2005 Ruling 2005-0117591R3 - Reorganization of a mutual fund trust

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether the proposed transactions to effectively replace a taxable Canadian corporation (Opco) directly and indirectly owned (Holdco) by a mutual fund trust (Fund) with a partnership structure would constitute a misuse of section 132.2 or an abuse of the provisions of the Act read as a whole. (Opco & Holdco amalgamate to form Amalco I. A subsidiary corporation (GPco) 100% owned by Fund will be created. GPco & Amalco I will form a Partnership with Amalco I transferring all former operating assets on a rollover basis. A new mutual fund corporation (Newco) will be created and the Fund will distribute Class A shares acquired to current Fund unitholders so that Newco will meet mutual fund requirements. Fund will then roll it's shares of Amalco I to Newco under s.85(1). Newco & Amalco I will amalgamate to form Amalco II. Fund will use 132.2 to acquire all the assets of Amalco II and become the limited partner of the Partnership. Amalco II will be wound up.)

Position: No

Reasons: The proposed transactions do not involve the type of conversion of a taxable Canadian corporation to a mutual fund corporation that has historically caused us concern. The current corporations are 100% within the mutual fund family and thus the conversion/restructuring is within that family. The desired structure could have been used when the MFT was created.

XXXXXXXXXX 								2005-011759

XXXXXXXXXX, 2005

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Fund")

This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the Fund. We also acknowledge your correspondence of XXXXXXXXXX. The documents submitted with your request are part of this document only to the extent described herein.

You confirmed that, to the best of your knowledge and that of the Fund, none of the issues involved in this ruling request:

(i) is in an earlier return of the taxpayer or a related person;

(ii) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person;

(iii) is under objection or appeal by the taxpayer or a related person;

(iv) is before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; or

(v) is the subject of a ruling previously considered by the Income Tax Rulings Directorate.

Definitions

In this letter, the following terms have the meanings specified:

"Act" means the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), as amended, and all references to a statute are to the Act, unless otherwise indicated;

"agreed amount" in respect of an asset means the amount that the transferor and the transferee of the asset agree upon in their election under subsection 85(1) in respect of that asset;

"capital property" has the meaning assigned by section 54 and subsection 248(1);

"CRA" means Canada Revenue Agency;

"Fund" means XXXXXXXXXX;

"Fund Declaration of Trust" means the declaration of trust of the Fund amended and restated XXXXXXXXXX and further amended and restated XXXXXXXXXX;

"Fund Unit" means a trust unit of the Fund;

"Holdco" means XXXXXXXXXX.;

XXXXXXXXXX

"Opco" means XXXXXXXXXX.;

"Partnership Unit" means the interest of a limited partner in the Partnership's capital;

"Regulations" means the Income Tax Regulations (Canada); and

XXXXXXXXXX

Facts

1. The Fund is a limited purpose trust formed under the laws of the Province of XXXXXXXXXX pursuant to the Fund Declaration of Trust. The Fund is a mutual fund trust as defined in subsection 132(6) that was established to, among other things, invest in securities, including shares and indebtedness of Opco and shares of Holdco. The Fund is not a registered investment as defined in section 204.4. The Fund Units are traded on the XXXXXXXXXX.

2. Through its subsidiaries, the Fund carries on a XXXXXXXXXX business exclusively in Canada (see paragraph 12 below).

3. The head office of the Fund is located at XXXXXXXXXX. The Fund's tax affairs are administered by CRA's XXXXXXXXXX Tax Services Office. The Fund's trust account number is XXXXXXXXXX. The Fund has a XXXXXXXXXX year-end for purposes of the Act.

4. Under the Fund Declaration of Trust, the Fund may issue an unlimited number of Fund Units. Each Fund Unit represents an equal and undivided beneficial interest in the distributions made by the Fund, as well as the net assets of the Fund in the event of termination or winding up of the Fund. Each Fund Unit is transferable, entitles the holder thereof to one vote on all matters to be voted on at all meetings of unitholders and is redeemable at the demand of the holder for a redemption price determined based on the trading price of Fund Units on the XXXXXXXXXX. The Fund Declaration of Trust prohibits non-residents of Canada from collectively owning a majority of the Fund Units.

5. There were XXXXXXXXXX Fund Units issued and outstanding as of XXXXXXXXXX As of XXXXXXXXXX, Fund Units representing less than XXXXXXXXXX% of the outstanding Fund Units were owned by the Fund trustees and directors and officers of Opco and Holdco. Less than XXXXXXXXXX% of the Fund Units are owned by non-residents of Canada.

6. Opco, formed on XXXXXXXXXX as a result of the amalgamation of XXXXXXXXXX and the predecessor Opco, is a corporation governed by the XXXXXXXXXX and is a taxable Canadian corporation and a private corporation for purposes of the Act. The head office of Opco is located at XXXXXXXXXX, and its tax affairs are administered by CRA's XXXXXXXXXX Tax Services Office. Opco's business number is XXXXXXXXXX. Opco has a XXXXXXXXXX year end for purposes of the Act.

7. The authorized capital of Opco consists of an unlimited number of voting class A common shares (the "Opco Class A Shares"), an unlimited number of non-voting class B common shares (the "Opco Class B Shares") and an unlimited number of non-voting class C common shares (the "Opco Class C Shares"). Prior to the consummation of the transaction described in paragraph 16 below, the Fund held XXXXXXXXXX Opco Class A Shares, representing all of the issued and outstanding Opco Class A Shares, with an aggregate adjusted cost base and paid-up capital of $XXXXXXXXXX. The fair market value of the Opco Class A Shares is at least equal to this amount. There are no issued and outstanding Opco Class B Shares. Holdco holds XXXXXXXXXX Opco Class C Shares, representing all of the issued and outstanding Opco Class C Shares, with an aggregate adjusted cost base and paid-up capital of $XXXXXXXXXX . The estimated fair market value of the Opco Class C Shares is nominal. The Opco Class A Shares and the Opco Class C Shares are capital property to the Fund and Holdco, respectively, for purposes of the Act.

8. Holdco was incorporated under the XXXXXXXXXX on XXXXXXXXXX and is a taxable Canadian corporation and a private corporation for purposes of the Act. The head office of Holdco is located at XXXXXXXXXX, and its tax affairs are administered by CRA's XXXXXXXXXX Tax Services Office. Holdco's business number is XXXXXXXXXX. Holdco has a XXXXXXXXXX year end for purposes of the Act.

9. The authorized capital of Holdco consists of an unlimited number of voting class A shares (the "Holdco Class A Shares") and an unlimited number of non-voting class B common shares (the "Holdco Class B Shares"). The Fund owns XXXXXXXXXX Holdco Class A Shares, representing all of the issued and outstanding Holdco Class A Shares, with an aggregate adjusted cost base and paid up capital of $XXXXXXXXXX. The estimated fair market value of such shares is $XXXXXXXXXX. Opco owns XXXXXXXXXX Holdco Class B Shares, representing all of the issued and outstanding Holdco Class B Shares, with an aggregate adjusted cost base of $XXXXXXXXXX and a paid-up capital of $XXXXXXXXXX. The fair market value of such shares is estimated to be a nominal amount. The Holdco Class A Shares and the Holdco Class B Shares are capital property to the Fund and Opco, as the case may be, for purposes of the Act.

10. In addition to the Fund's investment in Opco Class A Shares, prior to the consummation of the transaction described in paragraph 16 below, the Fund held $XXXXXXXXXX principal amount of notes (the "Opco Notes") issued by Opco in connection with the transactions described in paragraph 12 below. The Opco Notes bear interest at a rate of XXXXXXXXXX% per annum, with interest payable monthly. The Opco Notes mature on XXXXXXXXXX. The Opco Notes are capital property to the Fund for purposes of the Act.

11. Opco has $XXXXXXXXXX in available credit facilities, including a $XXXXXXXXXX term facility and a $XXXXXXXXXX revolving facility (which, in turn, includes a $XXXXXXXXXX operating line), that mature XXXXXXXXXX. As at XXXXXXXXXX the amount of $XXXXXXXXXX was outstanding under these credit facilities.

