2025 Ruling 2025-1051191R3 - Multi-wing split-up gross asset butterfly

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 exception to the application of subsection 55(2) provided in paragraph 55(3)(b) will apply to the proposed transactions.

Position: Yes.

Reasons: Conditions for application have been met and the "butterfly denial rules" in subsection 55(3.1) do not apply.

XXXXXXXXXX									2025-105119

XXXXXXXXXX, 2025

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX

This is in reply to your letter dated XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the taxpayers described herein.

This letter is based solely on the facts, proposed transactions, additional information and purposes of the proposed transactions described below. Any documentation submitted in respect of your request does not form part of the facts, proposed transactions or additional information unless specifically reproduced therein and any references to documentation are provided solely for the convenience of the reader.

We understand that to the best of your knowledge and that of the taxpayers, none of the proposed transactions and/or issues involved in this ruling are the same as, or substantially similar to, transactions and/or issues that are:

(a) in a previously filed tax return of the taxpayer or a related person and;

(i) being considered by the CRA in connection with such return;

(ii) under objection by the taxpayer or a related person; or

(iii) the subject of a current or completed court process involving the taxpayer or a related person; and

(b) the subject of an advance income tax ruling previously considered by the Income Tax Rulings Directorate of the CRA in connection with the taxpayer or a person related to the taxpayer.

The tax account numbers, Tax Services Offices and the Tax Centres and addresses of the taxpayers involved are as follows:

XXXXXXXXXX

Unless otherwise stated:

(a) all references herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Income Tax Act, R.S.C. 1985 c.1 (5th Supp.) (the “Act”), as amended to the date of this letter;

(b) all terms and conditions used in this letter that are defined in the Act have the meaning given in such definition;

(c) all references to monetary amounts are in Canadian dollars; and

(d) the singular should be read as plural and vice versa where the circumstances so require.

DEFINITIONS

The following abbreviations, terms and expressions have the meanings specified, and the relevant parties to the Proposed Transactions (as defined below) will be referred to as follows:

“Act 1” means the XXXXXXXXXX;

“adjusted cost base” or “ACB” means “adjusted cost base” as defined in section 54;

“agreed amount” means the amount agreed to by the transferor and the transferee in respect of the transfer of eligible property in a joint election filed pursuant to subsection 85(1);

“XXXXXXXXXX account” means the self-managed producer-government savings account that consists of two different funds: (a) XXXXXXXXXX, which are not taxable upon withdrawal (similar to a bank account); and (b) government contributions and interest earned on both funds, which are taxed as investment income upon withdrawal;

“arm’s length” has the meaning assigned by subsection 251(1);

“capital dividend” has the meaning assigned by subsection 83(2);

“capital property” has the meaning assigned by section 54;

“CCPC” means “Canadian-controlled private corporation” as that term is defined in subsection 125(7);

“CDA” means “capital dividend account” as that term is defined in subsection 89(1);

“CRA” means Canada Revenue Agency;

“DC” means XXXXXXXXXX, a corporation incorporated under Act 1, as described in Paragraph 1;

“DC Class A Common Shares” means the Class A common shares of DC, as described in Paragraph 2(a);

“DC Class J Preferred Shares” means the Class J preferred shares of DC, as described in Paragraph 2(d);

“DC Class K Preferred Shares” means the Class K preferred shares of DC, as described in Paragraph 2(d);

“DC Class P Preferred Shares” means the Class P preferred shares of DC, as described in Paragraph 2(f);

“DC Transfer 1” refers to the transfer of property by DC to TC1 as described in Paragraph 39 to Paragraph 41;

“DC Transfer 2” refers to the transfer of property by DC to TC2 as described in Paragraph 42 to Paragraph 44;

“DC Transfer 3” refers to the transfer of property by DC to TC3 as described in Paragraph 45 to Paragraph 47;

“DC Transfers” means the DC Transfer 1, DC Transfer 2, and DC Transfer 3, collectively;

“distribution” has the meaning assigned by subsection 55(1);

“dividend refund” has the meaning assigned by subsection 129(1);

“dividend rental arrangement” has the meaning assigned by subsection 248(1);

“eligible dividend” has the meaning assigned by subsection 89(14);

“eligible property” has the meaning assigned by subsection 85(1.1);

“ERDTOH” means “eligible refundable dividend tax on hand” which has the meaning assigned by subsection 129(4);

“fair market value” or “FMV” 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, expressed in terms of money;

“financial intermediary corporation” has the meaning assigned by subsection 191(1);

“forgiven amount” has the meaning assigned by subsection 80(1) or 80.01(1);

“GRIP” means “general rate income pool” as that expression is defined in subsection 89(1);

“Individual A” means XXXXXXXXXX, an individual who is resident in Canada for purposes of the Act. Individual A is the parent of Individual 1 and Individual 2, is the sibling of Individual B and is the uncle of Individual 3;

“Individual B” means XXXXXXXXXX, an individual who is resident in Canada for purposes of the Act. Individual B is the parent of Individual 3, the sibling of Individual A and the uncle of Individual 1 and Individual 2;

“Individual 1” means XXXXXXXXXX, an individual who is resident in Canada for purposes of the Act. Individual 1 is the offspring of Individual A, the sibling of Individual 2, the nephew of Individual B and the cousin of Individual 3;

“Individual 2” means XXXXXXXXXX, an individual who is resident in Canada for purposes of the Act. Individual 2 is the offspring of Individual A, the sibling of Individual 1, the nephew of Individual B and the cousin of Individual 3;

“Individual 3” means XXXXXXXXXX, an individual who is resident in Canada for purposes of the Act. Individual 3 is the offspring of Individual B, the nephew of Individual A and the cousin of Individual 1 and Individual 2;

“NERDTOH” means “non-eligible refundable dividend tax on hand” which has the meaning assigned by subsection 129(4);

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

“Paragraph” means a numbered paragraph in this letter;

“prescribed rate of interest” means the rate of interest prescribed by Regulation 4301 of the Income Tax Regulations, C.R.C. 1979, c. 945, as amended;

“principal amount” has the meaning assigned by subsection 248(1);

“private corporation” has the meaning assigned by subsection 89(1);

“proceeds of disposition” has the meaning assigned by section 54;

“Proposed Transactions” means the proposed transactions described in Paragraph 27 to Paragraph 55;

“Redemption Amount” means an amount equal to the FMV of the consideration received upon issuance of such shares;

“Redemption Value” means an amount equal to the aggregate of $1.00 per share;

“related person” has the meaning assigned by subsection 251(2);

“restricted financial institution” has the meaning assigned by subsection 248(1);

“specified financial institution” has the meaning assigned by subsection 248(1);

“specified investment business” has the meaning assigned by subsection 125(7);

“taxable Canadian corporation” has the meaning assigned in subsection 89(1);

“taxable preferred share” has the meaning assigned by subsection 248(1);

“taxation year” has the meaning assigned by subsection 249(1);

“TCs” means TC1, TC2 and TC3 collectively;

“TC Redemption Notes” means the TC1 Redemption Note, the TC2 Redemption Note and the TC3 Redemption Note, collectively;

“TC1” means XXXXXXXXXX, a corporation incorporated under Act 1, as described in Paragraph 9;

“TC1 Class A Common Shares” means the Class A common shares of TC1, as described in Paragraph 10(a);

“TC1 Class G Preferred Shares” means the Class G preferred shares of TC1, as described in Paragraph 10(c);

“TC1 Class H Preferred Shares” means the Class H preferred shares of TC1, as described in Paragraph 10(c);

“TC1 Redemption Note” means the non-interest bearing demand promissory note to be issued by TC1 to DC on the redemption of the TC1 Class G Preferred Shares owned by DC, as described in Paragraph 48(a);

“TC2” means XXXXXXXXXX, a corporation incorporated under Act 1, as described in Paragraph 15;

“TC2 Class A Common Shares” means the Class A common shares of TC2, as described in Paragraph 16(a);

“TC2 Class G Preferred Shares” means the Class G preferred shares of TC2, as described in Paragraph 16(c);

“TC2 Redemption Note” means the non-interest bearing demand promissory note to be issued by TC2 to DC on the redemption of the TC2 Class G Preferred Shares owned by DC, as described in Paragraph 48(b);

“TC3” means XXXXXXXXXX, a corporation incorporated under Act 1, as described in Paragraph 21;

“TC3 Class A Common Shares” means the Class A common shares of TC3, as described in Paragraph 22(a);

“TC3 Class G Preferred Shares” means the Class G preferred shares of TC3, as described in Paragraph 22(c);

“TC3 Class H Preferred Shares” means the Class H preferred shares of TC3, as described in Paragraph 22(c);

“TC3 Redemption Note” means the non-interest bearing demand promissory note to be issued by TC3 to DC on the redemption of the TC3 Class G Preferred Shares owned by DC, as described in Paragraph 48(c);

“winding-up dividend” means the dividend arising on the winding-up of DC by virtue of subsection 84(2) and paragraph 88(2)(b), as described in Paragraph 50 to 52.

FACTS

Distributing Corporation (DC)

1. DC is a taxable Canadian corporation and a CCPC that was incorporated on XXXXXXXXXX under Act 1. DC has a taxation year and fiscal period end of XXXXXXXXXX.

2. DC’s authorized share capital consists of an unlimited number of the following shares with the following rights, privileges and conditions:

(a) Class A Common Shares, Class B Common Shares and Class C Common Shares that are entitled to XXXXXXXXXX vote per share and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of DC on a liquidation, dissolution or on the winding-up of DC.

(b) Class D Common Shares, Class E Common Shares and Class F Common Shares that are not entitled to vote and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of DC on a liquidation, dissolution or on the winding-up of DC.

(c) Class G Preferred Shares, Class H Preferred Shares and Class I Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Value. These shares are entitled to non-cumulative dividends not to exceed XXXXXXXXXX% of the Redemption Value and are entitled to receive the aggregate Redemption Value on a liquidation, dissolution or on the winding-up of DC.

(d) Class J Preferred Shares, Class K Preferred Shares and Class L Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of DC.

(e) Class M Preferred Shares, Class N Preferred Shares and Class O Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Value. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Value of DC on a liquidation, dissolution or on the winding-up of DC.

(f) Class P Preferred Shares, Class Q Preferred Shares and Class R Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of DC.

3. The issued and outstanding shares of DC are as follows:

	Shareholder		Class					PUC		ACB
	Individual A	XXXXX Class K Preferred		XXXXX		XXXXX
	Individual B	XXXXX Class J Preferred		XXXXX		XXXXX
	Individual 1	XXXXX Class A Common		XXXXX		XXXXX
				XXXXX Class P Preferred		XXXXX		XXXXX
	Individual 2	XXXXX Class A Common		XXXXX		XXXXX
				XXXXX Class P Preferred		XXXXX		XXXXX
	Individual 3	XXXXX Class A Common		XXXXX		XXXXX

4. The shareholders of DC hold their shares of DC as capital property.

5. DC operates an XXXXXXXXXX. A share of the capital stock of DC is, to each of its shareholders, a “share of the capital stock of XXXXXXXXXX corporation” pursuant to the definition provided in subsection 110.6(1).

