Principal Issues: Supplementary Ruling to 2009-030634
XXXXXXXXXX 2010-038437 XXXXXXXXXX
XXXXXXXXXX , 2010
Dear XXXXXXXXXX :
Re: Supplementary Ruling - Original Ruling Letter 2009-030634
This is in reply to your e-mail correspondence of XXXXXXXXXX , in which you requested changes to the advance income tax ruling, 2009-030634, dated XXXXXXXXXX , 2010 (the "Original Ruling").
You have informed us of the following changes to be made to the Facts set forth in the Original Ruling:
Paragraph 2 is amended to state that Mrs. X was resident and domiciled in the province of XXXXXXXXXX at the time of her death. Accordingly, Paragraph 2 is replaced with the following:
2. Mrs. X died on XXXXXXXXXX and, at that time, was resident and domiciled in the province of XXXXXXXXXX . At the time of her death, Sibling1 and Sibling2 were the only heirs of Mrs. X.
Paragraph 6 is amended to correct details regarding the authorized capital of DC. Accordingly, Paragraph 6 is replaced with the following:
6. The authorized share capital of DC consists of:
(a) an unlimited number of voting, common shares;
(b) an unlimited number of Class A preference shares that are non-voting, XXXXXXXXXX % non-cumulative redeemable shares; and
(c) an unlimited number of Class B preference shares that are non-voting, XXXXXXXXXX % non-cumulative redeemable shares.
Paragraph 7 is amended to correct details regarding the issued shares in the capital of DC. Accordingly, Paragraph 7 is replaced with the following:
7. DC has the following issued and outstanding shares:
(a) XXXXXXXXXX common shares, of which XXXXXXXXXX are held by each of Trust 1 and Trust 2, respectively. The aggregate ACB and aggregate PUC of the DC shares owned by each of Trust 1 and Trust 2 is $XXXXXXXXXX and $XXXXXXXXXX , respectively. For greater clarity, the aggregate ACB and aggregate PUC of all the issued common shares in the capital of DC is $XXXXXXXXXX and $XXXXXXXXXX , respectively; and
(b) XXXXXXXXXX Class A preference shares, of which XXXXXXXXXX are held by each of Trust 1 and Trust 2, respectively. The aggregate ACB and aggregate PUC of the Class A preference shares owned by each of Trust 1 and Trust 2 is $XXXXXXXXXX and $XXXXXXXXXX , respectively, and each such share is redeemable for the amount of $XXXXXXXXXX . For greater clarity, the aggregate ACB and aggregate PUC of all the issued Class A preference shares in the capital of DC is $XXXXXXXXXX and $XXXXXXXXXX , respectively.
As a result of the foregoing changes, identifying the issued and outstanding DC Class A preference shares, Paragraphs 13 and 14 of the Proposed Transactions in the Original Ruling are amended to read as follows:
13. The DC Class A preference shares that are owned by each Trust will be transferred by that Trust to the SiblingCo owned by it in exchange for a SiblingCo Note of that SiblingCo having a FMV and principal amount
equal to the FMV of the DC Class A preference shares transferred to that SiblingCo.
The DC common shares will be transferred by the Trusts to the SiblingCos, as follows:
(a) in the event that the FMV of the XXXXXXXXXX DC common shares owned by a Trust does not exceed their ACB to that Trust, the Trust will transfer its DC common shares to the SiblingCo owned by it in exchange for a SiblingCo Note of that SiblingCo having a FMV and principal amount equal to the FMV of the DC common shares transferred to that SiblingCo; and
(b) in the event that the FMV of the XXXXXXXXXX DC common shares owned by a Trust exceeds their ACB to that Trust, the Trust will transfer its DC common shares to the SiblingCo owned by it in exchange for:
(i) a SiblingCo Note of that SiblingCo having a FMV and principal amount equal to the ACB of the DC common shares transferred to that SiblingCo, and
(ii) XXXXXXXXXX common shares of that SiblingCo.
For greater certainty, for the purposes of paragraph 84.1(1)(a) the ACB of the DC shares acquired by each SiblingCo will be their ACB otherwise determined and adjusted in accordance with the provisions of subsection 84.1(2) of the Act.
Having regard to paragraph 84.1(1)(a), no amount will be added by either SiblingCo to the stated capital account maintained for any particular class of shares of its capital stock issued to a Trust in consideration of the transfer by the Trust of its DC common shares.
14. In the event that shares of a SiblingCo are issued to a particular Trust in consideration for the transfer by it of DC common shares in accordance with Subparagraph 13(b) above, the particular Trust will jointly elect with that SiblingCo, in prescribed form and within the time referred to in subsection 85(6), to have the rules in subsection 85(1) apply to such transfer. The agreed amount for purposes of each such election will not be less than the lesser of the two amounts specified in paragraph 85(1)(c.1), nor will such amount exceed the FMV of the DC common shares that are transferred to the particular SiblingCo.
Subject to the limitations and qualifications referred to therein, the rulings given in the Original Ruling will continue to be binding on the Canada Revenue Agency provided the proposed transactions are completed by XXXXXXXXXX .
Yours truly,
XXXXXXXXXX
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch