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: Changes to the facts and the proposed transactions described in the advance income tax ruling no. 2007-022609 and in the supplemental rulings 2007-024291 and 2007-025506 to provide that instead of creating a new XXXXXXXXXX corporation to acquire the shares of Sub1 held by Opco, an inactive corporation already in existence will be used. Will that change of proposed transactions modify our ruling concerning XXXXXXXXXX
Position: The ruling will be amended to indicate that it applies to the taxation year beginning at the transfer of the Sub 1 shares from Opco. Otherwise, the ruling remains the same.
Reasons: If the Sub1 shares are transferred immediately at the beginning of the new taxation year, the cost amount of the Sub1 shares will represent at any time in that taxation year more than XXXXXXXXXX % of the total of the cost amounts of the property of XXXXXXXXXX Holdco #1 (the other asset being an amount of US$ XXXXXXXXXX ) because the time immediately before the transfer (when the condition is not met) is in the previous taxation year.
XXXXXXXXXX 2007-025933
XXXXXXXXXX , 2007
Dear Sir:
Re: Supplemental Advance Income Tax Ruling
XXXXXXXXXX - Tax Number BN XXXXXXXXXX (XXXXXXXXXX Tax Services Office, XXXXXXXXXX Taxation Centre)
This is in reply to your letter of XXXXXXXXXX in which you requested confirmation that certain changes to the advance income tax ruling we issued on XXXXXXXXXX, 2007 to XXXXXXXXXX (our file No. E2007-022609, hereinafter referred to as the "Ruling"), as amended by the Supplemental advance income tax ruling we issued on XXXXXXXXXX. 2007 (our file No. E2007-024291, hereinafter referred to as the "First Supplemental Ruling") and by the Supplemental advance income tax ruling we issued on XXXXXXXXXX, 2007 (our File No. E2007-025506, hereinafter referred to as the "Second Supplemental Ruling"), would not affect the rulings and the opinion given therein, as amended by the Supplemental advance income tax rulings.
As a result of your letter, the following changes to the Ruling are made:
1. The following definition is added in the Definitions section:
"XXXXXXXXXX Holdco #1" means XXXXXXXXXX;
2. Subparagraph 7i) is added to the Ruling after subparagraph 7h) and reads as follows:
i) XXXXXXXXXX % of the shares of XXXXXXXXXX Holdco #1 which is constituted in XXXXXXXXXX and is XXXXXXXXXX corporation within the meaning of the laws of XXXXXXXXXX. XXXXXXXXXX Holdco #1 has been inactive since its incorporation date.
3. Paragraph 9.1 is added to the Ruling after paragraph 9 and reads as follows:
In accordance to the description provided for in paragraph 13, the H Family Trust #1 and #2, the L Family Trust #1 and #2, the J Family Trust #1 and #2 were constituted on XXXXXXXXXX and the A Family Trust #1 and #2 were constituted on XXXXXXXXXX.
4. Paragraph 14.1, as added by the Supplemental advance income tax ruling issued on XXXXXXXXXX, 2007, is renumbered as paragraph 9.2 of the Ruling and amended to indicate that the four new corporations were constituted on XXXXXXXXXX.
5. Paragraph 11 of the Ruling, as amended by Supplemental advance income tax ruling issued on XXXXXXXXXX, 2007, is further changed to read as follows:
One new company is in the process of being constituted pursuant to the laws of XXXXXXXXXX ("XXXXXXXXXX Holdco #2"). The initial shareholder of XXXXXXXXXX Holdco #2 shall be Opco which shall be issued XXXXXXXXXX common share for XXXXXXXXXX.
6. Paragraph 11.1 is added after paragraph 11 of the Ruling and reads as follows:
The financial year of XXXXXXXXXX Holdco #1 will be modified so that it ends at the end of a day to be chosen by its boards of directors. At the end of that financial taxation year, the only asset of XXXXXXXXXX Holdco #1 will be an amount of US$ XXXXXXXXXX.
7. The words "Opco will transfer:" in paragraph 12 are replaced by:
Immediately at the beginning of the new financial year of XXXXXXXXXX Holdco #1, Opco will transfer:
8. The following subparagraphs 12f) and 12g) are added after subparagraph 12e) of the Ruling:
f) Immediately after the transfer provided for in subparagraph a), XXXXXXXXXX % of the issued and outstanding common shares of XXXXXXXXXX Holdco #1 will be redeemed for an amount equal to their fair market value, namely the amount of US$ XXXXXXXXXX.
g) Immediately after the transfers provided for in subparagraph b), the XXXXXXXXXX issued and outstanding common share of XXXXXXXXXX Holdco #2 shall be converted into XXXXXXXXXX voting redeemable preferred share.
9. The proposed transactions described in paragraphs 13, 14, 15 and 15.1 have already been or are in the process of being implemented.
10. The cost amount of the Sub1 shares held by Opco and transferred to XXXXXXXXXX Holdco #1 as provided in paragraph 12 exceeds the cost amount of the only asset held by XXXXXXXXXX Holdco #1 before the transfer.
You advised us that, apart from the amendments to the Facts and Proposed Transactions described above, there are no other changes to the Facts and Proposed Transactions described in the Ruling, in the First Supplemental Ruling and in the Second Supplemental Ruling. You advised us that the Facts, Proposed Transactions and Purpose of the Proposed Transactions described in the Ruling, as amended by the First and the Second Supplemental Ruling and by this letter, will constitute a complete and accurate disclosure of all relevant facts and transactions.
Considering the above, we hereby confirm that, subject to the conditions, limitations, qualifications and comments set out in the Ruling, as amended by the First and the Second Supplemental Ruling and by this letter, rulings A and B, as amended by the First Supplemental Ruling, will continue to be binding on the Canada Revenue Agency. Furthermore, ruling C should be replaced by:
C. XXXXXXXXXX.
The Opinion included in the Ruling issued on XXXXXXXXXX, 2007 should be read as amended by the First Supplemental Ruling.
The rulings given in the Ruling, as amended by the First Supplemental Ruling and by this letter, are binding on the Canada Revenue Agency provided that the Proposed Transactions are completed before XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for the Director
International and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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