6. According to its balance sheet for the period ended XXXXXXXXXX, DC’s principal assets and liabilities consist of:

Assets

(a) XXXXXXXXXX, accounts receivable, prepaid expenses, income taxes recoverable and sales taxes receivable;

(b) Capital assets including XXXXXXXXXX;

(c) Other long term assets including XXXXXXXXXX and marketable securities.

Liabilities

(a) Bank indebtedness, accounts payable, amounts due to shareholders, XXXXXXXXXX; and

(b) Third party long term debt.

There have not been any material change in the composition of DC’s assets and liabilities since XXXXXXXXXX.

7. DC reports its income for tax purposes in accordance with the “cash method,” as permitted under section 28.

8. As at XXXXXXXXXX, DC had the following tax balances:

(a) ERDTOH – XXXXXXXXXX;
(b) NERDTOH – XXXXXXXXXX;
(c) GRIP – XXXXXXXXXX; and
(d) CDA – XXXXXXXXXX.

Transferee Corporations

9. TC1 is a taxable Canadian corporation and a CCPC that was incorporated on XXXXXXXXXX, under Act 1. TC1 has a taxation year and fiscal period end of XXXXXXXXXX.

10. TC1’s authorized share capital consists of an unlimited number of the following shares with the following rights, privileges and conditions:

(a) Class A Common Shares, Class B Common Shares and Class C Common Shares that are entitled to XXXXXXXXXX vote per share and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of TC1 on a liquidation, dissolution or on the winding-up of TC1.

(b) Class D Common Shares, Class E Common Shares and Class F Common Shares that are not entitled to vote and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of TC1 on a liquidation, dissolution or on the winding-up of TC1.

(c) Class G Preferred Shares, Class H Preferred Shares and Class I Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Value. These shares are entitled to non-cumulative dividends not to exceed XXXXXXXXXX% of the Redemption Value and are entitled to receive the aggregate Redemption Value on a liquidation, dissolution or on the winding-up of TC1.

(d) Class J Preferred Shares, Class K Preferred Shares and Class L Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of TC1.

(e) Class M Preferred Shares, Class N Preferred Shares and Class O Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Value. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Value on a liquidation, dissolution or on the winding-up of TC1.

(f) Class P Preferred Shares, Class Q Preferred Shares and Class R Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of TC1.

11. The issued and outstanding shares of TC1 are as follows:

	Shareholder		Class					PUC		ACB
	Individual 1	XXXXX Class A Common		XXXXX		XXXXX

12. Individual 1 holds their shares of TC1 as capital property.

13. Since its incorporation, TC1 has not, and currently does not, carry on any business activity and does not have any significant assets or liabilities.

14. As at XXXXXXXXXX, TC1 had the following tax balances:

(a) ERDTOH – XXXXXXXXXX;
(b) NERDTOH – XXXXXXXXXX;
(c) GRIP – XXXXXXXXXX; and
(d) CDA – XXXXXXXXXX.

15. TC2 is a taxable Canadian corporation and a CCPC that was incorporated on XXXXXXXXXX, under Act 1. TC2 has a taxation year and fiscal period end of XXXXXXXXXX.

16. TC2’s authorized share capital consists of an unlimited number of the following shares with the following rights, privileges and conditions:

(a) Class A Common Shares, Class B Common Shares and Class C Common Shares that are entitled to XXXXXXXXXX vote per share and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of TC2 on a liquidation, dissolution or on the winding-up of TC2.

(b) Class D Common Shares, Class E Common Shares and Class F Common Shares that are not entitled to vote and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of TC2 on a liquidation, dissolution or on the winding-up of TC2.

(c) Class G Preferred Shares, Class H Preferred Shares and Class I Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Value. These shares are entitled to non-cumulative dividends not to exceed XXXXXXXXXX% of the Redemption Value and are entitled to receive the aggregate Redemption Value on a liquidation, dissolution or on the winding-up of TC2.

(d) Class J Preferred Shares, Class K Preferred Shares and Class L Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of TC2.

(e) Class M Preferred Shares, Class N Preferred Shares and Class O Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Value. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Value on a liquidation, dissolution or on the winding-up of TC2.

(f) Class P Preferred Shares, Class Q Preferred Shares and Class R Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of TC2.

17. The issued and outstanding shares of TC2 are as follows:

	Shareholder		Class				PUC		ACB
	Individual 2	XXXXX Class A Common	XXXXX		XXXXX

18. Individual 2 holds their shares of TC2 as capital property.

19. Since its incorporation, TC2 has not, and currently does not, carry on any business activity and does not have any significant assets or liabilities.

20. As at XXXXXXXXXX, TC2 had the following tax balances:

(a) ERDTOH – XXXXXXXXXX;
(b) NERDTOH – XXXXXXXXXX;
(c) GRIP – XXXXXXXXXX; and
(d) CDA – XXXXXXXXXX.

21. TC3 is a taxable Canadian corporation and a CCPC that was incorporated on XXXXXXXXXX, under Act 1. TC3 has a taxation year and fiscal period end of December 31.

22. TC3’s authorized share capital consists of an unlimited number of the following shares with the following rights, privileges and conditions:

(a) Class A Common Shares, Class B Common Shares and Class C Common Shares that are entitled to XXXXXXXXXX vote per share and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of TC3 on a liquidation, dissolution or on the winding-up of TC3.

