2019-0833091R3 Supplemental Ruling

Principal Issues: Changes (the Amendments) to Ruling no.2019-079457 (the Ruling Letter).

Position: Rulings E and G amended.

Reasons: The Amendments affect Rulings E and G.

Author: XXXXXXXXXX
Section: Subsections 55(2) and 86.1, paragraph 55(3)(b) and subparagraph 55(3.1)(b)(i)

XXXXXXXXXX
                                                                                                                                 2019-083309

XXXXXXXXXX, 2020

Dear XXXXXXXXXX:

Re:   XXXXXXXXXX
        Supplemental Income Tax Ruling Request

This is in reply to your letter dated XXXXXXXXXX, and is supplemental to our advance income tax ruling number 2019-079457 (the Ruling Letter) that was issued to the above-captioned taxpayer on XXXXXXXXXX. We also acknowledge the additional information provided to us in subsequent letters and emails (hereinafter collectively referred to as the Letters) and during our various telephone conversations.

In the Letters, you have requested certain amendments to the Ruling Letter and advised that the purpose of those amendments, generally, is to identify transactions that have been implemented and that are different from the corresponding Proposed Transactions described in the Ruling Letter.

In addition, you have advised that the Proposed Transactions described in the Ruling Letter, as modified by those amendments, have been completed. Consequently, you have requested a supplemental ruling to confirm that the Rulings given in the Ruling Letter will continue to be binding on the Canada Revenue Agency (the CRA) in light of those amendments.

As requested, the amendments (the Amendments), as set out below in this letter (the Supplemental Ruling Letter), are hereby made to the Ruling Letter:

Unless otherwise defined herein, all capitalized terms in the Supplemental Ruling Letter have the meanings assigned to them in the Ruling Letter, and, where the circumstances so require, the singular should be read as plural and vice versa.

For purposes of the Supplemental Ruling Letter, a numbered paragraph of the Supplemental Ruling Letter is defined as a “Supplemental Ruling Paragraph”.

RULING LETTER - ENTITIES INVOLVED

1.    The legal names of CanLP 12, CanLP 13 and CanLP 19 are amended to change from: (a) XXXXXXXXXX to XXXXXXXXXX, (b) XXXXXXXXXX to XXXXXXXXXX, and (c) XXXXXXXXXX to XXXXXXXXXX, respectively. 

RULING  LETTER - DEFINITIONS

2.    The following is added to the list of defined terms contained in the “DEFINITIONS” section:

“XXXXXXXXXX” has the meaning set out in Paragraph 192(i); 

“Paragraph” means a numbered paragraph of this letter;

“TC ULC Purchase Debt” has the meaning set out in Paragraph 180(a.1);

3.    The term “Spin-Out” is deleted and replaced by:

“Spin-Out” has the meaning set out in Paragraph 111;

RULING LETTER - FACTS

4.    The second paragraph of Paragraph 9(a) is amended by deleting “CanLP 15,” immediately before the reference to “CanLP 16”, and adding “(iv) 2 units in CanLP 15;” immediately before the reference to “and carries on business in Canada as the general partner of such partnerships” such that after the amendment, Paragraph 9(a) will read as follows:

(a)   all of the issued and outstanding common shares of Canco 1.

Canco 1 directly owns: (i) XXXXXXXXXX unit in each of CanLP 1, CanLP 4, CanLP 8, CanLP 9, CanLP 10, CanLP 11, CanLP 12, CanLP 13, CanLP 16, CanLP 17, CanLP 18, CanLP 19, CanGP 2, New CanLP 1 and New CanLP 2; (ii) XXXXXXXXXX unit in each of CanLP 2 and CanLP 3; (iii) XXXXXXXXXX units in CanLP 14; (iv) XXXXXXXXXX units in CanLP 15; and carries on business in Canada as the general partner of such partnerships.

