2015 Ruling 2015-0601441R3 - XXXXXXXXXX Partnership - winding up -- summary under Paragraph 6(1)(i)

Current structure

Sub1 and Sub2 (both taxable Canadian corporations and wholly-owned subsidiaries of Parent) are currently the sole partners of a general partnership (“Partnership”). RSUs are granted to eligible employees and officers for their employment services. RSUs are settled through cash payments. An RSU liability is measured at fair value. DSUs enable the Board of Directors and certain key executives to elect to receive certain types of remuneration in deferred share units. DSUs are only exercisable upon death or retirement of the participant. DSUs are settled through cash payments. A DSU liability is measured at fair value. Sub1 was indebted to Partnership under the demand non-interest bearing “Sub1-Partnership Note”), and Parent was indebted to Partnership under the “Parent-Partnership Note,” which was interest bearing and payable on demand.

Proposed transactions

1. Sub1 will repay the Sub1-Partnership Note by assuming Partnership’s accounts payable.
2. Sub1 will assume all indebtedness of Partnership, including the Partnership-Parent Note and Partnership’s obligation to pay "Employee Accruals" under various compensation and retirement plans, including under the RSUs and DSUs in consideration for additional Partnership Units.
3. Sub2 will transfer its interest in Partnership to Sub1 in consideration for Sub1 Preferred Shares and a non-interest bearing promissory note (the “Sub1 Note”), jointly electing under s. 85(1). As a consequence Partnership will cease to exist, Sub1 will become the sole owner of all the Partnership property and Sub1 will become subject to all the remaining obligations of Partnership, and immediately after the time that Partnership ceased to exist, Sub1 will carry on alone the business that was the business of Partnership.

Ruling

The fact that the obligations of Partnership under the Employee Unfunded Benefit Plans will become obligations of Sub1 as a consequence of Sub1 becoming the successor to Partnership’s business and successor employer to Partnership’s employees will not, in and of itself, result in a disposition of an employee’s rights under such Employee Unfunded Benefit Plans and a corresponding income inclusion for the employee.