2024 Ruling 2023-1001661R3 - Loss consolidation arrangement

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: (1) Whether Lossco will be entitled to apply the Non-Restricted Non-Capital Losses that it incurred against the interest income that it will earn on the Profitco Notes as part of the Loss Consolidation; (2) Whether each of the Profitcos will be entitled to deduct the interest expenditure that will be payable on the Profitco Note that they will owe to Lossco, and the Newco Preferred Share Dividends that they will respectively receive on the Newco Preferred Shares.

Position: (1) Yes; (2) Yes.

Reasons: The Loss Consolidation transactions will be legally effective, and will not contemplate dollar amounts and time frames that are blatantly artificial. In addition, each of the Profitcos will comply with the requirements found in paragraph 20(1)(c) and subsection 112(1), and the CRA views applicable to loss consolidations arrangements.

XXXXXXXXXX 2023-100166

XXXXXXXXXX, 2024

Dear XXXXXXXXXX

Re : Advance Income Tax Rulings Request – Loss Consolidation
XXXXXXXXXX

We are writing in response of your letter dated XXXXXXXXXX, 2023, in which you requested an Advance Income Tax Ruling (“Ruling Request”) on behalf of the abovementioned taxpayers (“Taxpayers”). We also considered the information provided to us in subsequent email correspondence.

We understand that, to the best of your knowledge and that of the Taxpayers, none of the Proposed Transactions or issues involved in the Ruling Request are the same as or substantially similar to transactions or issues that are:

(i) in a previously filed tax return of the Taxpayers or a person related to the Taxpayers that is: (a) being considered by the CRA in connection with such return, (b) under objection by the Taxpayers or a person related to the Taxpayers, or (c) the subject of a current or completed court process involving the Taxpayers or a person related to the Taxpayers; or

(ii) the subject of a ruling request previously considered by the Income Tax Rulings Directorate.

The Taxpayers have also confirmed that the Proposed Transactions described herein will not result in the Taxpayers or any person related to the Taxpayers being unable to pay any of their existing liabilities.

This letter is based solely on the Facts and Proposed Transactions described below. The documentation submitted with the Ruling Request does not form part of the Facts and Proposed Transactions, and any references thereto are provided solely for the convenience of the reader.

Unless otherwise stated: (a) all references to a statute are to the relevant provision of the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1, as amended (“Act”), or, where appropriate, to the Income Tax Regulations, C.R.C., c.945, as amended, (“Regulations”), (b) all references to monetary amounts are in Canadian dollars and (c) the singular should be read as plural and vice versa where the circumstances so require.

DEFINITIONS:

XXXXXXXXXX

“ACB” means “adjusted cost base” as that term is defined in section 54;

“Acquisition Date” means XXXXXXXXXX;

“Acquisition Debt” refers to the interest-bearing debt entered into by Lossco to directly acquire the Targets;

“Affiliated Person” has the meaning assigned by section 251.1 without reference to the definition of the term “controlled” in subsection 251.1(3);

“Arm’s Length” has the meaning assigned by subsection 251(1);

XXXXXXXXXX

“BIN” means the business identification number of a corporation with the CRA;

“Capital Loss” has the meaning assigned by paragraph 39(1)(b);

XXXXXXXXXX;

“Class A Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 1, each year prior to the Wind-Up, on the Class A Preferred Shares as further described in Paragraph 105;

“Class A Dividend Capital Contribution” refers to the contribution of capital that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class A Dividend as further described in Paragraph 105;

“Class A Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 1 in consideration for the transfer of the Profitco Note 1 proceeds to Newco as further described in Paragraph 71;

“Class B Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 2, each year prior to the Wind-Up, on the Class B Preferred Shares as further described in Paragraph 107;

“Class B Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class B Dividend as further described in Paragraph 107;

“Class B Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 2 in consideration for the transfer of the Profitco Note 2 proceeds to Newco as further described in Paragraph 74;

“Class C Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 3, each year prior to the Wind-Up, on the Class C Preferred Shares as further described in Paragraph 109;

“Class C Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class C Dividend as further described in Paragraph 109;

“Class C Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 3 in consideration for the transfer of the Profitco Note 3 proceeds to Newco as further described in Paragraph 77;

“Class D Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 4, each year prior to the Wind-Up, on the Class D Preferred Shares as further described in Paragraph 111;

“Class D Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class D Dividend as further described in Paragraph 111;

“Class D Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 4 in consideration for the transfer of the Profitco Note 4 proceeds to Newco as further described in Paragraph 80;

“Class E Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 5, each year prior to the Wind-Up, on the Class E Preferred Shares as further described in Paragraph 113;

“Class E Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class E Dividend as further described in Paragraph 113;

“Class E Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 5 in consideration for the transfer of the Profitco Note 5 proceeds to Newco as further described in Paragraph 83;

“Class F Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 6, each year prior to the Wind-Up, on the Class F Preferred Shares as further described in Paragraph 115;

“Class F Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class F Dividend as further described in Paragraph 115;

“Class F Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 6 in consideration for the transfer of the Profitco Note 6 proceeds to Newco as further described in Paragraph 86;

“Class G Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 7, each year prior to the Wind-Up, on the Class G Preferred Shares as further described in Paragraph 117;

“Class G Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class G Dividend as further described in Paragraph 117;

“Class G Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 7 in consideration for the transfer of the Profitco Note 7 proceeds to Newco as further described in Paragraph 89;

“Class H Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 8, each year prior to the Wind-Up, on the Class H Preferred Shares as further described in Paragraph 119;

“Class H Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class H Dividend as further described in Paragraph 119;

“Class H Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 8 in consideration for the transfer of the Profitco Note 8 proceeds to Newco as further described in Paragraph 92;

“Class I Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 9, each year prior to the Wind-Up, on the Class I Preferred Shares as further described in Paragraph 121;

“Class I Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class I Dividend as further described in Paragraph 121;

“Class I Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 9 in consideration for the transfer of the Profitco Note 9 proceeds to Newco as further described in Paragraph 95;

“Class J Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 10, each year prior to the Wind-Up, on the Class J Preferred Shares as further described in Paragraph 123;

“Class J Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class J Dividend as further described in Paragraph 123;

“Class J Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 10 in consideration for the transfer of the Profitco Note 10 proceeds to Newco as further described in Paragraph 98;

“Class K Dividend” refers to the Taxable Dividend that Newco will pay to Profitco 11, each year prior to the Wind-Up, on the Class K Preferred Shares as further described in Paragraph 125;

“Class K Dividend Capital Contribution” refers to the capital contribution that Lossco will make to Newco, each year prior to the Wind-Up, to fund the payment of the Class K Dividend as further described in Paragraph 125;

“Class K Preferred Shares” refers to the Newco Preferred Shares that Newco will issue to Profitco 11 in consideration for the transfer of the Profitco Note 11 proceeds to Newco as further described in Paragraph 101;

“Classes of Preferred Shares” refers to the Class A Preferred Shares, Class B Preferred Shares, Class C Preferred Shares, Class D Preferred Shares, Class E Preferred Shares, Class F Preferred Shares, Class G Preferred Shares, Class H Preferred Shares, Class I Preferred Shares, Class J Preferred Shares, and Class K Preferred Shares that Newco will respectively issue to the Profitcos as part of the Loss Consolidation;

“Contributions of Capital” collectively refers to the Class A Dividend Capital Contribution, Class B Dividend Capital Contribution, Class C Dividend Capital Contribution, Class D Dividend Capital Contribution, Class E Dividend Capital Contribution, Class F Dividend Capital Contribution, Class G Dividend Capital Contribution, Class H Dividend Capital Contribution, Class I Dividend Capital Contribution, Class J Dividend Capital Contribution, and Class K Dividend Capital Contribution that Lossco will have to make, at least once a year, after the implementation of the Loss Consolidation and before the Wind-Up;