Canco 1 also owns: (I) XXXXXXXXXX limited partner unit in CanLP 7; and (II) XXXXXXXXXX Cansub 4 class A common shares;

5.    Paragraph 12 is amended by replacing the reference to “there are XXXXXXXXXX DC ULC Common Shares issued and outstanding” with “there are XXXXXXXXXX DC ULC Common Shares issued and outstanding” such that after the amendment, Paragraph 12 will read as follows:

12.   The authorized share capital of DC ULC consists of an unlimited number of DC ULC Common Shares. Currently, there are XXXXXXXXXX DC ULC Common Shares issued and outstanding, each of which is entitled to XXXXXXXXXX vote per share.  All of the issued and outstanding DC ULC Common Shares are owned by Forco 3.

6.    Paragraph 14 is amended by replacing the reference to “(having an aggregate FMV of approximately $XXXXXXXXXX)” with “(having an aggregate FMV of approximately $XXXXXXXXXX)” such that after the amendment, Paragraph 14 will read as follows:

14.   The Business Segment 4 that is carried on in Canada by CanLP 5, CanLP 6, CanLP 7, CanLP 11, CanLP 12, CanLP 13, CanLP 14, CanLP 15, CanLP 18, CanLP 19 and CanGP 2 (having an aggregate FMV of approximately $XXXXXXXXXX) (the Canadian Spin Business) will be transferred to TC ULC on the DC ULC Transfer.

The business carried on by the DC ULC Group, other than the Canadian Spin Business, is referred to as the Canadian Keep Businesses.

7.    The second paragraph of Paragraph 22 is amended by replacing the reference to “all of the issued and outstanding shares of CanParent” with “all of the issued and outstanding shares of Cansub 2” such that after the amendment, Paragraph 22 will read as follows:

22.   Cansub 2 is a Taxable Canadian Corporation and a Private Corporation. All of its shares are owned by DC ULC. 

Prior to Amalgamation 1, CanParent owned all of the issued and outstanding shares of Cansub 2.  On Amalgamation 1, DC ULC acquired all of CanParent’s Cansub 2 shares.

Cansub 2 carries on a XXXXXXXXXX business in Canada which XXXXXXXXXX to members of the Foreign Pubco Group that are not directly or indirectly owned by DC ULC (the Cansub 2 Loans). 

The Cansub 2 Loans are term loans providing the debtor the ability to prepay without penalty.

Cansub 2’s only source of funding has been equity subscriptions made by CanParent to Cansub 2.  DC ULC has not advanced funding to Cansub 2 by way of debt.

8.    Paragraphs 29(b) through (g) are amended by deleting the reference to “USD” such that after the amendment, Paragraph 29 will read as follows:  

29.   The issued share capital of Cansub 3 consists of:

(a)   common shares;

(b)   class A preferred shares having an aggregate redemption amount of $XXXXXXXXXX;

(c)   class B preferred shares having an aggregate redemption amount of $XXXXXXXXXX;

(d)   class C preferred shares having an aggregate redemption amount of $XXXXXXXXXX;

(e)   class D preferred shares having an aggregate redemption amount of $XXXXXXXXXX;

(f)   class E preferred shares having an aggregate redemption amount of $XXXXXXXXXX; and

(g)   class F preferred shares having an aggregate redemption amount of $XXXXXXXXXX.

9.    Paragraph 32(e) is amended by replacing the reference to “XXXXXXXXXX%” with “XXXXXXXXXX%” such that after the amendment, Paragraph 32(e) will read as follows:

(e)   CanLP 14 as to XXXXXXXXXX% of the issued and outstanding class D preferred shares;

10.   Paragraph 52(a) is amended by replacing the reference to “(XXXXXXXXXX%)” with “(XXXXXXXXXX%)” such that after the amendment, Paragraph 52(a) will read as follows:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

11.   Paragraph 52(b) is amended by replacing the reference to “(XXXXXXXXXX%)” with “(XXXXXXXXXX%)” such that after the amendment, Paragraph 52(b) will read as follows:

(b)   Partnerco ULC, the general partner, as to XXXXXXXXXX units (XXXXXXXXXX%).