(b) Class D Common Shares, Class E Common Shares and Class F Common Shares that are not entitled to vote and include the right to receive dividends as and when declared by the board of directors, and to receive the remaining property of TC3 on a liquidation, dissolution or on the winding-up of TC3.

(c) Class G Preferred Shares, Class H Preferred Shares and Class I Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Value. These shares are entitled to non-cumulative dividends not to exceed XXXXXXXXXX% of the Redemption Value and are entitled to receive the aggregate Redemption Value on a liquidation, dissolution or on the winding-up of TC3.

(d) Class J Preferred Shares, Class K Preferred Shares and Class L Preferred Shares are entitled to XXXXXXXXXX vote per share and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of TC3.

(e) Class M Preferred Shares, Class N Preferred Shares and Class O Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Value. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Value on a liquidation, dissolution or on the winding-up of TC3.

(f) Class P Preferred Shares, Class Q Preferred Shares and Class R Preferred Shares are not entitled to vote and are redeemable and retractable for the Redemption Amount. These shares have a non-cumulative, discretionary dividend entitlement not to exceed the same rate as the prescribed rate of interest (in force at the time the shares are issued) and are entitled to receive the aggregate Redemption Amount on a liquidation, dissolution or on the winding-up of TC3.

23. The issued and outstanding shares of TC3 are as follows:

	Shareholder			Class				PUC		ACB
	Individual 3		XXXXX Class A Common	XXXXX		XXXXX

24. Individual 3 holds their shares of TC3 as capital property.

25. Since its incorporation, TC3 has not, and currently does not, carry on any business activity and does not have any significant assets or liabilities.

26. As at XXXXXXXXXX, TC3 had the following tax balances:

(a) ERDTOH – XXXXXXXXXX;
(b) NERDTOH – XXXXXXXXXX;
(c) GRIP – XXXXXXXXXX; and
(d) CDA – XXXXXXXXXX.

PROPOSED TRANSACTIONS

The Proposed Transactions will occur in the order presented unless otherwise indicated, with the exception of filing the applicable election forms, which will be filed within the applicable due dates following the completion of the Proposed Transactions.

Life insurance policy transactions

27. DC will surrender the life insurance policy in respect of Individual A and Individual B.

DC share transfers

28. Individual 1 will transfer all of their DC Class A Common Shares and all of their DC Class P Preferred Shares to TC1 for consideration consisting solely of TC1 Class M Preferred Shares, with an aggregate FMV equal to each of the aggregate FMV of the DC Class A Common Shares and DC Class P Preferred Shares, respectively, transferred to TC1 by Individual 1 at that time.

29. Individual 1 and TC1 will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of the DC Class A Common Shares and the DC Class P Preferred Shares to TC1 as described in Paragraph 28. For greater certainty, the agreed amount will be the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). The amount added to the stated capital account of the respective shares issued to Individual 1, in Paragraph 28, will be restricted to the greater of (i) the aggregate PUC, immediately before the disposition, of the respective shares transferred to TC1, as the case may be; and (ii) the aggregate ACB to Individual 1 immediately before the disposition, of such shares, taking into account any adjustments provided in paragraphs 84.1(2)(a) and (a.1).

30. Individual 2 will transfer all of their DC Class A Common Shares and all of their DC Class P Preferred Shares to TC2 for consideration consisting solely of TC2 Class M Preferred Shares, with an aggregate FMV equal to each of the aggregate FMV of the DC Class A Common Shares and DC Class D Preferred Shares, respectively, transferred to TC2 by Individual 2 at that time.

31. Individual 2 and TC2 will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of the DC Class A Common Shares and the DC Class P Preferred Shares to TC2 as described in Paragraph 30. For greater certainty, the agreed amount will be the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). The amount added to the stated capital account of the respective shares issued to Individual 2, in Paragraph 30, will be restricted to the greater of (i) the aggregate PUC, immediately before the disposition, of the respective shares transferred to TC2, as the case may be; and (ii) the aggregate ACB to Individual 2 immediately before the disposition, of such shares, taking into account any adjustments provided in paragraphs 84.1(2)(a) and (a.1).

32. Individual 3 will transfer all of their DC Class A Common Shares to TC3 for consideration consisting solely of TC3 Class M Preferred Shares, with an aggregate FMV equal to each of the aggregate FMV of the DC Class A Common Shares transferred to TC3 by Individual 3 at that time.

33. Individual 3 and TC3 will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of the DC Class A Common Shares to TC3 as described in Paragraph 32. For greater certainty, the agreed amount will be the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). The amount added to the stated capital account of the respective shares issued to Individual 3, in Paragraph 32, will be restricted to the greater of (i) the aggregate PUC, immediately before the disposition, of the respective shares transferred to TC3, as the case may be; and (ii) the aggregate ACB to Individual 3 immediately before the disposition, of such shares, taking into account any adjustments provided in paragraphs 84.1(2)(a) and (a.1).

34. Individual A will transfer all of their DC Class K Preferred Shares to TC1 for consideration consisting solely of TC1 Class H Preferred Shares, with an aggregate FMV equal to each of the aggregate FMV of the DC Class K Preferred Shares transferred to TC1 by Individual A at that time.

35. Individual A and TC1 will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of the DC Class K Preferred Shares to TC1 as described in Paragraph 34. For greater certainty, the agreed amount will be the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). The amount added to the stated capital account of the respective shares issued to Individual A, in Paragraph 34, will be restricted to the greater of (i) the aggregate PUC, immediately before the disposition, of the respective shares transferred to TC1, as the case may be; and (ii) the aggregate ACB to Individual A immediately before the disposition, of such shares, taking into account any adjustments provided in paragraphs 84.1(2)(a) and (a.1).

