Principal Issues: whether changes to the proposed transactions would have any impact on the rulings given
Position: no
Reasons: changes are not significant
XXXXXXXXXX 2005-0016520
XXXXXXXXXX, 2006
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
Advance Income Tax Ruling No. 2005-013289
This is in reply to your letter of XXXXXXXXXX wherein you advised of us certain additional amendments to the proposed transactions described in advance income tax ruling 2005-013289 (the "Ruling Letter") that was issued on XXXXXXXXXX, 2005. The Ruling Letter was subsequently amended by our letter #2005-016314 of XXXXXXXXXX, 2005 (the "Amending Letter").
Terms defined in the Ruling Letter have the same meaning when used in this letter.
A) The following changes should be made to the proposed transactions described in the Ruling Letter:
1) The revisions made to the proposed transactions described in Paragraphs 1 and 2 of the Amending Letter should be disregarded.
2) Paragraph 29 of the Ruling Letter is deleted and replaced by:
29. B Co will acquire all of the shares of each of Newlossco1, Newlossco2 and Newlossco3, as well as the Newlossco1 Note A, the Newlossco2 Note A and the Newlossco3 Note A, from Parentco for FMV consideration consisting of cash. The FMV will reflect, inter alia, interest rates, statutory income tax rates, the estimated time of utilization of the non-capital losses of Newlossco1, Newlossco2 and Newlossco3, as the case may be, and other considerations.
3) Paragraphs 31 to 33 of the Ruling Letter are deleted and replaced by:
32. Following the acquisition by B Co of all the shares of Newlossco1, Newlossco2 and Newlossco3, A Co, Newlossco1, Newlossco2 and Newlossco3 will be amalgamated on XXXXXXXXXX to form one corporation, Newsubco B, in such manner that:
a) All of the property of the predecessor corporations immediately before the merger (except the Newlossco1 Note A, the Newlossco2 Note A, the Newlossco3 Note A, the shares of Newlossco1, the shares of Newlossco2 and the shares of Newlossco3) will become property of Newsubco B by virtue of the merger;
b) All of the liabilities of the predecessor corporations immediately before the merger (except the Newlossco1 Note A, the Newlossco2 Note A and the Newlossco3 Note A) will become liabilities of Newsubco B by virtue of the merger; and
c) All of the shares of the predecessor corporations (except those of B Co) will be cancelled on the merger. The shares of B Co owned by its shareholders immediately before the merger will become shares of Newsubco B to those shareholders immediately after the merger.
B) As a result of the changes to the proposed transactions described above, the Rulings Requested and Given in the Ruling Letter are revised as follows:
1) The revisions to the Rulings Requested and Given described in the Amending Letter should be disregarded.
2) Parts (a) to (c) of Ruling E are deleted and replaced by:
b) B Co, Newlossco1, Newlossco2 and Newlossco3 described in Paragraph 32;
3) Parts 2 and 4 of Ruling E are deleted;
4) Part 7 of Ruling E is deleted and replaced by:
7. the provisions of subsection 87(2.1) will apply to the amalgamation referred to in (b) above to deem Newsubco B to be the same corporation as, and a continuation of each of Newlossco1, Newlossco2, Newlossco3 and B Co for the purposes, and subject to the restrictions, described in subsection 87(2.1). On this basis and subject to the rules contained in section 111, the non-capital losses of Newlossco1, Newlossco2 and Newlossco3 will be available to be utilized by Newsubco B;
5) Part 9 of Ruling E is deleted and replaced by:
9. the provisions of paragraph 87(2)(a) will apply to the amalgamation referred to in (b) above to deem Newsubco B to be a new corporation, the first taxation year of which commences immediately after the amalgamation, and the predecessor corporations will be deemed to have taxation years ended immediately prior to the amalgamation; and
6) Parts 1 to 3 of Ruling J are deleted and replaced by:
2. sale by Parentco of the Newlossco1 Note A, the Newlossco2 Note A and the Newlossco3 Note A to B Co described in Paragraph 29;
7) Parts 1 to 3 of Ruling K are deleted and replaced by:
2. B Co's ACB in respect of the Newlossco1 Note A, the Newlossco2 Note A, and the Newlossco3 Note A, as the case may be, will include the amount of any capital loss that would otherwise have been realized by Parentco on the sale of the Newlossco1 Note A, the Newlossco2 Note A, and the Newlossco3 Note A to B Co, as the case may be;
8) Parts 1 to 3 of Ruling L are deleted and replaced by:
2. settlement of the Newlossco1 Note A, the Newlossco2 Note A and the Newlossco3 Note A on the amalgamation of Newlossco1, Newlossco2, Newlossco3 and B Co described in Paragraph 32;
Notwithstanding the changes to the proposed transactions set out above, we confirm that the rulings given in the Ruling Letter, as herein amended, will continue to be binding on the CRA, subject to the conditions, limitations and qualifications set out in the Ruling Letter provided that the proposed transactions are completed before XXXXXXXXXX.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch