30 November 1997 Ruling 9804043 - TRIANGULAR AMALGAMATION

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Triangular Amalgamation

Position:

See statement of principal issues.

Reasons:

See statement of principal issues.

XXXXXXXXXX
XXXXXXXXXX 3-980404

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

We are writing in response to your letter of XXXXXXXXXX in which you requested advance income tax rulings on behalf of the above-noted taxpayer. We acknowledge receipt of your letter of XXXXXXXXXX and our telephone conversations in connection herewith.

To the best of your knowledge, and that of the taxpayers named herein, none of the issues involved in this advance income tax ruling request is under objection or appeal or is being considered by any tax services office or taxation centre of Revenue Canada in connection with any income tax return already filed.

Definitions

In this letter unless otherwise expressly stated:

(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;

(b) "ACB" means "adjusted cost base" as that expression is defined in section 54;

(c) "CBCA" means Canada Business Corporations Act;

(d) "Canadian corporation" has the meaning assigned by subsection 89(1);

(e) "capital property" has the meaning assigned by section 54;

(f) "cost amount" has the meaning assigned under subsection 248(1);

(g) "disposition" has the meaning assigned by section 54;

(h) "dividend rental arrangement" has the meaning assigned by subsection 248(1);

(i) "eligible property" has the meaning assigned by subsection 85(1.1);

(j) "forgiven amount" has the meaning assigned by subsections 80(1) or 80.01(1);

(k) "guarantee agreement" has the meaning assigned by subsection 112(2.2);

(l) "ITAR" means the Income Tax Application Rules;

(m) "paid-up capital" has the meaning assigned by subsection 89(1);

(n) "parent shares" has the meaning assigned by subsection 87(9);

(o) "predecessor corporation" has the meaning assigned by subsection 87(1);

(p) "principal amount" has the meaning assigned by subsection 248(1) except that where the debt or obligation was outstanding at January 1, 1972, for the purposes of section 80, it has the meaning assigned by subsection 26(1.1) of the ITAR;

(q) "public corporation" has the meaning assigned by subsection 89(1);

(r) "series of transactions or events" has the meaning assigned by subsection 248(10);

(s) "specified financial institution" has the meaning assigned under subsection 248(1);

(t) "specified shareholder" has the meaning assigned by subsection 248(1);

(u) "stated capital account" has the meaning assigned by section 26 of the CBCA;

(v) "taxable Canadian corporation" has the meaning assigned by subsection 89(1);

(w) "taxable dividend" has the meaning assigned by subsection 89(1); and

(x) "v-day value" of a property means the value of that property on "valuation day", within the meaning of section 24 of the ITAR.

FACTS

1. XXXXXXXXXX is a taxable Canadian corporation and a public corporation. XXXXXXXXXX became the publicly traded holding company in the XXXXXXXXXX Group as a result of the reorganization which was the subject of an advance income tax ruling issued on XXXXXXXXXX (the "Prior Ruling").

All the companies in the XXXXXXXXXX Group are specified financial institutions XXXXXXXXXX.

2. The authorized share capital of XXXXXXXXXX consists of an unlimited number of common shares and an unlimited number of XXXXXXXXXX

3. As at XXXXXXXXXX had approximately XXXXXXXXXX common shares issued and outstanding with a paid-up capital of XXXXXXXXXX. The XXXXXXXXXX common shares are widely held in Canada and the United States by approximately XXXXXXXXXX shareholders. There are no specified shareholders of XXXXXXXXXX.

XXXXXXXXXX has no XXXXXXXXXX

4. XXXXXXXXXX ("Holdco") is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX owns all XXXXXXXXXX of Holdco’s issued and outstanding common shares.

5. The shares of Holdco will be transferred to other wholly-owned subsidiaries of XXXXXXXXXX, prior to the proposed transactions described herein, as a result of the proposed transactions described in our advance income tax ruling issued on XXXXXXXXXX.