“Contributions of Capital Time” refers to the time when Lossco will have to make the Contributions of Capital, at least once a year, after the implementation of the Loss Consolidation and before the Wind-Up;

XXXXXXXXXX;

“CRA” means the Canada Revenue Agency;

“Daylight Loan” means the loan of up to $XXXXXXXXXX with arm’s length commercial terms that will be made by a third party financial institution to Lossco, as described in Paragraph 63;

“Dividend Rental Arrangement” has the meaning assigned by subsection 248(1);

“Excepted Dividend” has the meaning assigned by section 187.1;

“Excluded Dividend” has the meaning assigned by subsection 191(1);

“Fair Market Value” means the highest price available in an open and unrestricted market between informed and prudent parties dealing at Arm’s Length and under no compulsion to act, that is expressed in terms of cash;

“Financial Intermediary Corporation” has the meaning assigned by subsection 191(1);

XXXXXXXXXX;

“Guarantee Agreement” has the meaning assigned by subsection 112(2.2);

“Holdco 1” means XXXXXXXXXX, which is a Taxable Canadian Corporation and a Subsidiary Wholly-Owned Corporation of Lossco;

“Holdco 2” means XXXXXXXXXX, which is a Taxable Canadian Corporation and a Subsidiary Wholly-Owned Corporation of Lossco;

“Loss Consolidation” means the series of transactions that will be implemented to enable each of the Profitcos to pay an interest expense on the Profitco Notes that Lossco will issue to the Profitcos, and Lossco to receive interest income on the Profitco Notes that it will issue to the Profitcos before the Wind-Up as further described in Paragraphs 58 to 160;

“Loss Restriction Event” has the meaning assigned by subsection 251.2(2);

“Lossco” means XXXXXXXXXX, which is the corporation described in Paragraph 1;

“Lossco Group” refers to Lossco and Lossco’s subsidiaries;

“Lossco Note 1” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class A Preferred Shares to Lossco as further described in Paragraph 72;

“Lossco Note 2” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class B Preferred Shares to Lossco as further described in Paragraph 75;

“Lossco Note 3” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class C Preferred Shares to Lossco as further described in Paragraph 78;

“Lossco Note 4” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class D Preferred Shares to Lossco as further described in Paragraph 81;

“Lossco Note 5” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class E Preferred Shares to Lossco as further described in Paragraph 84;

“Lossco Note 6” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class F Preferred Shares to Lossco as further described in Paragraph 87;

“Lossco Note 7” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class G Preferred Shares to Lossco as further described in Paragraph 90;

“Lossco Note 8” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class H Preferred Shares to Lossco as further described in Paragraph 93;

“Lossco Note 9” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class I Preferred Shares to Lossco as further described in Paragraph 96;

“Lossco Note 10” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class J Preferred Shares to Lossco as further described in Paragraph 99;

“Lossco Note 11” refers to the non-interest bearing promissory note that Lossco will issue to Newco in consideration for Newco’s transfer of the subscription proceeds for the Class K Preferred Shares to Lossco as further described in Paragraph 102;

“Lossco Notes” refers collectively to the Lossco Note 1, Lossco Note 2, Lossco Note 3, Lossco Note 4, Lossco Note 5, Lossco Note 6, Lossco Note 7, Lossco Note 8, Lossco Note 9, Lossco Note 10, and Lossco Note 11 that Newco will issue to Lossco as part of the Loss Consolidation;

“Newco” means the Taxable Canadian Corporation to be formed by Lossco under the OBCA as further described in Paragraph 58;

“Newco Common Shares” means the common shares that Lossco will subscribe in the capital stock of Newco upon Newco’s incorporation as further described in Paragraph 58;

“Newco Preferred Shares” collectively refers to all the Classes of Preferred Shares that will be subscribed for by each of the Profitcos as part of the Loss Consolidation;

“Newco Preferred Share Dividends” collectively refers to the Class A Dividend, Class B Dividend, Class C Dividend, Class D Dividend, Class E Dividend, Class F Dividend, Class G Dividend, Class H Dividend, Class I Dividend, Class J Dividend, Class H Dividend, Class I Dividend, Class J Dividend, and Class K Dividend that will be paid by Newco, at least once a year, in respect of each Class of Preferred Shares that will be held by the Profitcos before the Wind-Up;

“Non-capital losses” has the meaning assigned by subsection 111(8);

“Non-Restricted Non-Capital Losses” refers to the Non-Capital Losses amounting to $XXXXXXXXXX that Lossco realized in the course of its taxation years ended XXXXXXXXXX and the Non-Capital Losses approximately amounting to $XXXXXXXXXX that Lossco expects to realize in respect of its taxation years ending XXXXXXXXXX, which are not subject to a Loss Restriction Event as further described in Paragraph 7;

XXXXXXXXXX

“Paragraph” means a numbered paragraph in this letter;

“Parentco” means XXXXXXXXXX, which is Taxable Canadian Corporation that acquired all the issued and outstanding shares of Lossco on XXXXXXXXXX;

“Permanent Establishment” has the meaning assigned by subsection 400(2) of the Regulations;

“Principal Amount” has the meaning assigned by subsection 248(1);

“Profitcos” collectively refers to Profitco 1, Profitco 2, Profitco 3, Profitco 4, Profitco 5, Profitco 6, Profitco 7, Profitco 8, Profitco 9, Profitco 10, and Profitco 11;

“Profitco 1” means XXXXXXXXXX, which is the corporation described in Paragraph 12;

“Profitco 2” means XXXXXXXXXX, which is the corporation described in Paragraph 16;

“Profitco 3” means XXXXXXXXXX, which is the corporation described in Paragraph 20;

“Profitco 4” means XXXXXXXXXX, which is the corporation described in Paragraph 24;

“Profitco 5” means XXXXXXXXXX, which is the corporation described in Paragraph 28;

“Profitco 6” means XXXXXXXXXX, which is the corporation described in Paragraph 32;

“Profitco 7” means XXXXXXXXXX, which is the corporation described in Paragraph 36;

“Profitco 8” means XXXXXXXXXX, which is the corporation described in Paragraph 40;

“Profitco 9” means XXXXXXXXXX., which is the corporation described in Paragraph 44;

“Profitco 10” means XXXXXXXXXX, which is the corporation described in Paragraph 48;

“Profitco 11” means XXXXXXXXXX, which is the corporation described in Paragraph 52;

“Profitco Note 1” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 1, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 70;

“Profitco Note 1 Interest” refers to the interest that Profitco 1 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 1 as further described in Paragraph 106;

“Profitco Note 2” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 2, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 73;

“Profitco Note 2 Interest” refers to the interest that Profitco 2 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 2 as further described in Paragraph 108;

“Profitco Note 3” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 3, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 76;

“Profitco Note 3 Interest” refers to the interest that Profitco 3 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 3 as further described in Paragraph 110;

“Profitco Note 4” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 4, which will be payable on demand and will bear interest a rate of XXXXXXXXXX% per annum as further described in Paragraph 79;

“Profitco Note 4 Interest” refers to the interest that Profitco 4 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 4 as further described in Paragraph 112;

“Profitco Note 5” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 5, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 82;

“Profitco Note 5 Interest” refers to the interest that Profitco 5 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 5 as further described in Paragraph 114;

“Profitco Note 6” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 6, which will be payable on demand and will bear interest a rate of XXXXXXXXXX% per annum as further described in Paragraph 85;

“Profitco Note 6 Interest” refers to the interest that Profitco 6 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 6 as further described in Paragraph 116;

“Profitco Note 7” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 7, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 88;

“Profitco Note 7 Interest” refers to the interest that Profitco 7 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 7 as further described in Paragraph 118;

“Profitco Note 8” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 8, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 91;