12.   Paragraph 54(a) is amended by replacing the reference to “(XXXXXXXXXX%)” with (XXXXXXXXXX%)” such that after the amendment, Paragraph 54(a) will read as follows:

(a)   DC ULC, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%);

13.   Paragraph 54(b) is amended by replacing the reference to “(XXXXXXXXXX%)” with “(XXXXXXXXXX%)” such that after the amendment, Paragraph 54(b) will read as follows:

(b)   Partnerco ULC, the general partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

14.   Paragraph 76 is amended by replacing the reference to “XXXXXXXXXX%” with “XXXXXXXXXX%” such that after the amendment, Paragraph 76 will read as follows:

76.   CanLP 14 directly owns XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3.

15.   Paragraph 78(a) is amended by replacing the reference to “(XXXXXXXXXX%)” with “(XXXXXXXXXX%)” such that after the amendment, Paragraph 78(a) will read as follows:

(a)   CanLP 6, the limited partner, as to XXXXXXXXXX units (XXXXXXXXXX%); and

16.   Paragraph 78(b) is amended by replacing the reference to “XXXXXXXXXX unit (XXXXXXXXXX%)” with “XXXXXXXXXX units (XXXXXXXXXX%)” such that after the amendment, Paragraph 78(b) will read as follows:

(b)   Canco 1, the general partner, as to XXXXXXXXXX units (XXXXXXXXXX%).

17.   Paragraph 112 is amended by replacing:

(a)   the reference to “by paying a dividend-in-kind of Foreign Pubco Spinco common shares to Foreign Pubco shareholders, as described in Paragraph 192(i)” with “by transferring all Foreign Pubco Spinco common shares owned by it to the Foreign Pubco shareholders under the terms of the XXXXXXXXXX, as described in Paragraph 192(i)”; and

(b)   the reference to “$XXXXXXXXXX USD to $XXXXXXXXXX USD” with “$XXXXXXXXXX USD to $XXXXXXXXXX USD”.

After the amendment, Paragraph 112 will read as follows:

112.  Foreign Pubco plans to accomplish the Spin-Out by transferring all Foreign Pubco Spinco common shares owned by it to the Foreign Pubco shareholders under the terms of the XXXXXXXXXX, as described in Paragraph 192(i).

Currently, the aggregate FMV of all of the issued and outstanding common shares of Foreign Pubco Spinco is estimated to be in the range of $XXXXXXXXXX USD to $XXXXXXXXXX USD and the aggregate FMV of all of the issued and outstanding Foreign Spinco XXXXXXXXXX is estimated to be in the range of $XXXXXXXXXX USD to $XXXXXXXXXX USD.

RULING LETTER – SUBJECT TRANSACTIONS

18.   Paragraph 113.1(f) is amended by replacing the reference to “(XXXXXXXXXX%)” with “(XXXXXXXXXX%)” such that after the amendment, Paragraph 113.1(f) will read as follows:

(f)   CanParent owned XXXXXXXXXX limited partner unit (XXXXXXXXXX%) in CanLP 7;

19.   Paragraph 114(h) is amended by replacing the reference to “(XXXXXXXXXX%)” with “(XXXXXXXXXX%)” and “$XXXXXXXXXX USD” with “$XXXXXXXXXX” such that after the amendment, Paragraph 114(h) will read as follows:

(h)   CanParent, as a limited partner of CanLP 7, sold XXXXXXXXXX unit (XXXXXXXXXX%) in CanLP 7 to Canco 3 in consideration for $XXXXXXXXXX, such amount being equal to the FMV of that interest in CanLP 7 immediately before the sale.

CanParent did not realize a capital gain on the sale of its interest in CanLP 7.

20.   Paragraph 120.3 is amended by replacing the reference to “$XXXXXXXXXX” with “$XXXXXXXXXX” such that after the amendment, Paragraph 120.3 will read as follows:

120.3.     Prior to XXXXXXXXXX, Cansub 4 owned XXXXXXXXXX units in CanLP 7.     

On XXXXXXXXXX, CanLP 7 redeemed XXXXXXXXXX units owned by Cansub 4 in consideration for $XXXXXXXXXX, such amount being equal to the aggregate FMV of the units immediately before the redemption. Cansub 4 realized a gain of approximately $XXXXXXXXXX on the redemption of its interest in CanLP 7.