6. XXXXXXXXXX is a taxable Canadian corporation and a public corporation and was continued under the CBCA. XXXXXXXXXX is a wholly-owned subsidiary of Holdco.

7. The authorized share capital of XXXXXXXXXX.

8. As at XXXXXXXXXX had approximately XXXXXXXXXX ordinary shares issued and outstanding.

9. XXXXXXXXXX is a taxable Canadian corporation XXXXXXXXXX.

XXXXXXXXXX

10. The authorized share capital of XXXXXXXXXX consists of XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each. The paid-up capital of the issued and outstanding XXXXXXXXXX common shares is $XXXXXXXXXX.

XXXXXXXXXX

XXXXXXXXXX

11. XXXXXXXXXX and its nominees hold XXXXXXXXXX common shares (representing approximately XXXXXXXXXX% of the total outstanding shares) which were acquired at a cost of $XXXXXXXXXX.

12.

XXXXXXXXXX

13. XXXXXXXXXX is a taxable Canadian corporation and XXXXXXXXXX.

XXXXXXXXXX

14.

XXXXXXXXXX

15. The authorized share capital of XXXXXXXXXX consists of XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each. XXXXXXXXXX has XXXXXXXXXX issued and outstanding shares common shares with a paid-up capital of $XXXXXXXXXX.

XXXXXXXXXX

16. XXXXXXXXXX and its nominees hold XXXXXXXXXX common shares (representing approximately XXXXXXXXXX% of the total outstanding shares) which were acquired at a cost of $XXXXXXXXXX.

17.

XXXXXXXXXX

18. XXXXXXXXXX was incorporated under the CBCA and is a taxable Canadian corporation. XXXXXXXXXX was set-up as a result of the reorganization, as described in the Prior Ruling, XXXXXXXXXX.

XXXXXXXXXX

19. The authorized share capital of XXXXXXXXXX consists of an unlimited number of common shares, and First and Second preferred shares.

20. As at XXXXXXXXXX, XXXXXXXXXX had XXXXXXXXXX common shares issued and outstanding with a paid-up capital of $XXXXXXXXXX and an ACB to XXXXXXXXXX of $XXXXXXXXXX. All of the issued common shares of XXXXXXXXXX are owned by XXXXXXXXXX.

21.

XXXXXXXXXX

All capital expenditures for the XXXXXXXXXX depreciable properties acquired by XXXXXXXXXX were included in the respective prescribed classes as depreciable property of XXXXXXXXXX, as the case may be.

PROPOSED TRANSACTIONS

22. The transactions described in paragraphs 24 to 35 will occur pursuant to a court-approved plan of arrangement (the "Arrangement"). The Arrangement will provide:

(a) for the amalgamation of XXXXXXXXXX (the "Amalgamation") to form a new corporation ("New XXXXXXXXXX"), as described in paragraph 25 below;

(b) for the XXXXXXXXXX common shares and XXXXXXXXXX common shares not owned by XXXXXXXXXX and its nominees to be exchanged for XXXXXXXXXX common shares or, at the option of the holders, XXXXXXXXXX;

(c) that New XXXXXXXXXX will retire the XXXXXXXXXX and XXXXXXXXXX at least their principal amount and will redeem any New XXXXXXXXXX shares issued on the Amalgamation; and

(d) for the issuance by New XXXXXXXXXX of its common shares to XXXXXXXXXXas consideration for the issuance by XXXXXXXXXX of its shares to a shareholder of XXXXXXXXXX and XXXXXXXXXX on the Amalgamation.

23. Prior to the implementation of the Arrangement, the issued and outstanding common shares of XXXXXXXXXX will be split XXXXXXXXXX shares for each XXXXXXXXXX common share issued and outstanding. There will be no change in the total capital represented by the issue, or in the interest or rights of any shareholder as a result of the stock split. The purpose of the stock split is to minimize the likelihood of fractional shares with significant value arising on the Amalgamation.