“Profitco Note 8 Interest” refers to the interest that Profitco 8 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 8 as further described in Paragraph 120;

“Profitco Note 9” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 9, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 94;

“Profitco Note 9 Interest” refers to the interest that Profitco 9 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 9 as further described in Paragraph 122;

“Profitco Note 10” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 10, which will be payable on demand and will bear interest a rate of XXXXXXXXXX% per annum at as further described in Paragraph 97;

“Profitco Note 10 Interest” refers to the interest that Profitco 10 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 10 as further described in Paragraph 124;

“Profitco Note 11” refers to the portion of the Daylight Loan equal to $XXXXXXXXXX that Lossco will lend to Profitco 11, which will be payable on demand and will bear interest at a rate of XXXXXXXXXX% per annum as further described in Paragraph 100;

“Profitco Note 11 Interest” refers to the interest that Profitco 11 will have to pay to Lossco, each year prior to the Wind-Up, on the Profitco Note 11 as further described in Paragraph 126;

“Profitco Notes” collectively refers to the Profitco Note 1, Profitco Note 2, Profitco Note 3, Profitco Note 4, Profitco Note 5, Profitco Note 6, Profitco Note 7, Profitco Note 8, Profitco Note 9, Profitco Note 10, and Profitco Note 11 that each of the Profitcos will respectively issue to Lossco as part of the Loss Consolidation;

“Profitcos” collectively refers to Profitco 1, Profitco 2, Profitco 3, Profitco 4, Profitco 5, Profitco 6, Profitco 7, Profitco 8, Profitco 9, Profitco 10, and Profitco 11;

“Proposed Transactions” refers to the transactions described in Paragraphs 58 to 160;

“Provincial Allocation” refers to the allocation of the Taxable Income earned by Lossco and each of the Profitcos in the provinces where they respectively have a Permanent Establishment for the purposes of computing their Taxable Income Earned in the Year in a Province in accordance with the rules found in Part IV of the Regulations;

“PUC” means “paid-up capital” as that term is defined in subsection 89(1);

XXXXXXXXXX

“Related Person” has the meaning assigned by subsection 251(2);

“Restricted Non-Capital Losses” refers to the Non-Capital Losses amounting to $XXXXXXXXXX that Lossco realized before it was subject to a Loss Restriction Event on the Acquisition Date;

“Specified Financial Institution” has the meaning assigned by subsection 248(1);

“Subsidiary Wholly-Owned Corporation” has the meaning assigned by subsection 248(1);

“Targets” refers to the corporations that Lossco periodically acquires to support the growth of its XXXXXXXXXX;

“Taxable Canadian Corporation” has the meaning assigned by subsection 89(1);

“Taxable Dividend” has the meaning assigned by subsection 89(1);

“Taxable Income” has the meaning assigned by subsection 248(1);

“Taxable Income Earned in the Year in a Province” has the meaning assigned by subsection 124(4);

“Taxable Preferred Shares” has the meaning assigned by subsection 248(1);

“Taxation Year-End Change” refers to the request that Lossco filed with the CRA on XXXXXXXXXX to change the taxation year-end of all the entities of the Lossco Group to XXXXXXXXXX as further described in Paragraph 3;

“Term Preferred Shares” has the meaning assigned by subsection 248(1); and

“Wind-Up” refers to the specific time in the taxation year of each Profitco ending XXXXXXXXXX when the Loss Consolidation will be terminated.

FACTS:

Lossco

1. Lossco is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which provides XXXXXXXXXX across Canada.

2. Lossco is a Subsidiary Wholly Owned Corporation of Parentco, which originally had a financial year and taxation year ending XXXXXXXXXX.

3. In accordance to subsection 249.1(7), Lossco filed the Taxation Year-End Change to align the taxation year-end of all the entities of the Lossco Group that participate in the Loss Consolidation with the XXXXXXXXXX financial year-end that will be used for accounting purposes for all such entities effective XXXXXXXXXX, such that the corporate entities of the Lossco Group that participate in the Loss Consolidation will have a taxation year ending XXXXXXXXXX. The present letter is issued on the basis that the Taxation Year-End Change will be granted by the CRA. Should that not be the case, Lossco and the Profitcos undertake to submit a supplementary ruling request in respect of the Proposed Transactions before XXXXXXXXXX.

4. The authorized share capital of Lossco includes an unlimited number of common shares.

5. XXXXXXXXXX.

6. During its taxation year ended XXXXXXXXXX, Lossco maintained a Permanent Establishments in XXXXXXXXXX provinces: XXXXXXXXXX. For that year, Lossco’s Provincial Allocation was as follows: XXXXXXXXXX. Lossco does not expect that its Provincial Allocation will significantly change in the foreseeable future.

7. Lossco incurred the following Non-Capital Losses in the course of carrying its business:

XXXXXXXXXX

In addition, Lossco expects to realize a Non-Capital Loss equal to $XXXXXXXXXX for its taxation year ending XXXXXXXXXX. Lossco also expects to realize a Non-Capital Loss of $XXXXXXXXXX for its taxation year that would end XXXXXXXXXX and $XXXXXXXXXX for its taxation year that would end XXXXXXXXXX.

8. Parentco acquired control of Lossco on XXXXXXXXXX. For the purposes of the Proposed Transactions, Lossco is not entitled to carry-forward the Restricted Non-Capital Losses that it realized prior to the Acquisition Date in computing its Taxable Income for a subsequent taxation year pursuant to subsection 111(5).

9. The Non-Restricted Non-Capital Losses, XXXXXXXXXX, are not subject to a Loss Restriction Event.

10. Without the implementation of the Proposed Transactions, the Non-Restricted Non-Capital Losses are expected to accumulate and to remain unused by Lossco.

Profitcos

11. The Profitcos either carry on a XXXXXXXXXX or a XXXXXXXXXX, which are aligned with the overall scope of Lossco’s business operations.

Profitco 1

12. Profitco 1 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

13. Profitco 1 is a Subsidiary Wholly-Owned Corporation of Lossco, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

14. During its taxation year ended XXXXXXXXXX, Profitco 1 maintained a Permanent Establishment in XXXXXXXXXX provinces: XXXXXXXXXX. For that year, Profitco 1’s Provincial Allocation was as follows: XXXXXXXXXX. Profitco 1 does not expect that its Provincial Allocation will significantly change in the foreseeable future.

15. The Taxable Income that Profitco 1 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 1 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 2

16. Profitco 2 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

17. Holdco 1 owns all the issued and outstanding shares of Profitco 2, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

18. During its taxation year ended XXXXXXXXXX, Profitco 2 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 2’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 2 does not expect that its Provincial Allocation will change in the foreseeable future.

19. The Taxable Income that Profitco 2 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 2 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 3

20. Profitco 3 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

21. Profitco 3 is a Subsidiary Wholly-Owned Corporation of Lossco, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

22. During its taxation year ended XXXXXXXXXX, Profitco 3 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 3’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 3 does not expect that its Provincial Allocation will change in the foreseeable future.

23. The Taxable Income that Profitco 3 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 3 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 4

24. Profitco 4 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

25. Holdco 2 owns all the issued and outstanding shares of Profitco 4, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

26. During its taxation year ended XXXXXXXXXX, Profitco 4 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 4’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 4 does not expect that its Provincial Allocation will change in the foreseeable future.

27. The Taxable Income that Profitco 4 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 4 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 5

28. Profitco 5 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

29. Holdco 2 owns all the issued and outstanding shares of Profitco 5, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

30. During its taxation year ended XXXXXXXXXX, Profitco 5 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 5’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 5 does not expect that its Provincial Allocation will change in the foreseeable future.

