30 November 1997 Ruling 9810333 - 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.

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: minor amendments to the facts and proposed transactions

Position:will not affect the rulings given

Reasons: the representative has provided a detailed explanation in respect of the proposed amendments. They do not result in any tax consequence.

XXXXXXXXXX
XXXXXXXXXX 							981033
XXXXXXXXXX 

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: Advance income tax ruling issued on behalf of XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX, wherein you requested certain amendments to the statements of facts and proposed transactions described in the advance income tax ruling issued on XXXXXXXXXX, 1998 (our file 972730)(the "Ruling"). All capitalized terms have the meaning assigned in the Ruling.

1. The following will be deleted from paragraph 5 of the Facts in the Ruling:

“XXXXXXXXXX is a Canadian-controlled private corporation incorporated under the CBCA. It is wholly-owned by XXXXXXXXXX and members of his immediate family, all of whom are Canadian residents."

		and substituted with the following:

“XXXXXXXXXX is a Canadian-controlled private corporation incorporated under the CBCA. It is wholly-owned by XXXXXXXXXX and members of his immediate family. The majority of the shareholders of XXXXXXXXXX are residents of Canada. The owner of one-third of the common shares is a resident of the United States."

2. Paragraph 8 of the Facts in the Ruling will be amended to delete the following sentence:

"Equityco's only outstanding class of shares is common shares."

		and replaced with the following:

"Equityco has four classes of outstanding shares: common shares, class A shares, class C shares and class D shares. The class A, class C and class D shares are fixed value preferred shares. XXXXXXXXXX percent of the class C and class D shares are owned equally by XXXXXXXXXX. The class A shares are held by XXXXXXXXXX."

3. Paragraph 1 of the Proposed transactions in the Ruling will be amended to delete the first sentence as follows:

“XXXXXXXXXX will transfer the XXXXXXXXXX common shares of Distributorco owned by him to his wholly owned holding company, XXXXXXXXXX, in exchange for additional common shares of XXXXXXXXXX having a fair market value equal to the fair market value of the common shares of Distributorco so transferred."

		and replaced with the following:

“XXXXXXXXXX will transfer the XXXXXXXXXX common shares of Distributorco owned by him to XXXXXXXXXX in exchange for XXXXXXXXXX fixed redemption value preferred shares of XXXXXXXXXX having a fair market value equal to the fair market value of the common shares of Distributorco so transferred."

4. Paragraph 1 of the Proposed Transactions in the Ruling will be amended to delete the last sentence as follows:

"The aggregate paid-up capital of the additional common shares of XXXXXXXXXX issued in exchange for the Distributorco common shares will be equal to the paid-up capital of the transferred Distributorco common shares."

		and replaced with the following:

"The aggregate paid-up capital of the newly issued preference shares of XXXXXXXXXX issued in exchange for the Distributorco common shares will be equal to the paid-up capital of the transferred Distributorco common shares."

5. Paragraph 2 of the Proposed Transactions in the Ruling will be amended to delete the sentence:

"Until the proposed transaction described in step 6 below takes place, Newco will have no issued and outstanding shares."

		and replaced with the following:

"Each of the Shareholders will be issued one common share of Newco."

6. Paragraph 6 of the Proposed Transactions of the Ruling will be amended to delete the following:

"As consideration for the transfer of the Distributorco Class B Preference shares, Newco will issue XXXXXXXXXX common shares to each of the XXXXXXXXXX Shareholders (for an aggregate of XXXXXXXXXX common shares)."

		and replaced with the following:

"As consideration for the transfer of the Distributorco Class B Preference shares, Newco will issue an additional XXXXXXXXXX common shares to each of the XXXXXXXXXX Shareholders (for an aggregate of XXXXXXXXXX common shares)."

We confirm that these amendments to the Statements of Facts and Proposed Transactions as described in the Ruling will not affect the rulings provided therein.

Further Ruling "A" as provided in the Ruling is amended to read as follows:

"The provisions of subsection 85(1) will apply to the transfer by XXXXXXXXXX of his XXXXXXXXXX common shares of Distributorco to XXXXXXXXXX in consideration for XXXXXXXXXX fixed value preference shares of XXXXXXXXXX such that the vendor's proceeds of disposition of the shares and the acquiror's cost of the shares will be deemed by paragraph 85(1)(a) to be equal to the elected amount in respect of that transfer."

This amended ruling is subject to the provisos listed in the Ruling.

We trust our comments will be of assistance to you.

Yours truly,

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