30 November 1997 Income Tax Severed Letter 9804101 - SUPPLEMENTARY TO LOSS UTIL SCHEME RULING

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.

XXXXXXXXXX							1-980410

Attention: XXXXXXXXXX

XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling
our file No. 3-972091 (the "Ruling")

We are writing in response to your letter of XXXXXXXXXX, wherein you requested amendments to the Proposed Transactions and additional rulings to the rulings described in our letter of XXXXXXXXXX, 1997. The requested changes arose as a result of advice from your legal department that Lossco must meet the solvency test, as set out in section 42 of the CBCA, by a reduction to the stated capital of its common shares prior to the declaration or payment of any dividend on the Lossco Preferred Shares. (Terms defined in the Ruling to have a certain meaning have the same meaning when used in this letter.)

As a result of your request the following changes are made to the Ruling:

1. Add new paragraph 5.1 as follows:

"A special resolution will be passed by the shareholders of Lossco, pursuant to subsection 38(1) of the CBCA, resolving to reduce the stated capital account maintained for Lossco's common shares by an amount of $XXXXXXXXXX to $XXXXXXXXXX. No amount will be paid or distributed to the shareholders of Lossco's common shares as a result of the reduction in stated capital. Lossco will include an amount of $XXXXXXXXXX in contributed surplus."

2. Add new subparagraph 9(d) as follows:

"In accordance with subsection 26(6) of the CBCA, Lossco will add $XXXXXXXXXX to the stated capital account of its common shares which had previously been credited to its contributed surplus account as described in paragraph 5.1.

As a result of this addition to Lossco's stated capital account, the paid-up capital in respect of Lossco's common shares will be increased by $XXXXXXXXXX, which is equal to the amount by which the paid-up capital in respect of the common shares will be reduced as a result of the reduction in stated capital described in paragraph 5.1."

3. The following rulings will be added:

"F. Provided that no amount is paid by Lossco on the reduction of the paid-up capital of its common shares as described in paragraph 5.1, Lossco will not be deemed to have paid a dividend and neither Profitco or Subco will be deemed to have received a dividend pursuant to subsection 84(4) on such reduction of paid-up capital."

G. By virtue of paragraph 84(1)(c.3), no dividend will be deemed to have been paid by Lossco when it increases its paid-up capital as described in subparagraph 9(d)."

We confirm that the above changes and additional rulings will not affect the rulings given in the Ruling and they will continue to be binding on the Department as indicated therein.

Yours truly,

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