12. The Fund acquired the Opco Class A Shares, the Opco Notes and the Holdco Class A Shares in connection with an initial public offering of Fund Units by the Fund that was completed on XXXXXXXXXX. The transactions involved in the initial public offering as well as a description of the Canadian XXXXXXXXXX business carried on by Opco (the "Business") are described in detail in the prospectus filed in connection with the initial public offering.

13. Since XXXXXXXXXX Opco has acquired XXXXXXXXXX additional XXXXXXXXXX businesses for an aggregate purchase price of $XXXXXXXXXX.

14. At the annual and special meeting of the unitholders of the Fund on XXXXXXXXXX the number of trustees of the Fund was increased from XXXXXXXXXX to XXXXXXXXXX. All XXXXXXXXXX trustees of the Fund are individuals resident in Canada. Under the Fund Declaration of Trust, holders of the Fund Units are entitled to vote with respect to the election or removal of the trustees of the Fund, as well as the election or removal of the nominees of the Fund to serve as directors of Opco.

15. At the annual and special meeting of the unitholders of the Fund, the unitholders of the Fund also approved the proposed transactions described below, by way of special resolution conditional on the Fund receiving the rulings requested below. In accordance with applicable securities legislation, the Fund sent to each of its unitholders in advance of the special meeting, a management information circular dated XXXXXXXXXX (the "Circular") describing the proposed transactions in respect of which approval was sought. The Fund filed the Circular with the securities regulators in each of the provinces in Canada as required under the applicable securities legislation. Such legislation requires that the Circular include information sufficient to enable a reasonable unitholder to form a reasoned judgment concerning the nature and effect of the proposed transactions and the resulting entities in the organizational structure of the Fund. This information must include the disclosure for both the Fund and Newco (as defined in paragraph 19 below) prescribed by the form of prospectus that such entities would be eligible to use for a distribution of securities.

16. XXXXXXXXXX

Proposed Transactions

Unless otherwise specified, the proposed transactions will take place in the order described below.

17. The Fund will incorporate a subsidiary corporation ("GPco") under the XXXXXXXXXX. The authorized capital of GPco will consist of an unlimited number of common shares. Upon incorporation, the Fund will subscribe for one common share of GPco for nominal consideration. The board of directors of GPco will consist of one or more persons, each of whom will be a person who is a senior employee of Opco other than the Chief Executive Officer and none of whom at any time will be a trustee of the Fund. The board of directors of Gpco will have the powers and authority to manage the business and affairs of Gpco, and Gpco will administer, manage, control and operate the business of the Partnership (as defined in paragraph 18 below). The trustees of the Fund, in their capacity as trustees of the Fund, will not have or limit such powers and authority.

18. GPco and Opco will form a limited partnership (the "Partnership") under the laws of the Province of XXXXXXXXXX. Upon formation, GPco will subscribe nominal consideration for a general partner interest in the Partnership and Opco will subscribe nominal consideration for one limited partnership unit of the Partnership (a "Partnership Unit"). Gpco will have a XXXXXXXXXX% interest in the Partnership.

19. The Fund will incorporate a subsidiary corporation ("Newco") under the XXXXXXXXXX and will acquire one common share of Newco on incorporation for a nominal amount. The only undertaking of Newco will be the investing of its funds in property, other than real property, including the Amalco I Shares, the Opco Notes and Partnership Units.

20. The authorized capital of Newco will consist of an unlimited number of common shares, class A shares ("Newco Class A Shares" and, following the amalgamation described in paragraph 29 below, "Amalco II Class A Shares") and class B shares ("Newco Class B Shares" and, following the amalgamation described in paragraph 29 below, "Amalco II Class B Shares"). Each common share of Newco (and each common share of Amalco II following the amalgamation described in paragraph 29 below) will: (i) entitle the holder thereof to one vote on all matters to be voted on at all meetings of shareholders; (ii) entitle the holder thereof to receive dividends if, as and when declared by the board of directors of Newco; (iii) be redeemable, at the option of the holder or Newco for a redemption price of $XXXXXXXXXX per share; and (iv) on the liquidation, dissolution or winding up of Newco, entitle the holder to share rateably in any remaining assets of Newco. Each Newco Class A Share and each Newco Class B Share will: (i) be non-voting; (ii) entitle the holder thereof to receive dividends if, as and when declared by the board of directors of Newco; (iii) be redeemable, at the option of Newco, without notice to the holders thereof for a redemption price per share equal to the fair market value of any consideration paid to acquire such share on issuance (the "Redemption Price"); (iv) be redeemable at the option of the holder upon not less than three business days, prior written notice to Newco for a redemption price per share equal to the Redemption Price; and (v) on the liquidation, dissolution or winding up of Newco, entitle the holder to receive the aggregate Redemption Price, together with any declared and unpaid dividends to the date of payment, before any amount will be paid or any assets of Newco distributed to the holders of common shares of Newco.

