2015-0619931R3 Supplementary Ruling

Principal Issues: Whether certain amendments to the proposed transactions will impact the rulings granted in the original ruling letter 2014-053220?

Position: See below.

Reasons: See below.

Author: XXXXXXXXXX
Section: -

XXXXXXXXXX                                                                                              2015-061993

Attention: XXXXXXXXXX

XXXXXXXXXX, 2015

Dear Sir,

Re:   Supplemental Income Tax Ruling
         XXXXXXXXXX

We are writing in response to your letter dated XXXXXXXXXX requesting an amendment to Income Tax Ruling 2014-053220, dated XXXXXXXXXX, 2015 (the “Original Ruling”). 

Capitalized terms used in this letter, but not defined herein, have the meanings given to them in the Original Ruling.

The Original Ruling is amended as follows:

1.    The definition of “Holdco4” is deleted.

2.    The references to “Corporation 12” and “Corporation 1” are deleted from the definition of “Predecessor Corporation”.

3.    The reference to “Holdco 4” in Paragraph 23 is deleted.

4.    Paragraph 25.3 is deleted.

5.    Paragraphs 29 to 38, inclusive, and the related heading immediately before Paragraph 29 are deleted.

6.    Paragraph 57 and the related heading immediately before it are deleted.

7.    The references to “Corporation 1” and “Corporation 12” are deleted from Paragraph 58.1.

8.    Former Paragraph 61 is replaced with new Paragraph 61 which states:

Upon the Amalgamation: (i) Newco will receive XXXXXXXXXX common shares,  XXXXXXXXXX Class B voting preference shares in Amalco XXXXXXXXXX and Amalco XXXXXXXXXX preferred shares, the terms and conditions of which will be identical to the terms and conditions of the XXXXXXXXXX preference shares in Corporation 18 which have an aggregate FMV of $XXXXXXXXXX; (ii) Corporation 23 will receive Amalco XXXXXXXXXX preferred shares, the terms and conditions of which will be identical to the terms and conditions of the XXXXXXXXXX preference shares in Corporation 7 which have an aggregate FMV of $XXXXXXXXXX; (iii) Corporation 22 will receive Amalco XXXXXXXXXX preferred shares, the terms and conditions of which will be identical to the terms and conditions of the XXXXXXXXXX non-voting preference shares in Corporation 19 which have an aggregate FMV of $XXXXXXXXXX and (iv) Corporation 12 will receive Amalco XXXXXXXXXX preferred shares, the terms and conditions of which will be identical to the terms and conditions of the Class A and Class D non-voting preference shares in Corporation 10 which have an aggregate FMV of $XXXXXXXXXX. The aggregate FMV of the Amalco XXXXXXXXXX shares issued to any shareholder of a Predecessor Corporation as described in this paragraph will be equal to the aggregate FMV of the shares of the Predecessor Corporations for which they are exchanged.

The Amalco shares to be received by Newco, Corporation 23, Corporation 12 and Corporation 22 will be held on capital account.

9.    The words “and (ii) the Corporation 12 XXXXXXXXXX non-voting preference shares which have an aggregate FMV of $XXXXXXXXXX.” in Paragraph 64 are deleted.

10.   The last sentence in Paragraph 64 is deleted from Paragraph 64 and added at the end of new Paragraph 64.1, as described below.

11.   New Paragraph 64.1, and its related heading are added after Paragraph 64 as follows:

Corporation 12’s transfer of Amalco XXXXXXXXXX shares to Newco

Corporation 12 will transfer its Amalco XXXXXXXXXX shares to Newco in exchange for preference shares in Newco, the terms and conditions of which will be identical to the terms and conditions of the Class A and D non-voting preference shares in Corporation 10 which have an aggregate FMV of $XXXXXXXXXX.

Corporation 12 and Newco will jointly elect in prescribed form and within the time limits prescribed in subsection 85(6) to have the provisions in subsection 85(1) apply to the transfer of the Amalco XXXXXXXXXX shares to Newco. The Agreed Amount in respect of the transfer will not be greater than the aggregate FMV of the Amalco XXXXXXXXXX shares at the time of the transfer. The Agreed Amount will not be less than the lesser of the amounts specified in subparagraphs 85(1)(i) and (ii).

The aggregate amount added to the Stated Capital of the preference shares in Newco will not exceed the aggregate cost to Newco of the Amalco XXXXXXXXXX shares less the amount of liabilities, if any, to be assumed by Newco. For greater certainty, the increase in the Stated Capital of the preference shares in Newco will not exceed the aggregate maximum amount that could be added to the Stated Capital of such shares without a consequential adjustment being made pursuant to subsection 85(2.1).

After the transfers of shares described in these paragraphs, Amalco XXXXXXXXXX will be Newco’s wholly-owned subsidiary.

12.   The numbering of the Paragraphs in the Original Ruling is preserved.

13.   Paragraphs (d), and (h) to (q) of Ruling A, inclusive, are deleted.

14.   The word “and” is deleted at the end of paragraph (cc) and added at the end of paragraph (dd) of Ruling A.

15.   Paragraph (ee) is added to Ruling A, as follows: “Corporation 12’s transfer of all of its Amalco XXXXXXXXXX shares to Newco as described in Paragraph 64.1”.

16.   Ruling B is amended to replace the reference to Paragraph 32 with a reference to Paragraph 28, and the references to Paragraphs 37 and 38 are deleted; and

17.   Ruling I is amended to replace the reference to Paragraph 32 with a reference to Paragraph 28, and the references to Paragraphs 37, 38 and 57 are deleted.

XXXXXXXXXX.  The omission of these steps together with the issuance of preference shares of Amalco XXXXXXXXXX to Corporation 12 (in step 61) and the transfer by Corporation 12 of Amalco XXXXXXXXXX shares to Newco (in step 64.1) maintain the fundamental economic interests of each of the existing shareholders.

Provided that the preceding statement constitutes a complete and accurate disclosure of the justification for the change to the Original Ruling described in this letter, we confirm that the rulings given in the Original Ruling, as modified by this letter, will continue to be binding on the Canada Revenue Agency subject to the same limitations and qualifications set out in the Original Ruling and in Information Circular 70-6R6 dated August 29, 2014.

Yours truly,

XXXXXXXXXX
For Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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