24. As part of the Arrangement and pursuant to the CBCA, each of XXXXXXXXXX and XXXXXXXXXX will continue under the CBCA.

XXXXXXXXXX

25. Following the continuation of XXXXXXXXXX under the CBCA XXXXXXXXXX (each of which corporations is referred to herein as a "predecessor corporation") will be amalgamated to form New XXXXXXXXXX. The Amalgamation will be one described in subsection 87(9) and will be carried out in such a manner that:

(a) all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the Amalgamation will become property of New XXXXXXXXXX by virtue of the Amalgamation;

(b) all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the Amalgamation will become liabilities of New XXXXXXXXXX by virtue of the Amalgamation;

(c) all the shareholders of XXXXXXXXXX and XXXXXXXXXX (other than XXXXXXXXXX, dissenting shareholders and any predecessor corporation) immediately before the Amalgamation will receive shares of XXXXXXXXXX by virtue of the amalgamation or, upon their decision, New XXXXXXXXXX shares. XXXXXXXXXX will receive only New XXXXXXXXXX common shares by virtue of the Amalgamation.

Each holder of XXXXXXXXXX common shares (other than those held by XXXXXXXXXX, dissenting shareholders, any predecessor corporation or a shareholder who has decided to receive New XXXXXXXXXX shares) will receive XXXXXXXXXX common shares and, if applicable, an amount in cash not to exceed $XXXXXXXXXX in lieu of a fraction of a share, for the holder’s XXXXXXXXXX common shares, having a fair market value equal to the fair market value of the holder’s XXXXXXXXXX common shares immediately before the Amalgamation and each holder of XXXXXXXXXX common shares (other than those held by XXXXXXXXXX, dissenting shareholders, any predecessor corporation or a shareholder who has decided to receive New XXXXXXXXXX shares) will receive XXXXXXXXXX common shares and, if applicable, an amount in cash not to exceed $XXXXXXXXXX in lieu of a fraction of a share, for the holder’s XXXXXXXXXX common shares, having a fair market value equal to the fair market value of the holder’s XXXXXXXXXX common shares immediately before the Amalgamation.

In the case of a shareholder of XXXXXXXXXX, as the case may be, who has decided not to receive XXXXXXXXXX common shares, that shareholder will receive XXXXXXXXXX shares in exchange for such holder’s XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be. The XXXXXXXXXX received by such a holder will be redeemable for an amount equal to the fair market value of that holder’s XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be, immediately before the Amalgamation.

A taxpayer, who, in lieu of a fraction of a share, receives an amount in cash not to exceed $XXXXXXXXXX may:

(a) reduce the adjusted cost base of the XXXXXXXXXX shares received on the Amalgamation by the amount of the cash so received

or

(b) treat the cash received as proceeds of a partial disposition of the shares of a predecessor corporation.

XXXXXXXXXX will receive for its XXXXXXXXXX common shares, XXXXXXXXXX common shares and XXXXXXXXXX common shares a number of New XXXXXXXXXX common shares, having a fair market value equal to the aggregate fair market value of the XXXXXXXXXX common shares, XXXXXXXXXX common shares and XXXXXXXXXX common shares held by XXXXXXXXXX immediately before the Amalgamation.

XXXXXXXXXX will receive, as sole consideration for agreeing to issue its common shares to the shareholders of XXXXXXXXXX and XXXXXXXXXX (other than XXXXXXXXXX, dissenting shareholders, any predecessor corporation or a shareholder who has decided to receive New XXXXXXXXXX redeemable special shares) a number of New XXXXXXXXXX common shares with a fair market value equal to the fair market value of the XXXXXXXXXX common shares issued.