36. Individual B will transfer all of their DC Class J Preferred Shares to TC3 for consideration consisting solely of TC3 Class H Preferred Shares, with an aggregate FMV equal to each of the aggregate FMV of the DC Class J Preferred Shares transferred to TC3 by Individual B at that time.

37. Individual B and TC3 will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of the DC Class J Preferred Shares to TC3 as described in Paragraph 36. For greater certainty, the agreed amount will be the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). The amount added to the stated capital account of the respective shares issued to Individual B, in Paragraph 36, will be restricted to the greater of (i) the aggregate PUC, immediately before the disposition, of the respective shares transferred to TC3, as the case may be; and (ii) the aggregate ACB to Individual B immediately before the disposition, of such shares, taking into account any adjustments provided in paragraphs 84.1(2)(a) and (a.1).

Classification of DC’s property

38. Immediately before the DC Transfers described in Paragraph 39 to 47, the property of DC will be classified into the following types of property:

(a) cash or near-cash property including, cash and cash equivalents, accounts receivable, taxes receivable, XXXXXXXXXX account, prepaid expenses and inventories;

(b) business property, comprising all of the assets of DC other than cash or near-cash property, any income from which would, for purposes of the Act, be income from a business (other than a specified investment business); and

(c) investment property, comprising all of the assets of DC other than cash or near-cash property, any income from which would, for purposes of the Act, be income from property or from a specified investment business.

For greater certainty, for the purposes of the distribution:

(d) DC will not have a significant influence over any corporation or other entity;

(e) tax accounts of DC, such as CDA, GRIP, NERDTOH or ERDTOH, if any, will not be considered property;

(f) the amount of any deferred tax will not be considered to be a property, as the case may be, for the purposes of the Proposed Transactions;

(g) amounts owing to DC that are due on demand or within XXXXXXXXXX will be considered to be cash or near-cash property; and

(h) any amount in respect of a refund of taxes, and interest thereon, actually receivable will be treated as cash or near-cash property.

DC Transfer 1

39. Immediately following the classification of DC’s types of property, DC will transfer a proportionate share of each type of property owned by DC at that time to TC1, such that immediately following the DC Transfer 1, the FMV of each type of property transferred to TC1 will be equal to or approximate that proportion of each type of property determined by the formula:

A x B/C

where:

A is the FMV, immediately before the DC Transfers, of all property of that type owned by DC at that time;

B is the aggregate FMV, immediately before the DC Transfers, of all the shares of the capital stock of DC owned by TC1 at that time; and

C is the aggregate FMV, immediately before the DC Transfers, of all the issued and outstanding shares of the capital stock of DC at that time.

For the purpose of this Paragraph, the expression “approximate that proportion” means that the discrepancy from that proportion, if any, will not exceed 1%, determined as a percentage of the FMV of each type of property that TC1 will receive as compared to what TC1 would have received (or DC would have retained) had it received (or retained) its appropriate proportion of the FMV of that type of property of DC.

40. As consideration for the transfer of property by DC to TC1 on the DC Transfer 1, TC1 will:

(a) assume the same proportion of the liabilities of DC as the proportion of the FMV of the property transferred to TC1 is of the FMV of all the property of DC immediately before the DC Transfer 1; and

(b) issue TC1 Class G Preferred Shares to DC having an aggregate FMV and redemption value equal to the Redemption Value, being the FMV of the property transferred to TC1, less the amount of liabilities that TC1 respectively assumed.

For greater certainty, the TC1 Class G Preferred Shares will be taxable preferred shares and short-term preferred shares, which will be held by DC as capital property.

41. In respect of the distribution of property under the DC Transfer 1, DC will jointly elect, with TC1 in prescribed form and within the time allowed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of each eligible property of DC that is transferred to TC1. The agreed amount in respect of each such eligible property will be as follows:

(a) in the case of capital property (other than depreciable property of a prescribed class), an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii);

(b) in the case of depreciable property of a prescribed class, if any, an amount not less than the least of the amounts described in subparagraphs 85(1)(e)(i), (ii) and (iii); and

(c) in the case of inventory, an amount determined in accordance with the formula set out in paragraph 85(1)(c.2).

For greater certainty, the amount of liabilities that are allocated by DC to a particular eligible property that is subject to an election under subsection 85(1), and that are assumed by TC1, will not exceed the agreed amount for that particular property in accordance with paragraph 85(1)(b). The amount of liabilities assumed by TC1, which are allocated by DC to a particular property that is not subject to an election under subsection 85(1), will not exceed the FMV of any such property.

TC1 will add to the stated capital account maintained for the TC1 Class G Preferred Shares, an amount equal to the amount by which the aggregate of the agreed amounts, in the case of each eligible property, and the aggregate FMV, in the case of other properties respectively transferred to TC1, exceeds the aggregate of the amount of DC liabilities assumed by TC1.

For greater certainty, the amount added to the stated capital account for the TC1 Class G Preferred Shares issued by TC1 as partial consideration for the distribution property under the DC Transfer 1, will not exceed the maximum amount that could be added to the aggregate PUC of such shares without a reduction taking place pursuant to subsection 85(2.1).

DC Transfer 2

42. Immediately following the classification of DC’s types of property, DC will transfer a proportionate share of each type of property owned by DC at that time to TC2, such that immediately following the DC Transfer 2, the FMV of each type of property transferred to TC2 will be equal to or approximates that proportion of each type of property determined by the formula:

A x B/C

where:

A is the net FMV, immediately before the DC Transfers, of all property of that type owned by DC at that time;

B is the aggregate FMV, immediately before the DC Transfers, of all the shares of the capital stock of DC owned by TC2 at that time; and

C is the aggregate FMV, immediately before the DC Transfers, of all the issued and outstanding shares of the capital stock of DC at that time.