31. The Taxable Income that Profitco 5 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 5 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 6

32. Profitco 6 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

33. Profitco 6 is a Subsidiary Wholly-Owned Corporation of Lossco, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

34. During its taxation year ended XXXXXXXXXX, Profitco 6 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 6’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 6 does not expect that its Provincial Allocation will change in the foreseeable future.

35. The Taxable Income that Profitco 6 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 6 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 7

36. Profitco 7 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

37. Profitco 7 is a Subsidiary Wholly-Owned Corporation of Lossco, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

38. During its taxation year ended XXXXXXXXXX, Profitco 7 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 7’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 7 does not expect that its Provincial Allocation will change in the foreseeable future.

39. The Taxable Income that Profitco 7 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 7 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 8

40. Profitco 8 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

41. Profitco 8 is a Subsidiary Wholly-Owned Corporation of Lossco, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

42. During its taxation year ended XXXXXXXXXX, Profitco 8 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 8’s Provincial Allocation was fully attributed to the province of XXXXXXXXXXo for that year. Profitco 8 does not expect that its Provincial Allocation will change in the foreseeable future.

43. The Taxable Income that Profitco 8 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 8 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 9

44. Profitco 9 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

45. Profitco 9 is a Subsidiary Wholly-Owned Corporation of Lossco, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

46. During its taxation year ended XXXXXXXXXX, Profitco 9 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 9’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 9 does not expect that its Provincial Allocation will change in the foreseeable future.

47. The Taxable Income that Profitco 9 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 9 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 10

48. Profitco 10 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

49. Holdco 1 owns all the issued and outstanding shares of Profitco 10, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

50. During its taxation year ended XXXXXXXXXX, Profitco 10 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 10’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 10 does not expect that its Provincial Allocation will change in the foreseeable future.

51. The Taxable Income that Profitco 10 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 10 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

Profitco 11

52. Profitco 11 is a Taxable Canadian Corporation governed by the XXXXXXXXXX, which carries on a XXXXXXXXXX.

53. Profitco 11 is a Subsidiary Wholly-Owned Corporation of Lossco, which will have a XXXXXXXXXX taxation year-end after XXXXXXXXXX.

54. During its taxation year ended XXXXXXXXXX, Profitco 11 exclusively maintained a Permanent Establishment in XXXXXXXXXX. Therefore, Profitco 11’s Provincial Allocation was fully attributed to the province of XXXXXXXXXX for that year. Profitco 11 does not expect that its Provincial Allocation will change in the foreseeable future.

55. The Taxable Income that Profitco 11 earned for the XXXXXXXXXX taxation years that ended prior to the taxation year during which the Loss Consolidation was implemented was as follows:

XXXXXXXXXX

In the absence of the Loss Consolidation, Profitco 11 expects to earn Taxable Income approximately equal to the following amounts for its taxation years ending XXXXXXXXXX:

XXXXXXXXXX

56. Because each of the Profitcos is either controlled directly or indirectly by Lossco, they qualify as an Affiliated Person with Lossco.

PROPOSED TRANSACTIONS

Implementation of the Loss Consolidation

57. The transactions described in Paragraphs 58 to 160 will occur in the order and within the time limitations specified in this letter.

Incorporation of Newco

58. Lossco will incorporate Newco under the XXXXXXXXXX, and will subscribe for Newco Common Shares for a nominal consideration. Newco will be a Subsidiary Wholly-Owned Corporation of Lossco.

59. Newco will be a Taxable Canadian Corporation having a XXXXXXXXXX taxation year-end. \

60. Newco will not be a Financial Intermediary Corporation.

61. Considering that Newco will only invest the Newco Preferred Shares subscription proceeds received from the Profitcos into Lossco in consideration for the Lossco Notes, it will not carry on any business or earn income from property.

62. Newco’s share capital will include an unlimited number of Newco Common Shares, and an unlimited number of Newco Preferred Shares each classes of which has the following attributes:

(a) non-voting;

(b) non-participating;

(c) redeemable at the option of the issuer and retractable at the option of the holder, subject to applicable law, at any time for an amount equal to the cash amount for which they were issued (“Redemption Price”). The payment of the Redemption Price may be satisfied, at the issuer’s option, either by:

(i) the payment of cash,

(ii) the delivery of property having a Fair Market Value at the time of their redemption/retraction equal to the Redemption Price, or

(iii) the delivery of the Lossco Note having a principal amount equal to the Redemption Price,

together with an amount in cash equal to all declared and unpaid dividends, and any accrued dividends which have not been declared and paid up to but excluding the date fixed for such redemption or retraction. For clarification purposes, the Newco Preferred Shares to be issued in respect of each of the Classes of Preferred Shares will not be considered to be shares of the same class; and

(d) entitle their holder to a cumulative dividend, payable annually, calculated daily and accruing by reference to the Redemption Price of the applicable Class of Preferred Shares at a fixed rate per annum equivalent to the rate per annum on the applicable Profitco Note plus approximately XXXXXXXXXX% (“Dividend Rate”). The Dividend Rate will be specifically determined when the Proposed Transactions are implemented.

Daylight Loan

63. Lossco will borrow an amount of up to $XXXXXXXXXX according to Arm’s Length commercial terms applicable to this type of loan from an Arm’s Length financial institution (“Daylight Loan”). The Principal Amount of the Daylight Loan will be specifically determined upon the implementation of the Proposed Transactions.

Profitco Notes, Newco Preferred Shares and Lossco Notes

64. Lossco, the Profitcos and Newco will enter into the following transactions to consolidate taxable income within the Lossco Group by causing Lossco to earn interest income on the Profitco Notes, and having each of the Profitcos to incur an interest expense on the Profitco Note that they will owe to Lossco, which will be deducted in computing their Taxable Income for the taxation years that will end prior to the Wind-Up.

65. Lossco will loan a portion of the Daylight Loan to each of the Profitcos in consideration for the Profitco Notes, the aggregate Fair Market Value of which will be equal to the Principal Amount of the Daylight Loan.

66. Each of the Profitco Notes will be payable on demand and will bear interest at an Arm’s Length rate of XXXXXXXXXX% per annum, which will be based on market conditions at the time of their issuance.

The terms of each of the Profitco Notes will provide that:

(a) The recourse of Lossco with respect to each the Profitco Notes will be limited to the Newco Preferred Shares that will be held by the Profitco (together with all proceeds, fruits and revenues from such shares), and not to any other assets of the Profitco, and

(b) The payment of the Principal Amount on the Profitco Note may be satisfied, at the option of the Profitco, through:

(i) the payment of cash to Lossco;

(ii) the transfer of property to Lossco having an aggregate Fair Market Value equal to the Principal Amount of the Profitco Note at the time of its repayment;

(iii) the delivery of the Newco Preferred Shares that the Profitco will hold in the capital stock of Newco to Lossco whose Redemption Price will be equal to the Principal Amount of the Profitco Note; or

(iv) the set-off of the Profitco Note against the Lossco Note that the Profitco may hold at the time of its repayment.

67. Each of the Profitcos will use the proceeds of the Profitco Note that it will receive to subscribe for a Class of Preferred Shares in the capital stock of Newco whose Redemption Price will be equal to the Principal Amount of the Profitco Note that they will owe to Lossco. The amount of dividend that will be paid by Newco, and received by each of the Profitcos on the Newco Preferred Shares will be sufficient to enable each of them to earn a profit on such Newco Preferred Shares after deducting the interest paid or payable on the Profitco Note that they will owe to Lossco.

68. Newco will use the subscription proceeds for each of the Classes of Preferred Shares to make the Lossco Notes to Lossco, the aggregate Fair Market Value of which will be equal to aggregate Principal Amount of the Profitco Notes.