New XXXXXXXXXX will add to the stated capital accounts maintained for its common shares and XXXXXXXXXX shares an amount not to exceed the aggregate of the paid-up capital of the XXXXXXXXXX common shares, XXXXXXXXXX common shares and XXXXXXXXXX common shares (except a share held by any predecessor corporation) immediately before the Amalgamation less the aggregate of the paid-up capital of the XXXXXXXXXX common shares and XXXXXXXXXX common shares that are exchanged for XXXXXXXXXX common shares. The amount to be added to the stated capital account of the New XXXXXXXXXX shares will be equal to that proportion of the aggregate paid-up capital of all the shares of New XXXXXXXXXX that:

(a) the aggregate fair market value of shares of the shareholders of XXXXXXXXXX and XXXXXXXXXX that have elected to receive New XXXXXXXXXX shares immediately before the Amalgamation;

is of

(b) the aggregate fair market value of all the issued and outstanding shares of XXXXXXXXXX immediately before the Amalgamation.

XXXXXXXXXX will add to the stated capital account maintained for its common shares an amount not to exceed the aggregate of the paid-up capital of the XXXXXXXXXX common shares and XXXXXXXXXX common shares that are exchanged for XXXXXXXXXX common shares.

XXXXXXXXXX will not file any designation pursuant to subparagraph 87(9)(c)(ii) to increase the cost of any property.

26. The XXXXXXXXXX common shares, XXXXXXXXXX common shares, XXXXXXXXXX and

						XXXXXXXXXX

XXXXXXXXXX will give notice of the transactions in the Arrangement, and in the case of a shareholder of XXXXXXXXXX, as the case may be, who cannot be immediately located or identified, the XXXXXXXXXX common shares issued to such a shareholder will be held for such a holder (the "Reserved XXXXXXXXXX Shares"). Dividends paid on the Reserved XXXXXXXXXX Shares will also be held for such a holder and, in the case, where such a holder is a non-resident, XXXXXXXXXX will withhold and remit Part XIII tax at the appropriate rate.

A former shareholder of XXXXXXXXXX, as the case may be, who comes forward in the future will receive his or her entitlement of the Reserved XXXXXXXXXX Shares and dividends paid on such shares in the period following the completion of the Arrangement.

27. A shareholder of XXXXXXXXXX, as the case may be, who dissents from the Amalgamation will cease to be a shareholder of that corporation on the effective date of the Amalgamation and the shares of such a shareholder on which the right to dissent was exercised will no longer be considered to be outstanding as shares of that corporation for corporate law purposes. After completion of the proposed transactions each such dissenting shareholder will be entitled to be paid by New XXXXXXXXXX an amount equal to the fair value of the shares in respect of which the right to dissent is exercised.

28. The authorized share capital of New XXXXXXXXXX will consist of an unlimited number of common shares, First and Second preferred shares and XXXXXXXXXX shares.

The New XXXXXXXXXX shares will be non-voting and redeemable for an amount equal to the fair market value of the XXXXXXXXXX common shares or XXXXXXXXXX common shares for which the shares will be issued. For the purposes of subsection 191(4), the terms and conditions of the New XXXXXXXXXX shares, will specify an amount in respect of each such share. The amount to be specified in respect of each such share, at the time of issuance, will be expressed as a dollar amount, will not be determined by a formula and will not exceed the fair market value of the consideration for which each such share will be issued.

29. New XXXXXXXXXX will be renamed XXXXXXXXXX" ("New XXXXXXXXXX", as the context dictates).

30. Immediately following the Amalgamation, New XXXXXXXXXX will redeem the XXXXXXXXXX shares issued on the Amalgamation for an amount in cash equal to the redemption price of the shares so redeemed. The New XXXXXXXXXX shares will not be acquired in the manner in which shares would normally be purchased in the open market.

31. New XXXXXXXXXX will retire the XXXXXXXXXX that were outstanding immediately before the Amalgamation and that became a debt or obligation of New XXXXXXXXXX on the Amalgamation. New XXXXXXXXXX will pay to:

(a) each holder (other than a holder who dissented to the Amalgamation) an amount at least equal to the principal amount of the debenture held in XXXXXXXXXX (or the Canadian dollar equivalent thereof) plus accrued and unpaid interest to the day the XXXXXXXXXX are retired; and

(b) each holder who dissented to the Amalgamation an amount equal to the fair value of the XXXXXXXXXX held prior to the Arrangement as determined by the court.