21.   Paragraph 120.4 is amended by replacing the reference to “$XXXXXXXXXX” with “$XXXXXXXXXX” such that after the amendment, Paragraph 120.4 will read as follows:

120.4.     Prior to XXXXXXXXXX, Cansub 4 owned XXXXXXXXXX% of the issued and outstanding class D preferred shares of Cansub 3.

On XXXXXXXXXX, Cansub 4 sold all its class D preferred shares of Cansub 3 to CanLP 11 in consideration for $XXXXXXXXXX, such amount being equal to the aggregate FMV of the Cansub 3 shares immediately before the sale. Cansub 4 realized a gain of approximately $XXXXXXXXXX on the sale of its Cansub 3 shares.

22.   Paragraph 120.12(c) is amended by replacing the reference to “as a limited partner of CanPL 6” with “as a limited partner of CanLP 6” such that after the amendment, Paragraph 120.12 (c) will read as follows:  

(c)   DC ULC, as a limited partner of CanLP 6, sold XXXXXXXXXX (XXXXXXXXXX%) units in CanLP 6 to Partnerco ULC in consideration for $XXXXXXXXXX USD, such amount being equal to the aggregate FMV of the units immediately before the sale. DC ULC did not realize a capital gain on the sale of its interest in CanLP 6.  The partners of CanLP 6 agreed that Partnerco ULC would become an additional general partner of CanLP 6; and

RULING LETTER – PROPOSED TRANSACTIONS

23.   Paragraph 121(a) is amended by replacing the reference to “exceeds the aggregate FMV of the TC ULC Assumed Liabilities” with “exceeds the aggregate FMV of the TC ULC Assumed Liabilities and the TC ULC Purchase Debt” such that after the amendment, Paragraph 121(a) will read as follows: 

(a)   each TC ULC Preferred Share will be redeemable, subject to applicable law, at any time at the option to TC ULC at an amount (such amount being the TC ULC Redemption Amount) equal to the amount by which the aggregate FMV of the Distribution Property (for greater certainty, including any Additional Cash Transfer) transferred by DC ULC to TC ULC on the DC ULC Transfer exceeds the aggregate FMV of the TC ULC Assumed Liabilities and the TC ULC Purchase Debt, and then dividing such amount by the number of TC ULC Preferred Shares issued in consideration for the DC ULC Transfer, plus the amount of all declared but unpaid dividends thereon; 

24.   Paragraph 158.1 is amended by replacing the reference to “$XXXXXXXXXX” with “$XXXXXXXXXX” such that after the amendment, Paragraph 158.1 will read as follows:

158.1.     Forco 5 and Forco 6 will, in aggregate, repay to DC ULC a portion of the Principal Amount owing on the Cansub 2 Spin Loans. It is anticipated that approximately $XXXXXXXXXX of the Cansub 2 Spin Loans will be repaid.

25.   Paragraph 176 is amended by replacing the reference to “$XXXXXXXXXX” with “$XXXXXXXXXX” and “$XXXXXXXXXX” with “$XXXXXXXXXX” such that after the amendment, Paragraph 176 will read as follows:

176.  Immediately after the determination of the types of property and the aggregate net FMV of each type of property described in Paragraphs 173 and 174, DC ULC will transfer (the DC ULC Transfer), and will be legally obligated to transfer the Additional Cash Transfer, if any, as described in Paragraph 179, a proportionate share of each type of its property to TC ULC (the Distribution Property) such that, immediately following such transfer, the Additional Cash Transfer and the liability assumption described in Paragraph 180(a), the aggregate net FMV of each type of property so transferred to TC ULC (determined in each case on the basis of the principles described in Paragraphs 173 and 174) will be equal to or approximate that proportion of the aggregate net FMV of all property of DC ULC of that type, determined immediately before such transfer that:

(a)   the aggregate FMV, immediately before the DC ULC Transfer, of all of the DC ULC Special Shares owned by TC ULC at that time

      is of

(b)   the aggregate FMV, immediately before the DC ULC Transfer, of all of the issued and outstanding DC ULC New Shares at that time.