69. The terms of each of the Lossco Notes will provide that:

(a) The recourse of Newco with respect to the Lossco Note will be limited to the Profitco Note that will be held by Lossco in connection with the issuance of the Lossco Note (“Applicable Profitco Note”), and not to any other assets of Lossco, and

(b) The payment of the Principal Amount of the Lossco Note may be satisfied, at the option of Lossco, through:

(i) the payment of cash to Newco;

(ii) the transfer of property to Newco having an aggregate Fair Market Value equal to the Principal Amount of the Lossco Note at the time of its repayment;

(iii) the transfer of the Applicable Profitco Note to Newco whose Redemption Price will be equal to the Principal Amount of the Lossco Note; or

(iv) the set-off of the Applicable Profitco Note against the Lossco Note that the Profitco may hold at the time of its repayment.

Profitco Note 1, Class A Preferred Shares and Lossco Note 1

70. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 1 in consideration for the Profitco 1 Note that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

71. Profitco 1 will use the proceeds from the Profitco Note 1 to subscribe for the Class A Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 1. As security for the indebtedness evidenced by the Profitco Note 1, Profitco 1 will grant an interest in the Class A Preferred Shares to Lossco.

72. Newco will use the proceeds from the issuance of the Class A Preferred Shares to make the Lossco Note 1 to Lossco. As security for the indebtedness evidenced by the Lossco Note 1, Lossco will grant an interest in the Profitco Note 1 to Newco.

Profitco Note 2, Class B Preferred Shares and Lossco Note 2

73. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 2 in consideration for the Profitco Note 2 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

74. Profitco 2 will use the proceeds from the Profitco Note 2 to subscribe for the Class B Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 2. As security for the indebtedness evidenced by the Profitco Note 2, Profitco 2 will grant an interest in the Class B Preferred Shares to Lossco.

75. Newco will use the proceeds from the issuance of the Class B Preferred Shares to make the Lossco Note 2 to Lossco. As security for the indebtedness evidenced by the Lossco Note 2, Lossco will grant an interest in the Profitco Note 2 to Newco.

Profitco Note 3, Class C Preferred Shares and Lossco Note 3

76. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 3 in consideration for the Profitco Note 3 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

77. Profitco 3 will use the proceeds from the Profitco Note 3 to subscribe for the Class C Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 3. As security for the indebtedness evidenced by the Profitco Note 3, Profitco 3 will grant an interest in the Class C Preferred Shares to Lossco.

78. Newco will use the proceeds from the issuance of the Class C Preferred Shares to make the Lossco Note 3 to Lossco. As security for the indebtedness evidenced by the Lossco Note 3, Lossco will grant an interest in the Profitco Note 3 to Newco.

Profitco Note 4, Class D Preferred Shares and Lossco Note 4

79. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 4 in consideration for the Profitco Note 4 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

80. Profitco 4 will use the proceeds from the Profitco Note 4 to subscribe for the Class D Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 4. As security for the indebtedness evidenced by the Profitco Note 4, Profitco 4 will grant an interest in the Class D Preferred Shares to Lossco.

81. Newco will use the proceeds from the issuance of the Class D Preferred Shares to make the Lossco Note 4 to Lossco. As security for the indebtedness evidenced by the Lossco Note 4, Lossco will grant an interest in the Profitco Note 4 to Newco.

Profitco Note 5, Class E Preferred Shares and Lossco Note 5

82. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 5 in consideration for the Profitco Note 5 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

83. Profitco 5 will use the proceeds from the Profitco Note 5 to subscribe for the Class E Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 5. As security for the indebtedness evidenced by the Profitco Note 5, Profitco 5 will grant an interest in the Class E Preferred Shares to Lossco.

84. Newco will use the proceeds from the issuance of the Class E Preferred Shares to make the Lossco Note 5 to Lossco. As security for the indebtedness evidenced by the Lossco Note 5, Lossco will grant an interest in the Profitco Note 5 to Newco.

Profitco Note 6, Class F Preferred Shares and Lossco Note 6

85. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 6 in consideration for the Profitco Note 6 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

86. Profitco 6 will use the proceeds from the Profitco Note 6 to subscribe for the Class F Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 6. As security for the indebtedness evidenced by the Profitco Note 6, Profitco 6 will grant an interest in the Class F Preferred Shares to Lossco.

87. Newco will use the proceeds from the issuance of the Class F Preferred Shares to make the Lossco Note 6 to Lossco. As security for the indebtedness evidenced by the Lossco Note 6, Lossco will grant an interest in the Profitco Note 6 to Newco.

Profitco Note 7, Class G Preferred Shares and Lossco Note 7

88. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 7 in consideration for the Profitco Note 7 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

89. Profitco 7 will use the proceeds from the Profitco Note 7 to subscribe for the Class G Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 7. As security for the indebtedness evidenced by the Profitco Note 7, Profitco 7 will grant an interest in the Class G Preferred Shares to Lossco.

90. Newco will use the proceeds from the issuance of the Class G Preferred Shares to make the Lossco Note 7 to Lossco. As security for the indebtedness evidenced by the Lossco Note 7, Lossco will grant an interest in the Profitco Note 7 to Newco.

Profitco Note 8, Class H Preferred Shares and Lossco Note 8

91. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 8 in consideration for the Profitco Note 8 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

92. Profitco 8 will use the proceeds from the Profitco Note 8 to subscribe for the Class H Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 8. As security for the indebtedness evidenced by the Profitco Note 8, Profitco 8 will grant an interest in the Class H Preferred Shares to Lossco.

93. Newco will use the proceeds from the issuance of the Class H Preferred Shares to make the Lossco Note 8 to Lossco. As security for the indebtedness evidenced by the Lossco Note 8, Lossco will grant an interest in the Profitco Note 8 to Newco.

Profitco Note 9, Class I Preferred Shares and Lossco Note 9

94. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 9 in consideration for the Profitco Note 9 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

95. Profitco 9 will use the proceeds from the Profitco Note 9 to subscribe for the Class I Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 9. As security for the indebtedness evidenced by the Profitco Note 9, Profitco 9 will grant an interest in the Class I Preferred Shares to Lossco.

96. Newco will use the proceeds from the issuance of the Class I Preferred Shares to make the Lossco Note 9 to Lossco. As security for the indebtedness evidenced by the Lossco Note 9, Lossco will grant an interest in the Profitco Note 9 to Newco.

Profitco Note 10, Class J Preferred Shares and Lossco Note 10

97. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 10 in consideration for the Profitco Note 10 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

98. Profitco 10 will use the proceeds from the Profitco Note 10 to subscribe for the Class J Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 10. As security for the indebtedness evidenced by the Profitco Note 10, Profitco 10 will grant an interest in the Class J Preferred Shares to Lossco.

99. Newco will use the proceeds from the issuance of the Class J Preferred Shares to make the Lossco Note 10 to Lossco. As security for the indebtedness evidenced by the Lossco Note 10, Lossco will grant an interest in the Profitco Note 10 to Newco.

Profitco Note 11, Class K Preferred Shares and Lossco Note 11

100. Lossco will loan a portion of the Daylight Loan approximately equal to $XXXXXXXXXX to Profitco 11 in consideration for the Profitco Note 11 that will bear interest at a rate of XXXXXXXXXX% per annum, which will not exceed the Arm’s Length commercial rate granted by an Arm’s Length financial institution for this type of loan.

101. Profitco 11 will use the proceeds from the Profitco Note 11 to subscribe for the Class K Preferred Shares in the capital stock of Newco whose Fair Market Value, PUC and ACB will be equal to the Principal Amount of the Profitco Note 11. As security for the indebtedness evidenced by the Profitco Note 11, Profitco 11 will grant an interest in the Class K Preferred Shares to Lossco.

102. Newco will use the proceeds from the issuance of the Class K Preferred Shares to make the Lossco Note 11 to Lossco. As security for the indebtedness evidenced by the Lossco Note 11, Lossco will grant an interest in the Profitco Note 11 to Newco.