32. The v-day value and the amount to retire each XXXXXXXXXX is as follows:

Cdn $ XXXXXXXXXX

V-day values XXXXXXXXXX XXXXXXXXXX

Retirement
amount (estimated) XXXXXXXXXX XXXXXXXXXX

The retirement amount of the XXXXXXXXXX will not be less than the fair market value, on valuation day, of the XXXXXXXXXX issued.

33. New XXXXXXXXXX will retire the XXXXXXXXXX that were outstanding immediately before the Amalgamation and that became a debt or obligation of New XXXXXXXXXX on the Amalgamation. New XXXXXXXXXX will pay to:

(a) each holder (other than a holder who dissented to the Amalgamation) an amount at least equal to the principal amount of the bond held in XXXXXXXXXX (or the Canadian dollar equivalent thereof) plus accrued and unpaid interest to the day the XXXXXXXXXX are retired; and

(b) each holder who dissented to the Amalgamation an amount equal to the fair value of the XXXXXXXXXX held prior to the Arrangement as determined by the court.

34. The v-day value and the amount to retire each XXXXXXXXXX is as follows:

Cdn $ XXXXXXXXXX

V-day values XXXXXXXXXX XXXXXXXXXX

Retirement
amount (estimated) XXXXXXXXXX XXXXXXXXXX

The retirement amount of the XXXXXXXXXX will not be less than the fair market value, on valuation day, of the XXXXXXXXXX issued.

35. In the case of a holder of the XXXXXXXXXX or XXXXXXXXXX, as the case may be, who cannot be immediately located or identified, New XXXXXXXXXX will establish two segregated accounts (the "Reserved Cash Accounts") in which will be credited funds equal to the amounts, respectively, of the retirement amount described in subparagraphs 31(a) and 33(a) due to such a holder.

NewXXXXXXXXXX will withhold and remit Part XIII tax at the appropriate rate for interest paid on the XXXXXXXXXX or XXXXXXXXXX held by a non-resident.

A former holder of the XXXXXXXXXX or XXXXXXXXXX, as the case may be, who comes forward in the future will receive his or her entitlement of the respective Reserved Cash Account in the period following the completion of the Arrangement.

36. XXXXXXXXXX will transfer at fair market value all of the New XXXXXXXXXX common shares that it owns to XXXXXXXXXX. As sole consideration for such transfer, XXXXXXXXXX will issue to XXXXXXXXXX common shares of XXXXXXXXXX with a fair market value equal to the fair market value at the time of the transfer of the shares transferred by XXXXXXXXXX to XXXXXXXXXX. XXXXXXXXXX will add to the stated capital account maintained for its common shares an amount equal to the adjusted cost base of the shares transferred.

37. XXXXXXXXXX and XXXXXXXXXX will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer. The agreed amount in respect of the shares so transferred will be equal to the adjusted cost base to XXXXXXXXXX immediately before the transfer, which amount will be less than the fair market value of such shares. The agreed amount in respect of the New XXXXXXXXXX common shares so transferred will not be less than $XXXXXXXXXX.

38. XXXXXXXXXX will transfer at fair market value its interest in the XXXXXXXXXX. As sole consideration for such transfer, New XXXXXXXXXX will issue to XXXXXXXXXX common shares of New XXXXXXXXXX with a fair market value equal to the fair market value at the time of the transfer of the XXXXXXXXXX transferred by XXXXXXXXXX to NewXXXXXXXXXX. New XXXXXXXXXX will add to the stated capital account maintained for its common shares an amount equal to the cost amount of the properties transferred.