For the purpose of this Paragraph, the expression “approximate that proportion” means that the discrepancy from that proportion, if any, will not exceed 1%, determined as a percentage of the FMV of each type of property that TC2 will receive as compared to what TC2 would have received (or DC would have retained) had it received (or retained) its appropriate proportion of the FMV of that type of property of DC.

43. As consideration for the transfer of property by DC to TC2 on the DC Transfer 2, TC2 will:

(a) assume the same proportion of the liabilities of DC as the proportion of the FMV of the property transferred to TC2 is of the FMV of all the property of DC immediately before the DC Transfer 2; and

(b) issue TC2 Class G Preferred Shares to DC having an aggregate FMV and redemption value equal to the Redemption Value, being the FMV of the property transferred to TC2, less the amount of liabilities that TC2 respectively assumed.

For greater certainty, the TC2 Class G Preferred Shares will be taxable preferred shares and short-term preferred shares, which will be held by DC as capital property.

44. In respect of the distribution of property under the DC Transfer 2, DC will jointly elect, with TC2 in prescribed form and within the time allowed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of each eligible property of DC that is transferred to TC2. The agreed amount in respect of each such eligible property will be as follows:

(a) in the case of capital property (other than depreciable property of a prescribed class), an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii);

(b) in the case of depreciable property of a prescribed class, if any, an amount not less than the least of the amounts described in subparagraphs 85(1)(e)(i), (ii) and (iii); and

(c) in the case of inventory, an amount determined in accordance with the formula set out in paragraph 85(1)(c.2).

For greater certainty, the amount of liabilities that are allocated by DC to a particular eligible property that is subject to an election under subsection 85(1), and that are assumed by TC2, will not exceed the agreed amount for that particular property. The amount of liabilities assumed by TC2, which are allocated by DC to a particular property that is not subject to an election under subsection 85(1), will not exceed the FMV of any such property.

TC2 will add to the stated capital account maintained for the TC2 Class G Preferred Shares, an amount equal to the amount by which the aggregate of the agreed amounts, in the case of each eligible property, and the aggregate FMV, in the case of other properties respectively transferred to TC2, exceeds the aggregate of the amount of DC liabilities assumed by TC2.

For greater certainty, the amount added to the stated capital account for the TC2 Class G Preferred Shares issued by TC2 as partial consideration for the distribution property under the DC Transfer 2, will not exceed the maximum amount that could be added to the aggregate PUC of such shares without a reduction taking place pursuant to subsection 85(2.1).

DC Transfer 3

45. Immediately following the classification of DC’s types of property, DC will transfer a proportionate share of each type of property owned by DC at that time to TC3, such that immediately following the DC Transfer 3, the FMV of each type of property transferred to TC3 will be equal to or approximates that proportion of each type of property determined by the formula:

A x B/C

where:

A is the FMV, immediately before the DC Transfers, of all property of that type owned by DC at that time;

B is the aggregate FMV, immediately before the DC Transfers, of all the shares of the capital stock of DC owned by TC3 at that time; and

C is the aggregate FMV, immediately before the DC Transfers, of all the issued and outstanding shares of the capital stock of DC at that time.

For the purpose of this Paragraph, the expression “approximate that proportion” means that the discrepancy from that proportion, if any, will not exceed 1%, determined as a percentage of the FMV of each type of property that TC3 will receive as compared to what TC3 would have received (or DC would have retained) had it received (or retained) its appropriate proportion of the FMV of that type of property of DC.

46. As consideration for the transfer of property by DC to TC3 on the DC Transfer 3, TC3 will:

(a) assume the same proportion of the liabilities of DC as the proportion of the FMV of the property transferred to TC3 is of the FMV of all the property of DC immediately before the DC Transfer 3; and

(b) issue TC3 Class G Preferred Shares to DC having an aggregate FMV and redemption value equal to the Redemption Value, being the FMV of the property transferred to TC3, less the amount of liabilities that TC3 respectively assumed.

For greater certainty, the TC3 Class G Preferred Shares will be taxable preferred shares and short-term preferred shares, which will be held by DC as capital property.

47. In respect of the distribution of property under the DC Transfer 3, DC will jointly elect, with TC3 in prescribed form and within the time allowed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers of each eligible property of DC that is transferred to TC3. The agreed amount in respect of each such eligible property will be as follows:

(a) in the case of capital property (other than depreciable property of a prescribed class), an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii);

(b) in the case of depreciable property of a prescribed class, if any, an amount not less than the least of the amounts described in subparagraphs 85(1)(e)(i), (ii) and (iii); and

(c) in the case of inventory, an amount determined in accordance with the formula set out in paragraph 85(1)(c.2).

For greater certainty, the amount of liabilities that are allocated by DC to a particular eligible property that is subject to an election under subsection 85(1), and that are assumed by TC3, will not exceed the agreed amount for that particular property. The amount of liabilities assumed by TC3, which are allocated by DC to a particular property that is not subject to an election under subsection 85(1), will not exceed the FMV of any such property.

TC3 will add to the stated capital account maintained for the TC3 Class G Preferred Shares, an amount equal to the amount by which the aggregate of the agreed amounts, in the case of each eligible property, and the aggregate FMV, in the case of other properties respectively transferred to TC3, exceeds the aggregate of the amount of DC liabilities assumed by TC3.