Repayment of the Daylight Loan

103. Lossco will use the proceeds from the Lossco Notes to fully repay the Daylight Loan.

Maintenance of the Loss Consolidation

Transaction steps

104. When jointly determined by Lossco and each of the Profitcos and before the Wind-Up of the Loss Consolidation, the following transactions will occur, on the same date, at least once a year, in respect of the Class of Preferred Shares that will be held by each of the Profitcos:

(a) Pursuant to a capital contribution agreement to be entered with each of the Profitcos, Lossco will make the Contributions of Capital the aggregate amount of which will be equal to the accrued and unpaid Newco Preferred Share Dividends for that year:

(i) Lossco will fund each of the Contribution of Capital with cash on hand at the Contributions of Capital Time. If Lossco’s cash-on-hand is insufficient at the Contributions of Capital Time, Lossco will borrow an amount from an Arm’s Length financial institution to fund the Contributions of Capital.

(ii) No shares will be issued by Newco, and no amount will be added to the stated capital of the Newco Common Shares as a result of each of the Contributions of Capital. The aggregate amount of the Contributions of Capital will be recorded as contributed surplus for accounting purposes. For greater certainty, the Contributions of Capital will not be income to Newco pursuant to International Financial Reporting Standards, and

(iii) Lossco will not claim, at any time, a Capital Loss in respect of its investment in Newco;

(b) Subject to any applicable solvency test under the applicable corporate legislation, Newco will pay the accrued and unpaid Newco Preferred Shares Dividends on each Class of Preferred Shares to each of the Profitcos; and

(c) Immediately after the receipt of the Newco Preferred Shares Dividends, each of the Profitcos will pay to Lossco the accrued and unpaid interests that is payable on the Profitco Note that it will owe to Lossco.

Contributions of Capital, Newco Preferred Share Dividends and interest payments on the Profitco Notes (Paragraph 104(a), 104(b) and 104(c) above)

Class A Dividend Capital Contribution, Class A Dividend and Profitco Note 1 Interest

105. Lossco will make the Class A Dividend Capital Contribution to Newco to fund the payment of the Class A Dividend to Profitco 1.

106. Immediately after the receipt of the Class A Dividend, Profitco 1 will pay and Lossco will receive the amount of the Profitco Note 1 Interest.

Class B Dividend Capital Contribution, Class B Dividend and Profitco Note 2 Interest

107. Lossco will make the Class B Dividend Capital Contribution to Newco to fund the payment of the Class B Dividend to Profitco 2.

108. Immediately after the receipt of the Class B Dividend, Profitco 2 will pay and Lossco will receive the amount of the Profitco Note 2 Interest.

Class C Dividend Capital Contribution, Class C Dividend and Profitco Note 3 Interest

109. Lossco will make the Class C Dividend Capital Contribution to Newco to fund the payment of the Class C Dividend to Profitco 3.

110. Immediately after the receipt of the Class C Dividend, Profitco 3 will pay and Lossco will receive the amount of the Profitco Note 3 Interest.

Class D Dividend Capital Contribution, Class D Dividend and Profitco Note 4 Interest

111. Lossco will make the Class D Dividend Capital Contribution to Newco to fund the payment of the Class D Dividend to Profitco 4.

112. Immediately after the receipt of the Class D Dividend, Profitco 4 will pay and Lossco will receive the amount of the Profitco Note 4 Interest.

Class E Dividend Capital Contribution, Class E Dividend and Profitco Note 5 Interest

113. Lossco will make the Class E Dividend Capital Contribution to Newco to fund the payment of the Class E Dividend to Profitco 5.

114. Immediately after the receipt of the Class E Dividend, Profitco 5 will pay and Lossco will receive the amount of the Profitco Note 5 Interest.

Class F Dividend Capital Contribution, Class F Dividend and Profitco Note 6 Interest

115. Lossco will make the Class F Dividend Capital Contribution to Newco to fund the payment of the Class F Dividend to Profitco 6.

116. Immediately after the receipt of the Class F Dividend, Profitco 6 will pay and Lossco will receive the amount of the Profitco Note 6 Interest.

Class G Dividend Capital Contribution, Class G Dividend and Profitco Note 7 Interest

117. Lossco will make the Class G Dividend Capital Contribution to Newco to fund the payment of the Class G Dividend to Profitco 7.

118. Immediately after the receipt of the Class G Dividend, Profitco 7 will pay and Lossco will receive the amount of the Profitco Note 7 Interest.

Class H Dividend Capital Contribution, Class H Dividend and Profitco Note 8 Interest

119. Lossco will make the Class H Dividend Capital Contribution to Newco to fund the payment of the Class H Dividend to Profitco 8.

120. Immediately after the receipt of the Class H Dividend, Profitco 8 will pay and Lossco will receive the amount of the Profitco Note 8 Interest.

Class I Dividend Capital Contribution, Class I Dividend and Profitco Note 9 Interest

121. Lossco will make the Class I Dividend Capital Contribution to Newco to fund the payment of the Class I Dividend to Profitco 9.

122. Immediately after the receipt of the Class I Dividend, Profitco 9 will pay and Lossco will receive the amount of the Profitco Note 9 Interest.

Class J Dividend Capital Contribution, Class J Dividend and Profitco Note 10 Interest

123. Lossco will make the Class J Dividend Capital Contribution to Newco to fund the payment of the Class J Dividend to Profitco 10.

124. Immediately after the receipt of the Class J Dividend, Profitco 10 will pay and Lossco will receive the amount of the Profitco Note 10 Interest.

Class K Dividend Capital Contribution, Class K Dividend and Profitco Note 11 Interest

125. Lossco will make the Class K Dividend Capital Contribution to Newco to fund the payment of the Class K Dividend to Profitco 11.

126. Immediately after the receipt of the Class K Dividend, Profitco 11 will pay and Lossco will receive the amount of the Profitco Note 11 Interest.

Wind-Up of the Loss Consolidation

Transaction steps

127. Within XXXXXXXXXX months after its implementation, the Loss Consolidation will be wound-up as follows:

(a) Lossco will make capital contributions to Newco the aggregate amount of which will be equal to the amount of the accrued and unpaid Newco Preferred Shares Dividends, if any, payable to each of the Profitcos at the time of the Wind-Up;

(b) Newco will declare and pay the accrued and unpaid Newco Preferred Shares Dividends, if any, payable to each of the Profitcos at the time of the Wind-Up;

(c) Each of the Profitcos will pay the accrued and unpaid interest, if any, payable on the Profitco Note owing to Lossco at the time of the Wind-Up;

(d) Newco will redeem the Newco Preferred Shares that each of the Profitcos will hold in the capital stock of Newco. The Redemption Price for each of the Newco Preferred Shares will be satisfied by Newco’s assignment of the Lossco Note to each of the Profitcos having a Principal Amount equal to the Redemption Price of the Newco Preferred Shares;

(e) Lossco and each of the Profitcos will set-off the amounts payable under the Profitco Note and the Lossco Note in full and absolute payment of each of these obligations;

(f) Newco will be wound-up into Lossco pursuant to subsection 88(1).

(g) Newco will file articles of dissolution with the appropriate corporate registry within a reasonable time after the Wind-Up.

Redemption of the Newco Preferred Shares and settlement of the Profitco Notes and Lossco Notes (Paragraph 127(d) and 127(e) above)

Profitco Note 1, Class A Preferred Shares and Lossco Note 1

128. As at or around XXXXXXXXXX, Newco will redeem the Class A Preferred Shares that Profitco 1 will hold in the capital stock of Newco.

129. Newco will pay the Redemption Price of the Class A Preferred Shares, which is equal to the Principal Amount of the Lossco Note 1, by assigning the Lossco Note 1 that it will hold to Profitco 1.