21. Opco and Holdco (referred to collectively in this paragraph as the "predecessor corporations") will amalgamate pursuant to an amalgamation agreement under the provisions of the XXXXXXXXXX to form Amalco I in such a manner that: (i) all the property (except any amounts receivable from any predecessor corporation or shares in the capital stock of any predecessor corporation) of the predecessor corporations held immediately before the amalgamation will become property of Amalco I by virtue of the amalgamation; (ii) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation (including the Opco Notes) will become liabilities of Amalco I; and (iii) all of the Opco Class C Shares held by Holdco and all of the Holdco Class B Shares held by Opco immediately prior to the amalgamation will be cancelled on the amalgamation. Pursuant to the terms of the amalgamation agreement, the authorized capital of Amalco I will consist of an unlimited number of common shares and the Fund will receive XXXXXXXXXX common shares of Amalco I (the "Amalco I Shares"), representing all of the issued and outstanding common shares of Amalco I in exchange for its Opco Class A Shares and its Holdco Class A Shares on the amalgamation.

22. Amalco I will transfer all of its assets to the Partnership in exchange for (a) the assumption by the Partnership of certain existing liabilities of Opco XXXXXXXXXX and (b) additional Partnership Units. Each employee of Amalco I (as successor to the amalgamation of Opco) will become an employee of GPco. GPco and Amalco I will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have the provisions of subsection 97(2) apply to the transfer of assets to the Partnership by Amalco I so that no gain or loss will be realized by Amalco I on the transfer of assets to the Partnership.

23. Concurrently with the transfer of assets by Amalco I to the Partnership, the existing credit facilities described in paragraph 11 above will be restructured. This will involve (i) XXXXXXXXXX and (ii) Amalco I assigning to the Partnership, and the Partnership assuming, the rights and obligations of Amalco I under the existing revolving facility. In connection with the foregoing, the existing credit agreement will be amended and restated to XXXXXXXXXX, as borrowers thereunder. In addition, each subsidiary of the Fund, including the Partnership, will provide customary guarantees of, and security for, the Fund's obligations under the term facility.

24. In accordance with the Circular (see paragraph 15 above), the Fund will subscribe for a number of Newco Class A Shares equal to the number of Fund Units then outstanding for a subscription price per Newco Class A Share of $XXXXXXXXXX, or such greater amount as is determined on the date of the reorganization. To the extent necessary, the Fund will borrow on a daylight loan basis to fund the aggregate subscription price payable for the Newco Class A Shares.

25. In accordance with the Circular, the Fund will distribute, as a return of capital, each Newco Class A Share acquired, as described in paragraph 24 above, to the holders of Fund Units. Each holder of Fund Units will receive a number of Newco Class A Shares equal to the number of Fund Units owned by such holder immediately before the distribution of the Newco Class A Shares. The distribution of the Newco Class A Shares and the Fund Units distributed in paragraph 31 below to the unitholders of the Fund in accordance with the Circular will be exempt from the registration and prospectus requirements of applicable Canadian securities legislation. The number of Fund Units owned by each holder will not be reduced as a result of this distribution. The Newco Class A Shares will be listed on the XXXXXXXXXX immediately following the distribution of such shares to the holders of Fund Units.

26. Following the distribution of the Newco Class A Shares and the listing of such shares on the XXXXXXXXXX, as described in paragraph 25 above, and prior to the amalgamation described in paragraph 29 below, Newco will be a public corporation pursuant to paragraph (a) of the definition of that term in subsection 89(1).

