2015-0592251R3 Supplemental ruling

Principal Issues: Amendments to ruling number 2014-054088

Position: Ruling modified

Reasons: Amendment to Ruling F of the original ruling no. 2014-054088 and confirmation that, subject to this amendment and to the conditions, limitations, qualifications, and comments set out therein, the original ruling no. 2014-054088 will continue to be binding on the CRA

Author: XXXXXXXXXX
Section: 55(3)(b), 55(3.1), 55(3.2), 55(5)(e)(ii)

XXXXXXXXXX
                                                      2015-059225

XXXXXXXXXX, 2015

Dear XXXXXXXXXX,

Re:   Supplemental Advance Income Tax Ruling
         XXXXXXXXXX

This is in reply to your emails in which you requested amendments to our Advance Income Tax Ruling number 2014-054088 (the “Ruling”) that was issued to the above-referenced taxpayers on XXXXXXXXXX.

Capitalized terms not defined herein have the meanings assigned to them in the Ruling.

As a result of your request, the following amendments are made to the Ruling:

1) The definition of “Trust” is amended by replacing the reference to “B” by a reference to “F”.

2) Paragraph 55 is amended by adding the following subparagraph after subparagraph iii.:

iv.   A and TC1 will each sell a XXXXXXXXXX% undivided interest in a property forming part of the Real Estate, namely the property XXXXXXXXXX, to TC2 and, in consideration therefor, TC2 will issue to A and TC1 a demand, non-interest bearing and non-convertible, promissory note, which will be repaid by TC2 following the transfer of properties described in Paragraph 65.

3) The following Paragraph is added immediately after Paragraph 72:

72.1  TC1 will redeem the XXXXXXXXXX TC1 Class G shares held by the Trust. The Trust will loan the redemption proceeds to TC1 for a period not exceeding XXXXXXXXXX years.

4) Paragraph 77 is amended by replacing the words “to persons that are not related to the seller” by the words “to TC1, TC2, TC3 or TC4”.

5) Ruling F is amended to read as follows:

Provided that:

a)    E is still a beneficiary under the Trust at the time of the redemption of the TC1 Class G shares described in Paragraph 72.1; and

b)    as part of the series of transactions or events that includes the Proposed Transactions, there is not:

(i) an acquisition of property in circumstances described in paragraph 55(3.1)(a);

(ii) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(iii) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);

(iv) an acquisition of property in the circumstances described in subparagraph 55(3.1)(b)(iii);

which has not been described in the Proposed Transactions,

then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the portion of the dividends described in Rulings C and D above that constitute taxable dividends. For greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

Considering the above, we hereby confirm that, subject to the conditions, limitations, qualifications and comments set out in the Ruling, as amended by this letter, the rulings given in the Ruling will continue to be binding on the Canada Revenue Agency.

Yours truly,

XXXXXXXXXX
Section Manager
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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