130. The Lossco Note 1 that Lossco will have to pay to Profitco 1 and the Profitco Note 1 that Profitco 1 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 2, Class B Preferred Shares and Lossco Note 2

131. As at or around XXXXXXXXXX, Newco will redeem the Class B Preferred Shares that Profitco 2 will hold in the capital stock of Newco.

132. Newco will pay the Redemption Price of the Class B Preferred Shares, which is equal to the Principal Amount of the Lossco Note 2, by assigning the Lossco Note 2 that it will hold to Profitco 2

133. The Lossco Note 2 that Lossco will have to pay to Profitco 2 and the Profitco Note 2 that Profitco 2 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 3, Class C Preferred Shares and Lossco Note 3

134. As at or around XXXXXXXXXX, Newco will redeem the Class C Preferred Shares that Profitco 3 will hold in the capital stock of Newco.

135. Newco will pay the Redemption Price of the Class C Preferred Shares, which is equal to the Principal Amount of the Lossco Note 3, by assigning the Lossco Note 3 that it will hold to Profitco 3

136. The Lossco Note 3 that Lossco will have to pay to Profitco 3 and the Profitco Note 3 that Profitco 3 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 4, Class D Preferred Shares and Lossco Note 4

137. As at or around XXXXXXXXXX, Newco will redeem the Class D Preferred Shares that Profitco 4 will hold in the capital stock of Newco.

138. Newco will pay the Redemption Price of the Class D Preferred Shares, which is equal to the Principal Amount of the Lossco Note 4, by assigning the Lossco Note 4 that it will hold to Profitco 4.

139. The Lossco Note 4 that Lossco will have to pay to Profitco 4 and the Profitco Note 4 that Profitco 4 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 5, Class E Preferred Shares and Lossco Note 5

140. As at or around XXXXXXXXXX, Newco will redeem the Class E Preferred Shares that Profitco 5 will hold in the capital stock of Newco.

141. Newco will pay the Redemption Price of the Class E Preferred Shares, which is equal to the Principal Amount of the Lossco Note 5, by assigning the Lossco Note 5 that it will hold to Profitco 5.

142. The Lossco Note 5 that Lossco will have to pay to Profitco 5 and the Profitco Note 5 that Profitco 5 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 6, Class F Preferred Shares and Lossco Note 6

143. As at or around XXXXXXXXXX, Newco will redeem the Class F Preferred Shares that Profitco 6 will hold in the capital stock of Newco.

144. Newco will pay the Redemption Price of the Class F Preferred Shares, which is equal to the Principal Amount of the Lossco Note 6, by assigning the Lossco Note 6 that it will hold to Profitco 6.

145. The Lossco Note 6 that Lossco will have to pay to Profitco 6 and the Profitco Note 6 that Profitco 6 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 7, Class G Preferred Shares and Lossco Note 7

146. As at or around XXXXXXXXXX, Newco will redeem the Class G Preferred Shares that Profitco 7 will hold in the capital stock of Newco.

147. Newco will pay the Redemption Price of the Class G Preferred Shares, which is equal to the Principal Amount of the Lossco Note 7, by assigning the Lossco Note 7 that it will hold to Profitco 7.

148. The Lossco Note 7 that Lossco will have to pay to Profitco 7 and the Profitco Note 7 that Profitco 7 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 8, Class H Preferred Shares and Lossco Note 8

149. As at or around XXXXXXXXXX, Newco will redeem the Class H Preferred Shares that Profitco 8 will hold in the capital stock of Newco.

150. Newco will pay the Redemption Price of the Class H Preferred Shares, which is equal to the Principal Amount of the Lossco Note 8, by assigning the Lossco Note 8 that it will hold to Profitco 8.

151. The Lossco Note 8 that Lossco will have to pay to Profitco 8 and the Profitco Note 8 that Profitco 8 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 9, Class I Preferred Shares and Lossco Note 9

152. As at or around XXXXXXXXXX, Newco will redeem the Class I Preferred Shares that Profitco 9 will hold in the capital stock of Newco.

153. Newco will pay the Redemption Price of the Class I Preferred Shares, which is equal to the Principal Amount of the Lossco Note 9, by assigning the Lossco Note 9 that it will hold to Profitco 9.

154. The Lossco Note 9 that Lossco will have to pay to Profitco 9 and the Profitco Note 9 that Profitco 9 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 10, Class J Preferred Shares and Lossco Note 10

155. As at or around XXXXXXXXXX, Newco will redeem the Class J Preferred Shares that Profitco 10 will hold in the capital stock of Newco.

156. Newco will pay the Redemption Price of the Class J Preferred Shares, which is equal to the Principal Amount of the Lossco Note 10, by assigning the Lossco Note 10 that it will hold to Profitco 10.

157. The Lossco Note 10 that Lossco will have to pay to Profitco 10 and the Profitco Note 10 that Profitco 10 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

Profitco Note 11, Class K Preferred Shares and Lossco Note 11

158. As at or around XXXXXXXXXX, Newco will redeem the Class K Preferred Shares that Profitco 11 will hold in the capital stock of Newco.

159. Newco will pay the Redemption Price of the Class K Preferred Shares, which is equal to the Principal Amount of the Lossco Note 11, by assigning the Lossco Note 11 that it will hold to Profitco 11.

160. The Lossco Note 11 that Lossco will have to pay to Profitco 11 and the Profitco Note 11 that Profitco 11 will have to pay to Lossco, which have the same Principal Amount and Fair Market Value, will be legally extinguished by way of set-off.

ADDITIONAL INFORMATION

Pertaining to the Loss Consolidation

161. The Proposed Transactions will be legally effective.

162. Lossco, Newco and each of the Profitcos are Related Persons and Affiliated Persons and will continue to be Related Persons and Affiliated Persons throughout the Proposed Transactions.

163. Lossco will only use the Non-Restricted Non-Capital Losses in the course of the Loss Consolidation. For greater certainty, none of the Restricted Non-Capital Losses will be used by Lossco as part of the Proposed Transactions.

164. It is not intended nor expected that the interest income to be earned by Lossco in the course of the Loss Consolidation will materially exceed an amount that could be fully sheltered with the Non-Restricted Non-Capital Losses.

165. There is no intention for any of the Profitcos to generate a significant loss carryforward balance as a result of the Proposed Transactions having regard to the expected carryback of the Non-Capital Losses to prior taxation years, and the expected carryforward of the Non-Capital Losses to subsequent taxation years prior to the Wind-Up. Should that occur prior to the Wind-Up, the Profitco and Lossco will immediately seek to unwind the individual arrangement at that time to prevent the creation of a significant loss carryforward balance.

166. The Newco Preferred Shares will be Term Preferred Shares and Taxable Preferred Shares.

167. Each of the Newco Preferred Share Dividends, which are generally described in Paragraph 104b) and specifically described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125 will qualify as an Excluded Dividend and an Excepted Dividend.

168. At all relevant times in the course of the Proposed Transactions, each of the Profitcos will be a Specified Financial Institution because it will be related to a particular corporation that is described in paragraph (e) of the definition of Specified Financial Institution. However, each of the Profitcos will not acquire the Newco Preferred Shares, which are generally described in Paragraph 67, and specifically described in Paragraphs 71, 74, 77, 80, 83, 86, 89, 92, 95, 98 and 101, in the ordinary course of their business.

169. At no time during the implementation of the Loss Consolidation will any of the Newco Preferred Shares be:

(a) the subject of a Guarantee Agreement;

(b) the subject of a Dividend Rental Arrangement;

(c) the subject of any secured undertaking of the type described in paragraph 112(2.4)(a); or

(d) issued for consideration that is or includes:

(i) an obligation of the type described in subparagraph 112(2.4)(b)(i), other than an obligation of a corporation that is related (if the Act were read without reference to paragraph 251(5)(b)); or

(ii) any right of the type described in subparagraph 112(2.4)(b)(ii).