39. XXXXXXXXXX and New XXXXXXXXXX will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer. The agreed amount in respect of XXXXXXXXXX so transferred will be equal to the adjusted cost base to XXXXXXXXXX immediately before the transfer, which amount will be less than the fair market value of such properties. The agreed amount in respect of the XXXXXXXXXX so transferred will not be less than $XXXXXXXXXX in each case.

ADDITIONAL INFORMATION

40. None of the shares of any of the corporations referred to in this letter has been or will be subject to a guarantee agreement, within the meaning referred to in subsection 112(2.2), that is given by a person or partnership that is a specified financial institution, or a specified person in relation to any such institution, for any of the purposes described in that subsection.

41. None of the shares of any of the corporations referred to in this letter will be subject to a dividend rental arrangement.

42. None of the shares of any of the corporations referred to in this letter has been or will be issued or acquired as part of a transaction or event or series of transactions or events of the type described in subsection 112(2.5).

PURPOSE OF THE PROPOSED TRANSACTIONS

43. The purpose of the proposed transactions is to allow for the elimination XXXXXXXXXX by merging these corporations with XXXXXXXXXX. The merger would result in:

(a) the elimination of the need to incur administrative costs, that are borne by XXXXXXXXXX, for the ongoing filing and reporting obligations of XXXXXXXXXX and XXXXXXXXXX, which continue to exist as public corporations.

XXXXXXXXXX

(b) the merging of the interests of XXXXXXXXXX, and each of XXXXXXXXXX and XXXXXXXXXX, of their respective assets entered into over XXXXXXXXXX years ago

XXXXXXXXXX

		and

(c) providing an opportunity to achieve value enhancement for the benefit of the security holders of XXXXXXXXXX and XXXXXXXXXX.

RULINGS

Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, proposed transactions and the overall purposes of the proposed transactions, we confirm the following:

A. The split of the XXXXXXXXXX common shares, in and by itself, as described in paragraph 23 above will not result in a disposition of the XXXXXXXXXX shares held by XXXXXXXXXX.

B. By reason of the application of subsection 87(9), the Amalgamation will be an amalgamation described in subsection 87(1) with the result that:

(i) the XXXXXXXXXX common shares received by a shareholder of XXXXXXXXXX and XXXXXXXXXX will be deemed to be shares of the capital stock of New XXXXXXXXXX for the purposes of paragraph 87(1)(c), subsection 87(4) and the ITAR;

(ii) subparagraph 87(9)(c)(i) and paragraph 87(4)(b) will apply to deem XXXXXXXXXX to have acquired the new shares of New XXXXXXXXXX at a cost of nil;

(iii) paragraphs 87(4)(a) and (b), but for greater certainty not paragraphs (c), (d) and (e), will apply to each holder (except any predecessor corporation) who, immediately before the Amalgamation owned shares of the capital stock of the predecessor corporation that were capital property to the shareholder and who received no consideration for the disposition of those shares on the Amalgamation, other than shares of the capital stock of XXXXXXXXXX or New XXXXXXXXXX, as the case may be, and an amount in cash not to exceed $XXXXXXXXXX received in lieu of a fraction of a share; and

(iv) in determining the adjusted cost base of the New XXXXXXXXXX common shares to a shareholder of a predecessor corporation at any time after the Amalgamation, subsection 26(21) of the ITAR will apply such that in computing the cost of the New XXXXXXXXXX common shares issued on the Amalgamation, the cost will be determined by reference to subsection 26(3) of the ITAR, as it would have applied to the issued and outstanding shares of a predecessor corporation if there had been no amalgamation.

For greater certainty, the condition in paragraph 87(1)(c) will be satisfied on the Amalgamation by the issuance of the Reserved XXXXXXXXXX Shares as described in paragraph 26 above.

