After describing the distribution of property by the distributing corporation (DC) to three transferee corporations (TC1, TC2 and TC3) under a reorganization that is ruled to qualify as a butterfly reorganization and which is later represented not to include an acquisition described in s. 55(3.1)(c) "which is not described herein," the ruling describes a co-ownership agreement that is entered into by TC1, TC2 and TC3:
The co-ownership agreement will indicate that: (i) the co-owners do not intend to create a partnership; (ii) no co-owners can act on behalf of another co-owner without obtaining prior consent from that co-owner; (iii) each co-owner has a well-defined separation of interests in and ownership of the properties subject to the co-ownership agreement; (iv) a co-owner cannot charge and/or grant security over the co-owned properties as a whole (i.e. the other co-owner's interest) as each co-owner only has the right to deal with its own interest in the co-owned properties; (v) profit and loss is calculated by each co-owner individually and there is no mechanism in the agreement that deals with the allocation of profit or loss; and (vi) the liability of the co-owners is limited to their own expenses.
The ruling letter summary states that provided the representation that there is no partnership is accurate, the entering into of this co-ownership agreement will not taint the butterfly.