27. The Fund and Newco will enter into an agreement of purchase and sale under which the Fund will transfer the Amalco I Shares and the Opco Notes then outstanding to Newco for an aggregate purchase price equal to the respective fair market value of each property so transferred. Newco will satisfy the purchase price by issuing to the Fund Newco Class B Shares with an aggregate fair market value equal to the fair market value of the Amalco I Shares and the Opco Notes.

28. The Fund will jointly elect with Newco, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Amalco I Shares and the Opco Notes as described in paragraph 27 above. The agreed amount in respect of the Amalco I Shares and the Opco Notes will be an amount not less than the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). In each case, the agreed amount will not exceed the fair market value of the respective property, nor will it be less than the amount permitted under paragraph 85(1)(b).

29. Newco and Amalco I (referred to collectively in this paragraph as the "predecessor corporations") will amalgamate pursuant to an amalgamation agreement under the provisions of the XXXXXXXXXX to form Amalco II in such a manner that: (i) all of the property (except any amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations held immediately before the amalgamation will become property of Amalco II by virtue of the amalgamation; (ii) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Amalco II; and (iii) all of the Amalco I Shares and Opco Notes held by Newco immediately prior to the amalgamation will be cancelled by virtue of the amalgamation. Pursuant to the amalgamation agreement, the articles of amalgamation of Amalco II will be the same as the articles of Newco, and each shareholder of Newco will receive shares of Amalco II that are identical to the shares of Newco held by such shareholder immediately prior to the amalgamation. The amalgamation agreement will specify that the amalgamation is effective at a time after the distribution of the Newco Class A Shares described at paragraph 25 above has been completed and the Newco Class A Shares are listed on the XXXXXXXXXX.

30. Amalco II and the Fund will enter into an agreement of purchase and sale under which Amalco II will transfer all of its assets, including the Partnership Units and the cash proceeds received on the subscription by the Fund for Newco Class A Shares as described in paragraph 24 above, to the Fund for a purchase price equal to their fair market value. The Fund will satisfy the purchase price by issuing to Amalco II a number of Fund Units with an aggregate fair market value equal to the fair market value of the assets so acquired. The Fund will use the cash transferred by Amalco II to repay the daylight loan, if any, referred to in paragraph 24 above.

31. On the same day as, but following, the transfer described in paragraph 30 above, Amalco II will redeem all of the issued and outstanding Amalco II Class A Shares as well as all of the Amalco II Class B Shares owned by the Fund. As consideration for such redemptions, Amalco II will distribute the Fund Units that it acquires from the Fund, as described in paragraph 30 above, to the holders of the Amalco II Class A Shares and the Fund (as the holder of Amalco II Class B Shares) in proportion to the respective values of their shareholdings in Amalco II. Because the Fund cannot, at law, hold an interest in itself, the Fund Units distributed to it by Amalco II on the redemption of the Amalco II Class B Shares will be cancelled upon receipt.

32. Following the transactions described in paragraphs 30 and 31 above, but prior to the dissolution of Amalco II described in paragraph 33 below, Amalco II will jointly elect with the Fund, in prescribed form and within the time referred to in paragraph (c) of the definition of qualifying exchange in subsection 132.2(2), to have the provisions of section 132.2 apply to the transfer by Amalco II of its assets, including the Partnership Units as described in paragraph 30 above to the Fund.

33. Following the exchange described in paragraph 31 above, Amalco II will have no assets or liabilities, but will continue to hold registered title to real property that has been transferred to the Partnership, as described in paragraph 22 above, as nominee of the Partnership. Amalco II may also hold certain contracts as nominee on behalf of the Partnership pending receipt of third party consents to the assignment. At such time as Amalco II no longer holds registered title to such assets, it may be liquidated and dissolved under the applicable provisions of the XXXXXXXXXX.

34. The outstanding Fund Units (including the Fund Units distributed to the holders of Amalco II Class A Shares in paragraph 31 above) will automatically be consolidated such that the total number of Fund Units outstanding upon completion of the Proposed Transactions will be equal to the total number of Fund Units outstanding immediately prior to the commencement of such transactions.