C. On the redemption of the NewXXXXXXXXXX shares described in paragraph 30 above, the amount, if any, by which the amount paid to redeem the particular shares exceeds the paid-up capital of the particular shares immediately before the redemption

(i) will be deemed pursuant to paragraph 84(3)(a) to be a dividend paid by the issuer of such shares;

(ii) will be deemed pursuant to paragraph 84(3)(b) to be a dividend received by the holder of such shares;

(iii) by virtue of the application of paragraph (j) of the definition proceeds of disposition in section 54, the amount of a deemed dividend described in (ii) above will be excluded from the proceeds of disposition of the share; and

(iv) Part VI.1 of the Act will not apply to the deemed dividends described in (i) above because the dividends will be excluded dividends pursuant to paragraph 191(4)(d).

D. The provisions of subsection 55(2) will apply to a dividend described in Ruling C above, received by a corporation resident in Canada in respect of which the corporation is entitled to a deduction under subsection 112(1) or 138(6), other than the portion of the dividend, if any, subject to tax under Part IV that is not refunded as a consequence of the payment of a dividend to a corporation where the payment is part of a series of transactions or events that include the payment of a dividend described in Ruling C.

E. The retirement of the XXXXXXXXXX and XXXXXXXXXX by New XXXXXXXXXX, as described in subparagraphs 31(a) and 33(a), respectively, will not give rise to a forgiven amount pursuant to paragraph 80(2)(k).

F. The provisions of subsection 39(2) will apply to New XXXXXXXXXX with respect to any gain or loss arising on the retirement of the XXXXXXXXXX and XXXXXXXXXX, as described in paragraphs 31 and 33 above, by virtue of the fluctuation after 1971 of a foreign currency.

G. For purposes of section 80, subsection 26(1.1) of the ITAR will apply in determining the principal amount of the XXXXXXXXXX and XXXXXXXXXX that were outstanding immediately before the Amalgamation that became debts of New XXXXXXXXXX on the Amalgamation.

H. A holder of XXXXXXXXXX common shares or XXXXXXXXXX common shares who holds his shares as capital property and who dissents to the Amalgamation, will include in the proceeds of disposition of the XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be, the cash payment received in respect of such shares for the purposes of calculating the capital gain or loss on such shares.

For greater certainty, subsection 84(3) will not apply to such acquisition.

I. The provisions of subsection 85(1) will apply to:

(i) the transfer of the NewXXXXXXXXXX common shares from XXXXXXXXXX to XXXXXXXXXX described in paragraph 36 above; and

(ii) the transfer of its interest in theXXXXXXXXXX from XXXXXXXXXX to New XXXXXXXXXX described in paragraph 38 above;

with the result that the amount agreed upon by the transferor and each transferee in their joint election in respect of the transferred property will, in each case, be deemed pursuant to paragraph 85(1)(a) to be the proceeds of disposition thereof to the transferor and cost thereof to the transferee. Paragraph 85(1)(h) will apply to deem that the cost:

(iii) to XXXXXXXXXX of the XXXXXXXXXX common shares received as consideration for the transfer described in paragraph 36 above;

(iv) to XXXXXXXXXX of the New XXXXXXXXXX common shares received as consideration for the transfer described in paragraph 38 above

will be the agreed amount in respect of the properties transferred.

For greater certainty, paragraph 85(1)(e.2) will not apply to the transfers described herein.

J. The provisions of subsections 15(1), 56(2) and 246(1) will not be applied as a result of the proposed transactions, in and by themselves.

K. The provisions of subsection 245(2) will not be applied as a result of the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 issued by Revenue Canada and are binding provided that the proposed transactions are completed before XXXXXXXXXX.

These rulings are based on the Act as it reads and do not take into account any future amendments, whether currently proposed or not, to the Act.

COMMENTS

Nothing in this letter should be construed as confirmation that Revenue Canada has reviewed or accepted

(a) the determination of the fair market value or adjusted cost base of any property referred to herein, or the paid-up capital of any shares, debentures or bonds; or

(b) any tax consequences arising from the facts or proposed transactions described herein other than those specifically confirmed in the rulings given.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and Interpretations
Directorate
Policy and Legislation Branch