For greater certainty, the amount added to the stated capital account for the TC3 Class G Preferred Shares issued by TC3 as partial consideration for the distribution property under the DC Transfer 3, will not exceed the maximum amount that could be added to the aggregate PUC of such shares without a reduction taking place pursuant to subsection 85(2.1).

TC share redemptions

48. Each of the TCs will redeem all of the respective TC Class G Preferred Shares held by DC for an amount equal to the Redemption Value of such shares. As consideration therefor:

(a) TC1 will issue the TC1 Redemption Note to DC;

(b) TC2 will issue the TC2 Redemption Note to DC; and

(c) TC3 will issue the TC3 Redemption Note to DC.

The TC Redemption Notes will each have a principal amount and FMV equal to the aggregate Redemption Value of the respective TC Class G Preferred Shares owned by DC. DC will accept the TC1 Redemption Note, the TC2 Redemption Note and the TC3 Redemption Note as payment in full for the respective TC Class G Preferred Shares so redeemed.

Winding-up of DC

49. TC1, TC2 and TC3 will resolve to wind-up and dissolve DC in accordance with the provisions of Act 1.

50. In the course of the winding-up of DC:

(a) DC will assign and distribute the TC1 Redemption Note to TC1;

(b) DC will assign and distribute the TC2 Redemption Note to TC2;

(c) DC will assign and distribute the TC3 Redemption Note to TC3; and

(d) TC1, TC2 and TC3 will assume their proportionate share (based on the proportion described under their respective DC Transfer) of the income tax liability owing by DC as a result of the income tax resulting from the DC Transfers

which will represent all or substantially all of the property owned by DC and all of the liabilities of DC, immediately before the winding-up of DC. As a result of the assignment and distribution of the TC Redemption Notes, the obligation of each of the TCs under such notes, as the case may be, will be extinguished and cancelled.

51. To the extent there is a positive balance in the CDA of DC immediately prior to the distribution of the TC Redemption Notes, DC will elect, in the manner and form required under subsection 83(2), to treat the portion of the winding-up dividend referred to in subparagraph 88(2)(b)(i) as a separate capital dividend.

52. To the extent that there is a positive GRIP balance in DC at the time of the winding-up of DC, DC will designate, pursuant to subsection 89(14), to treat a portion of the dividend referred to in subparagraph 88(2)(b)(iii) arising on the winding-up of DC, which is deemed to be a separate dividend, to be an eligible dividend by notifying the TCs in writing, in a timely manner, that the dividend is an eligible dividend.

53. As a result of the assignment and distribution of the TC Redemption Notes, described in Paragraph 50, the obligation of each of the TCs under their respective TC Redemption Notes will be extinguished and cancelled.

54. Upon receipt of any dividend refund to which DC may become entitled as a result of the Proposed Transactions, DC will immediately transfer the cash received in the form of a dividend refund (under the terms of the agreement governing the winding-up of DC) to each TC in the same proportion as set out under their respective DC Transfer.

55. Within a reasonable time following the distribution of such dividend refund, articles of dissolution will be filed by DC with the appropriate corporate registry and, upon receipt of a certificate of dissolution, DC will be dissolved.

ADDITIONAL INFORMATION

56. Except as described in the Facts and the Proposed Transactions, no property has been or will be acquired by DC, in contemplation of and before the Proposed Transactions, other than in a transaction described in subparagraphs 55(3.1)(a)(i) to (iv).

57. There has not, and will not be, as part of the series of transactions or events that includes the Proposed Transactions, any disposition or acquisition of property in circumstances described in subparagraphs 55(3.1)(b)(i) or (iii), or an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii).

58. None of the property received by the TCs as part of the series of transactions or events that includes the distribution of property under the DC Transfers, will be acquired by a person unrelated to the TCs, or by a partnership, in the circumstances described in paragraph 55(3.1)(c).

59. None of the corporations referred to herein is or will be, at any time during the series of transactions or events that includes the Proposed Transactions, a specified financial institution, a restricted financial institution or a corporation described in any of the paragraphs (a) to (f) of the definition of financial intermediary corporation.

60. During the implementation of the Proposed Transactions, none of the shares of the corporations referred to herein will be:

(a) the subject of any undertaking or agreement that is referred to in subsection 112(2.2) as a guarantee agreement;

(b) issued or acquired as part of a transaction, event or series of transactions or events of the type described in subsection 112(2.5);

(c) the subject of a dividend rental arrangement;

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

(e) 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 (otherwise than by reason of a right referred to in paragraph 251(5)(b)); or

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

61. Immediately before the redemption of the TC Class G Preferred Shares in Paragraph 48, each of the TCs will be connected to DC pursuant to paragraph 186(4)(b) and DC will have a substantial interest in each of the TCs as that term is defined in subsection 191(2).

62. Immediately before the distributions of property by DC to the TCs on the winding-up of DC described in Paragraph 50, DC will be connected to each of the TCs pursuant to paragraph 186(4)(b). The TCs will also have a substantial interest in DC as that term is defined in subsection 191(2) at that time.

63. The Proposed Transactions will not result in any of the taxpayers being unable to pay its existing tax liabilities.

PURPOSE OF THE PROPOSED TRANSACTIONS

64. The purpose of the Proposed Transactions is to separate, on a tax-deferred basis, the assets owned by DC between the TCs to allow Individual 1, Individual 2 and Individual 3 to carry on their respective portion of DC’s XXXXXXXXXX independently from one another.

