by relatives in the same companies, and set the conclusion out level by level. The engagement produced a documented position on each corporation in the chain, affiliate or not and from which date, which is what the reporting and the surplus work are built on in every year afterwards.
Case study 2
A minority holding that crossed the line once relatives were counted
On its own, the client's stake in the overseas company was well short of anything they thought mattered. Siblings held shares in the same company. Once those interests were taken into account the test was met, and had been for years. We established the holdings from the company's register, documented the relationships the test turns on, and fixed the date status began. The engagement produced a written basis for treating the company as an affiliate, and an accounting exercise starting from that date rather than from the year the question was first asked.
Case study 3
Deciding whether founder shares issued abroad brought affiliate status
A client had taken shares in a company incorporated outside Canada at its formation, alongside unrelated founders. The holding was small and the company had raised money since, diluting it further. The question was whether the test had ever been met and, if so, when it stopped being met. We reconstructed the share capital through each funding round and identified the period in which the interest sat above the line. The engagement produced a defined window of affiliate status, with the share movements behind it recorded, rather than an assumption in either direction.
Case study 4
Fixing the date a company ceased to be an affiliate
The client sold their interest in the foreign corporation partway through a year and stopped thinking about it. The status, and the reporting that goes with it, ran up to the disposition rather than to the start of that year. We established the effective date from the transfer documents and from the company's own filings in its home country, which did not agree, and resolved the difference. The engagement produced a closing position: the last reportable year identified, the surplus pools drawn up to the sale, and a reason on file for filing nothing afterwards.
Case study 5
Classifying an instrument before measuring the interest it represented
Money had gone into the foreign company under an agreement that called itself a loan but carried rights that looked more like equity. Whether the client's interest met the affiliate test depended on how that instrument was characterised. We read the agreement against what the parties had actually done with it, including how returns were paid and which rights were exercised, and formed a position. The engagement produced a characterisation supported by the documents and by the conduct, and a measurement of the shareholding that follows from it.
Case study 6
Building surplus accounts years after affiliate status began
Status had existed for a long time before anyone identified it, so there were no pools for a distribution to be drawn from. We worked back through the affiliate's accounts from the year the test was first met, sorted each year's earnings by type and by source country, and carried the balances forward to the present. The engagement produced surplus accounts with an audit trail to the foreign statements standing behind them, which is what any future dividend has to be measured against.
Case study 7
A Foreign Affiliate Return Filed Years Late
The reporting obligation on a company held abroad runs separately from the corporate return and carries its own exposure. The work is reconstructing the surplus position across the open years before any filing goes in.
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Case study 8
A Canadian Working in the US on a Work Visa
Immigration status and tax residence are different tests, and a visa says nothing about which country taxes the salary. The file fixes residence, applies the employment article, and sequences the two returns so the credit lands where it is usable.
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