The Distribution Property will include all of DC ULC’s Spinco ULC Common Shares and Partnerco ULC Common Shares, and all or a portion of the Cansub 2 Spin Loans remaining after the partial repayment described in Paragraph 158.1 (which is currently estimated to be $XXXXXXXXXX and is referred to as the Distributed Cansub 2 Spin Loans) owned by DC ULC immediately before the DC ULC Transfer. The remaining portion of the Cansub 2 Spin Loans will be referred to as the Retained Cansub 2 Spin Loans.

The transfer of the Distributed Cansub 2 Spin Loans to TC ULC will constitute an assignment of the Distributed Cansub 2 Spin Loans by DC ULC to TC ULC such that the Distributed Cansub 2 Spin Loans will remain in existence and not be considered to be a new debt.

At the time of the DC ULC Transfer, the aggregate FMV of the Distribution Property will be approximately $XXXXXXXXXX.

26.   Paragraph 177 is amended by adding “, and determined without taking into account the TC ULC Purchase Debt and its repayment described in Paragraph 191.70,” immediately before the reference to “as compared to what TC ULC would have received” such that after the amendment, Paragraph 177 will read as follows: 

177.  The expression “approximate that proportion” described in Paragraphs 176, 179 and 184  means that the discrepancy from that proportion, if any, would not exceed XXXXXXXXXX%, determined as a percentage of the aggregate net FMV of each type of property of DC ULC which TC ULC has received (or DC ULC has retained), and determined without taking into account the TC ULC Purchase Debt and its repayment described in Paragraph 191.70, as compared to what TC ULC would have received (or DC ULC would have retained) had it received (or retained) its appropriate pro rata share of the aggregate net FMV of that type of property of DC ULC.

27.   Paragraph 180 is amended by:

(a)   replacing the reference in Paragraph 180(a) to “$XXXXXXXXXX” with $XXXXXXXXXX”; and the reference to “$XXXXXXXXXX” with “$XXXXXXXXXX”, and deleting the word “and” at the end of Paragraph 180(a);

(b)   adding new Paragraph 180(a.1) after Paragraph 180(a) as follows:

(a.1) deliver to DC ULC a promissory note, payable to DC ULC on demand without interest, having a Principal Amount and FMV equal to approximately $XXXXXXXXXX (the TC ULC Purchase Debt); and

(c)   replacing the reference in Paragraph 180(b) to “having an aggregate FMV at that time” with “having an aggregate FMV and redemption amount at that time”; and the reference to “exceeds the TC ULC Assumed Liabilities, as described in Paragraph 180(a)” with “exceeds the aggregate of the TC ULC Assumed Liabilities, as described in Paragraph 180(a), and the TC ULC Purchase Debt, as described in Paragraph 180(a.1).”

After the amendments, Paragraph 180 will read as follows:

180.  As consideration for the Distribution Property, TC ULC will:

(a)   assume certain liabilities (the TC ULC Assumed Liabilities) of DC ULC, including a portion of the Newco XXXXXXXXXX Loan (the Newco XXXXXXXXXX Assumed Loan). The Principal Amount and FMV of the Newco XXXXXXXXXX Assumed Loan will be approximately $XXXXXXXXXX. The remaining portion of the Newco XXXXXXXXXX Loan (approximately $XXXXXXXXXX) will be referred to as the Newco XXXXXXXXXX Retained Loan;

(a.1) deliver to DC ULC a promissory note, payable to DC ULC on demand without interest, having a Principal Amount and FMV equal to approximately $XXXXXXXXXX (the TC ULC Purchase Debt); and

(b)   issue TC ULC Preferred Shares to DC ULC having an aggregate FMV and redemption amount at that time equal to the amount by which the aggregate FMV of the Distribution Property transferred to TC ULC at that time (for greater certainty including any Additional Cash Transfer) exceeds the aggregate of the TC ULC Assumed Liabilities, as described in Paragraph 180(a), and the TC ULC Purchase Debt, as described in Paragraph 180(a.1).

28.   Paragraph 183 is amended by replacing the reference to “less the TC ULC Assumed Liabilities, as described in Paragraph 180(a)” with “less the aggregate of the TC ULC Assumed Liabilities, as described in Paragraph 180(a), and the TC ULC Purchase Debt, as described in Paragraph 180(a.1).” After the amendment, Paragraph 183 will read as follows:

183.  The amount that will be added to the Stated Capital of the TC ULC Preferred Shares issued by TC ULC as consideration for the Distribution Property, will not exceed the aggregate cost, determined pursuant to subsection 85(1), to TC ULC of the Distribution Property acquired from DC ULC, less the aggregate of the TC ULC Assumed Liabilities, as described in Paragraph 180(a), and the TC ULC Purchase Debt, as described in Paragraph 180(a.1).