RULINGS

Provided that the above statements of Facts, Proposed Transactions, Additional Information and Purpose of the Proposed Transactions are accurate and constitute a complete disclosure of all relevant information and provided that the Proposed Transactions are completed in the manner described above, our rulings are as follows:

A. Subject to the application of subsection 69(11), provided the joint elections are filed in the prescribed form and manner within the time limits specified in subsection 85(6) and provided that each particular property so transferred is an eligible property in respect of which shares have been issued as full or partial consideration therefor, the provisions of subsection 85(1) will apply to:

(a) The transfer, by Individual 1, of the DC Class A Common Shares and DC Class P Preferred Shares, to TC1, described in Paragraph 28;

(b) The transfer, by Individual 2, of the DC Class A Common Shares and DC Class P Preferred Shares, to TC2, described in Paragraph 30;

(c) The transfer, by Individual 3, of the DC Class A Common Shares, to TC3, described in Paragraph 32;

(d) The transfer, by Individual A, of the DC Class K Preferred Shares, to TC1, described in Paragraph 34;

(e) The transfer, by Individual B, of the DC Class J Preferred Shares, to TC3, described in Paragraph 36;

(f) The transfer, by DC, of property to TC1, under the DC Transfer 1, described in Paragraph 39 to 41;

(g) The transfer, by DC, of property to TC2, under the DC Transfer 2, described in Paragraph 42 to 44;

(h) The transfer, by DC, of property to TC3, under the DC Transfer 3, described in Paragraph 45 to 47,

such that the agreed amount in respect of each such transfer will be deemed to be the transferor’s proceeds of disposition of the particular property and the transferee’s cost thereof.

For greater certainty, paragraph 85(1)(e.2) will not apply to any of these transfers.

B. The taxable dividends described herein:

(a) will be included in computing the income of the person deemed to have received such a dividend pursuant to subsection 82(1) and paragraph 12(1)(j);

(b) will be deductible by the recipient pursuant to subsection 112(1) in computing its taxable income for the taxation year in which such a dividend is deemed to have been received, and, for greater certainty, such deduction will not be prohibited by subsections 112(2.1), (2.2), (2.3) or (2.4);

(c) will be excluded in determining the recipient corporation’s proceeds of disposition of the shares so redeemed, purchased or cancelled pursuant to paragraph (j) of the definition of proceeds of disposition in section 54;

(d) will, by virtue of subsection 112(3), reduce the loss, if any, in respect of the disposition of the shares on which the dividend is deemed to be received; and

(e) will not be subject to tax under Part IV except, as provided in paragraph 186(1)(b), to the extent that the payer corporation is entitled to a dividend refund for its taxation year in which it paid such dividend, which, for greater certainty, will include the taxable dividends described herein;

(f) will not be subject to Part IV.1; and

(g) will not be subject to Part VI.1 by virtue of paragraph (a) of the definition of excluded dividend in subsection 191(1).

C. Provided that, as part of the series of transactions or events that includes the Proposed Transactions, there is not:

(a) an acquisition of property in the circumstances described in paragraph 55(3.1)(a);

(b) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(c) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);

(d) an acquisition of property in the circumstances described in subparagraph 55(3.1)(b)(iii); or

(e) an acquisition of property in the circumstances described in paragraphs 55(3.1)(c) or 55(3.1)(d),

which has not been described in this letter, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends described herein, and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

D. The extinguishment of the TC Redemption Notes, as described in Paragraphs 50 and 53, will not, in and of itself, give rise to a forgiven amount. In addition, neither DC or the TCs will otherwise realize a gain or incur any loss as a result of such extinguishment.

E. The provisions of subsections 15(1), 56(2) and 246(1) will not apply to any of the Proposed Transactions, in and by themselves.

F. The provisions of subsection 245(2) will not be applied to the Proposed Transactions, in and by themselves, to re-determine the tax consequences confirmed in the rulings given above.

The above rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R12 issued on April 1, 2022, and are binding on the CRA provided that the Proposed Transactions are completed within six months of the date of this letter, unless otherwise specified.

The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act, which if enacted, could have an effect on the rulings provided herein.

OTHER COMMENTS

Unless otherwise confirmed in the above rulings, nothing in this letter should be construed as implying that the CRA has confirmed, reviewed or has made any determination in respect of:

(a) the PUC of any share or the ACB or FMV of any property referred to herein;

(b) the balance of the CDA, GRIP, ERDTOH or NERDTOH of any corporation;

(c) the attribution of safe income to any share of any corporation referred to herein (see generally CRA documents 2020-0861031C6 and 2021-0889611E5, and the paper titled “CRA Update on Subsection 55(2) and Safe Income – Where Are We Now” delivered at the Canadian Tax Foundation Conference on December 22, 2023, for guidance on the allocation of safe income on a corporate reorganization); and

(d) any other tax consequence relating to the facts, Proposed Transactions or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the rulings given above, including whether any of the Proposed Transactions would also be included in a series of transactions or events that includes other transactions or events that are not described in this letter.

Nothing in this letter should be construed as confirmation, express or implied, that, for the purposes of any of the rulings given above, any adjustment to the FMV of the properties transferred or the redemption amount of the shares issued as consideration, whether pursuant to a price adjustment clause or otherwise, will be effective retroactively to the time of the transfer and issuance of shares. Furthermore, the operation of a price adjustment clause may invalidate one or more rulings provided. The general position of the CRA with respect to price adjustment clauses is stated in Income Tax Folio S4-F3-C1, Price Adjustment Clauses.

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

Yours Truly,

XXXXXXXXXX
Manager, Reorganizations Section II
For Division Director
Reorganizations Division
Income Tax Rulings Directorate