35. The Fund Declaration of Trust will be amended to provide that, if a unitholder of the Fund is not entitled to receive cash upon a redemption of Units as a result of the limitations set out in the Fund Declaration of Trust, then the Units tendered for redemption will, subject to any applicable regulatory approvals, be redeemed in part by cash and in part by way of a distribution in specie of notes issued by the Partnership, and not securities of Opco as currently provided in the Fund Declaration of Trust. The notes issued by the Partnership in these circumstances will be issued under a note indenture and may include provisions whereby such notes will be specifically subordinated to any indebtedness under the credit facilities described in paragraph 23 above.

Purpose of Proposed Transactions

36. The purpose of the proposed transactions is to reorganize the Fund and its subsidiaries so that the Fund will be positioned to pursue additional acquisitions and/or XXXXXXXXXX. The Fund's business plan includes expansion of its business through (i) acquisitions of additional XXXXXXXXXX businesses funded out of after-tax profits in excess of planned distributions and/or proceeds of subsequent offerings of Fund Units to the public, and (ii) XXXXXXXXXX. In the former case, such acquisitions would generally be made through a subsidiary limited partnership as this would maximize returns to the holders of Fund Units. XXXXXXXXXX. In either case, without reorganizing the existing structure of the Fund, it would be difficult to efficiently integrate the operations of the acquired business within a single operating entity in a manner that maximizes returns to unitholders. The proposed transactions will alleviate this concern and will maximize unitholder value, XXXXXXXXXX.

Rulings

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, the proposed transactions and the purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:

A. Provided that at the time Amalco II transfers its assets to the Fund, Amalco II is a mutual fund corporation within the meaning assigned by subsection 131(8) and the Fund is a mutual fund trust within the meaning assigned by subsection 132(6), the property transferred has a fair market value of at least 90% of the fair market value of all property owned by Amalco II at that time, and provided that the joint elections are filed in prescribed form and within the time set out in to in paragraph (c) of the definition of qualifying exchange in subsection 132.2(2), the transactions described in paragraphs 30 to 32 above will constitute a qualifying exchange such that provisions of subsection 132.2(1) will apply to:

(a) the transfer of the Partnership Units from Amalco II to the Fund described in paragraph 30 above;

(b) the purchase for cancellation by Amalco II of the Amalco II Class A shares and Amalco II Class B shares described in paragraph 31 above; and

(c) the transfer of the Fund Units from Amalco II to holders of the Amalco II Class A Shares and the Amalco II Class B Shares described in paragraph 31 above.

B. Section 253.1 will apply in respect of the proposed transactions such that the Fund will not, solely because of its acquisition and holding of the Partnership Units, be considered to carry on any business or other activity of the Partnership.

C. Subsection 245(2) will not apply to redetermine the tax consequences described above, solely as a result of the proposed transactions described herein.

Comments

The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act. Nothing in this ruling should be construed as implying that the CRA has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those described in the rulings given.

These rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R5 issued on May 17, 2002, and are binding on the Canada Revenue Agency provided that the proposed transactions are completed on or before XXXXXXXXXX

Opinion

On July 18, 2005, the Department of Finance released legislative proposals concerning section 132.2. This opinion is based on those legislative proposals.

Provided that at the time Amalco II transfers its assets to the Fund, Amalco II is a mutual fund corporation within the meaning assigned by subsection 131(8) and the Fund is a mutual fund trust within the meaning assigned by subsection 132(6), the property transferred has a fair market value of at least 90% of the fair market value of all property owned by Amalco II at that time, and provided that the joint elections are filed in prescribed form and within the time set out in paragraph (c) of the definition of qualifying exchange in proposed subsection 132.2(1), the transactions described in paragraphs 30 to 32 above will constitute a qualifying exchange within the meaning of proposed subsection 132.1(1), such that provisions of proposed subsections 132.2(3) and (4) will apply to:

(a) the transfer of the Partnership Units from Amalco II to the Fund described in paragraph 30 above;

(b) the purchase for cancellation by Amalco II of the Amalco II Class A shares and Amalco II Class B shares described in paragraph 31 above; and

(c) the transfer of the Fund Units from Amalco II to holders of the Amalco II Class A Shares and the Amalco II Class B Shares described in paragraph 31 above.

Yours truly,

XXXXXXXXXX
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Planning Branch