For greater certainty, the increase to the aggregate PUC of the TC ULC Preferred Shares issued to DC ULC, will not exceed the maximum amount that could be added to the aggregate PUC of such shares, having regard to subsection 85(2.1).

29.   Paragraph 185(g) is amended by replacing the reference to “XXXXXXXXXX CanLP 15 unit” with “XXXXXXXXXX CanLP 15 units” such that after the amendment, Paragraph 185(g) will read as follows:

(g)   XXXXXXXXXX CanLP 15 units in consideration for $XXXXXXXXXX USD;

30.   Paragraph 186 is amended by replacing the reference to “Immediately following the DC ULC Transfer, the following transactions will occur in the following order:” with “ Immediately following the DC ULC Transfer, the transaction described in Paragraph 186(b) will occur before the transaction described in Paragraph 186(a):”.  After the amendment, Paragraph 186 will read as follows:

186.  Immediately following the DC ULC Transfer, the transaction described in Paragraph 186(b) will occur before the transaction described in Paragraph 186(a):

(a)   TC ULC will redeem all of the TC ULC Preferred Shares owned by DC ULC (the TC ULC Redemption) for an amount equal to their aggregate TC ULC Redemption Amount. 

In satisfaction of the aggregate TC ULC Redemption Amount for such shares, TC ULC will issue a promissory note, payable to DC ULC on demand without interest, having a Principal Amount and FMV equal to the aggregate TC ULC Redemption Amount of the TC ULC Preferred Shares so redeemed (the TC ULC Redemption Note). 

DC ULC will accept the TC ULC Redemption Note in full payment of the redemption price of the TC ULC Preferred Shares, and will assume the full risk of the note being dishonoured.

TC ULC will not designate the TC ULC Dividend to be an Eligible Dividend under subsection 89(14), as all of the issued and outstanding shares of DC ULC (the dividend recipient) are owned by Forco 3, a foreign corporation, and, therefore, this designation will not be relevant.

(b)   DC ULC will redeem all of the DC ULC Special Shares owned by TC ULC (the DC ULC Redemption) for an amount equal to their aggregate DC ULC Redemption Amount. 

In satisfaction of the aggregate DC ULC Redemption Amount for such shares, DC ULC will issue a promissory note, payable to TC ULC on demand without interest, having a Principal Amount and FMV equal to the aggregate DC ULC Redemption Amount of the DC ULC Special Shares so redeemed (the DC ULC Redemption Note). 

TC ULC will accept the DC ULC Redemption Note in full payment of the redemption price of the DC ULC Special Shares, and will assume the full risk of the note being dishonoured.

DC ULC will not designate the DC ULC Dividend to be an Eligible Dividend under subsection 89(14), as all of the issued and outstanding shares of TC ULC (the dividend recipient) are owned by Foreign Spinco, a foreign corporation, and, therefore, this designation will not be relevant.

31.   New Paragraph 191.70 is added after Paragraph 191.7 as follows:  

191.70     TC ULC will repay the TC ULC Purchase Debt in cash.

32.   Paragraph 192(i) is deleted and replaced by the following:

(i)   Foreign Pubco will transfer all of its Foreign Pubco Spinco common shares to the Foreign Pubco shareholders XXXXXXXXXX.

XXXXXXXXXX. 

Cash will be delivered by an exchange agent (XXXXXXXXXX), in lieu of any fractional Foreign Pubco Spinco common shares, XXXXXXXXXX. 

The exchange agent will:

(I)   act as agent for those Foreign Pubco shareholders;

(II) aggregate all such fractional shares;

(III)      cause such fractional shares to be sold in the open market for the account of those shareholders; and

(IV) distribute the proceeds, less any brokerage commissions or other fees, to each shareholder entitled thereto in accordance with such holder’s proportional interest in the aggregate number of shares sold.