170. The terms of the Profitco Notes, which are generally described in Paragraph 66, and specifically described in Paragraphs 70, 73, 76, 79, 82, 85, 88, 91, 94, 97 and 100, including the interest rate bearing on each such Profitco Notes reflect the terms and a commercial interest rate that are applicable to Arm’s Length transactions.

171. The XXXXXXXXXX of the Lossco Group has provided a letter confirming that debt ratios of the consolidated entity formed by Parentco, Lossco and Lossco’s subsidiaries as well as the controlling interest that XXXXXXXXXX managed by XXXXXXXXXX. hold in Lossco support the view that the amount of the Daylight Loan will not exceed the borrowing capacity of the Lossco Group.

172. Based on Lossco’s existing and anticipated assets and resources, it is expected that Lossco will have the financial capacity to make the Contributions of Capital described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125.

173. In the course of the maintenance and the Wind-Up:

(a) Newco will satisfy the relevant solvency test required under the XXXXXXXXXX to pay each of the Newco Preferred Share Dividends, which are generally described in Paragraph 104b) and specifically described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125; and

(b) Newco will satisfy the relevant solvency required under the XXXXXXXXXX to redeem the Newco Preferred Shares, which are generally described in Paragraph 67, and specifically described in Paragraphs 71, 74, 77, 80, 83, 86, 89, 92, 95, 98 and 101.

174. The Newco Preferred Share Dividends, which are generally described in Paragraph 104b) and specifically described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125, will have no other purposes other than the one described under the heading “Purposes of the Proposed Transactions”.

175. The increase in the ACB of the Newco Common Shares that will result from the Contributions of Capital, which are generally described in Paragraph 125a) and specifically described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125, will be eliminated as part of the Wind-Up of the Loss Consolidation pursuant to subsection 88(1).

Pertaining to Lossco and the Profitcos

176. XXXXXXXXXX

177. XXXXXXXXXX

178. XXXXXXXXXX

179. XXXXXXXXXX

180. XXXXXXXXXX

181. XXXXXXXXXX

182. XXXXXXXXXX

183. XXXXXXXXXX

184. XXXXXXXXXX

185. XXXXXXXXXX

186. XXXXXXXXXX

187. XXXXXXXXXX

PURPOSE OF THE PROPOSED TRANSACTIONS

188. The sole purpose of the Proposed Transactions is to consolidate Taxable Income and Non-Capital Losses that are not subject to a Loss Restriction Event within a group of Related Persons and Affiliated Persons by causing Lossco to earn interest income on each of the Profitco Notes so that it can use a significant portion of its Non-Restricted Non-Capital Losses, and having the Profitcos to incur, in aggregate, a corresponding interest expense so that they can reduce their income and Taxable Income before the Wind-Up.

189. The purpose of the payment and the receipt of the Newco Preferred Share Dividends, which are generally described in Paragraph 104b) and specifically described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125, is to provide a reasonable return on the Newco Preferred Shares and to fund the interest payments made by each of the Profitcos that will be due on each of the Profitco Notes as generally described in Paragraph 66, and specifically described in Paragraphs 70, 73, 76, 79, 82, 85, 88, 91, 94, 97 and 100. More specifically, none of the purposes of the Newco Preferred Share Dividends is to effect a significant reduction in the portion of the capital gain that, but for the Newco Preferred Share Dividend, would have been realized on a disposition of any shares of the capital stock of Newco or the Fair Market Value of the Newco Preferred Share, or to effect a significant increase in the cost of any property.

190. The Proposed Transactions are not being undertaken to refresh Non-Capital Losses or facilitate the use of such Non-Capital Losses in a taxation year that ends after the taxation year in which the Non-Capital Losses would have otherwise expired in the hands of Lossco.

191. The purpose of the Loss Consolidation is not to shift income to a lower rate province. Any shift of income between provinces would be incidental to the Proposed Transactions.

RULINGS:

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, Proposed Transactions and the Purposes of the Proposed Transactions, the Proposed Transactions are completed in the manner described above, and there are no other transactions which may be relevant to the Rulings requested, we rule that:

A. Provided that each of the Profitcos respectively has a legal obligation to pay interest on the Profitco Notes as further described in Paragraphs 70, 73, 76, 79, 82, 85, 88, 91, 94, 97 and 100 and that each of the Profitcos continues to hold the Newco Preferred Shares respectively referred to in Paragraphs 71, 74, 77, 80, 83, 86, 89, 92, 95, 98 and 101 for the purpose of gaining or producing income, each of the Profitcos will be entitled, pursuant to paragraph 20(1)(c), to deduct the lesser of: (i) the interest paid or payable (depending on the method regularly followed by the Profitco in computing its income for purposes of the Act) in respect of the year on the Profitco Note that it has issued to Lossco, and (ii) a reasonable amount in respect thereof.

B. The provisions of subsections 15(1), 56(2) and 246(1) will not apply to the Proposed

Transactions, in and by themselves.

C. No amount will be included in the income of Newco under any of section 9, or paragraph

12(1)(c) or 12(1)(x) in respect of the Contributions of Capital, which are referred in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125, that Newco will receive from Lossco as part of the Proposed Transactions.

D. The Newco Preferred Share Dividends that each of the Profitcos will receive, which are

described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125, will beTaxable Dividends and such Newco Preferred Share Dividends will, pursuant to subsection 112(1), be deductible in computing the taxable income of each of the Profitcos for the taxation year in which the Newco Preferred Share Dividends are received by the Profitcos. For greater certainty, such deduction will not be precluded by any of subsection 112(2.1), 112(2.2), 112(2.3) or 112(2.4).

E. Part IV.1 and VI.1 will not apply to the Newco Preferred Share Dividends described in Ruling D.

F. Provided that the payment and receipt of the Newco Preferred Share Dividends, which are described in Paragraphs 105, 107, 109, 111, 113, 115, 117, 119, 121, 123 and 125, have no purpose other than the ones described in the “Purpose of the Proposed Transactions”, and the Proposed Transactions are undertaken in the manner described above, the provisions of subsection 55(2) will not apply in respect of the dividends referred in Ruling D that are received by each of the Profitcos on the Newco Preferred Shares.

G. The settlement of the each of Profitco Notes and the Lossco Notes as described in Paragraphs 130, 133, 136, 139, 142, 145, 148, 151, 154, 157 and 160 will not give rise to any “forgiven amount” for purposes of section 80.

H. Subsection 245(2) will not be applied as a result of entering into the Proposed Transactions, in and by themselves, to re-determine the tax consequences confirmed in the Rulings given.

The above Rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R12 dated April 1, 2022, and are binding on the CRA provided that the Proposed Transactions described in Paragraphs 58 to 103 above are commenced and entered into on or before XXXXXXXXXX, and the remaining Proposed Transactions described in Paragraphs 104 to 160 are undertaken as described in this letter .

The above Rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and the Regulations which, if enacted, could have an effect on the Rulings provided herein.

OTHER COMMENTS:

Nothing in this letter should be construed as implying that the CRA has agreed to, reviewed or has made any determination in respect of:

(a) the Fair Market Value or ACB of any property or the PUC of any shares referred to herein;

(b) the amount of any Non-Capital Loss;

(c) the provincial income tax implications relating to the allocation of income and expenses under the Proposed Transaction;

(d) the application or non-application of a general anti-avoidance provision of any province;

(e) the application of the Excessive Interest and Financing Expenses Limitation rules to the Proposed Transactions; and

(f) any tax consequences relating to the Facts and Proposed Transactions described herein other than those specifically described in the Rulings given above.

An invoice for our fees in connection with the rulings request will be forwarded to you under separate cover.

Yours Truly,

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