RULING LETTER – ADDITIONAL INFORMATION

33.   Paragraph 202 is amended by:

(a)   deleting the word “or” at the end of Paragraph 202(a);

(b)   deleting the full stop at the end of Paragraph 202(b) and replacing it with “; or”; and

(c)   adding new Paragraph 202(c) after Paragraph 202(b) as follows:  

(c)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Pubco common shares be derived, directly or indirectly, from one or more of the shares of DC ULC or TC ULC.

After the amendments, Paragraph 202 will read as follows:

202.  At no time, during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, will:

(a)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Spinco XXXXXXXXXX be derived, directly or indirectly, from one or more of the shares of DC ULC or TC ULC;

(b)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Pubco Spinco common shares be derived, directly or indirectly, from one or more of the shares of TC ULC; or

(c)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Pubco common shares be derived, directly or indirectly, from one or more of the shares of DC ULC or TC ULC.

For greater certainty, the Proposed Transactions constitute a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D.

RULING LETTER – PURPOSE OF COMPLETED TRANSACTIONS AND PROPOSED TRANSACTIONS

34.   Paragraph 244 is deleted and replaced by the following:

244   XXXXXXXXXX

SUPPLEMENTAL RULING LETTER - ADDITIONAL INFORMATION

35.   On XXXXXXXXXX, the DC ULC Transfer occurred.

36.   XXXXXXXXXX.

On XXXXXXXXXX, Foreign Pubco transferred all Foreign Pubco Spinco common shares owned by it to the Foreign Pubco shareholders XXXXXXXXXX.

XXXXXXXXXX.

37.   The TC ULC Purchase Debt was repaid in cash on or about XXXXXXXXXX.

SUPPLEMENTAL RULING LETTER - PURPOSES OF THE AMENDMENTS TO THE RULING LETER

XXXXXXXXXX.

SUPPLEMENTAL RULING LETTER – AMENDMENTS TO RULINGS E AND G OF THE RULING LETTER

Based on the Amendments, Rulings E and G of the Ruling Letter are hereby amended as follows:

Ruling E

Ruling E is amended by adding new paragraph (a.1) after paragraph (a) such that after the amendment, Ruling E will read as follows:

E.    By virtue of the provisions of paragraph 55(3)(b), subsection 55(2) will not apply to the Taxable Dividends referred to in Ruling D, provided that:

(a)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Spinco XXXXXXXXXX, is not, at any time during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, derived, directly or indirectly, from one or more of the shares of TC ULC or DC ULC;

(a.1) XXXXXXXXXX% or more of the FMV of any one of the Foreign Pubco common shares, is not, at any time during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, derived, directly or indirectly, from one or more of the shares of TC ULC or DC ULC;

(b)   XXXXXXXXXX% or more of the FMV of any one of the Foreign Pubco Spinco common shares, is not, at any time during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, derived, directly or indirectly, from one or more of the shares of TC ULC; or

(c)   as part of a Series of Transactions or Events that includes the Taxable Dividends referred to in Ruling D, there is not:

(i)   an acquisition of property in the 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); or

(iv)  an acquisition of shares in the capital stock of DC ULC in the circumstances described in subparagraph 55(3.1)(b)(iii),

that has not been described herein and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

Ruling G

Ruling G is deleted in its entirety and the following substituted therefor:

G.    The provisions of section 86.1 will not apply to the exchange, by a particular shareholder of Foreign Pubco, of its Foreign Pubco common shares for Foreign Pubco’s Foreign Pubco Spinco common shares XXXXXXXXXX, as described in Paragraph 192(i).

CONFIRMATION

Provided that the preceding statements and the statements contained in the Ruling Letter  constitute a complete and accurate disclosure of all the relevant facts and proposed transactions and of the purposes of the Proposed Transactions and the Amendments, notwithstanding the Amendments, we hereby confirm that, subject to the conditions, limitations, qualifications and comments set out in the Ruling Letter and in Information Circular 70-6R10 dated September 29, 2020, the Rulings given in the Ruling Letter, as hereby amended, will continue to be binding on the CRA.   

Yours truly,

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

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