Principal Issues: 1) Whether subsection 84(2) applies to the proposed transactions. 2) Whether subsection 245(2) applies to the proposed transactions.
Position: 1) No. Favorable ruling given. 2) No. Favorable lruling given.
Reasons: In accordance with the provisions of the Act and our previous positions.
XXXXXXXXXX
XXXXXXXXXX 2021
Dear Sir,
Re: Request for Advance Income Tax Rulings
XXXXXXXXXX Estate
This is in response to your letter dated XXXXXXXXXX, and amended on XXXXXXXXXX, requesting advance income tax rulings on behalf of your client, XXXXXXXXXX. We have also taken into account the information you sent us by email as well as additional information submitted during telephone conversations (XXXXXXXXXX).
Unless otherwise indicated, all statutory references below are to the provisions of the Income Tax Act, R.S.C. 1985, c. 1, (5th Supp.) (the "Act").
To the best of your knowledge and that of the parties involved in the transactions, none of the matters to which this request for advance rulings relates:
(i) relates to a tax return previously filed by the taxpayers or a person related to them;
(ii) is under examination by a Tax Services Office or Tax Centre in connection with a tax return previously filed by the taxpayers or a person related to them;
(iii) is the subject of a notice of objection by the taxpayers or a person related to them;
(iv) is not the subject of a pending or completed legal proceeding involving the taxpayers or a person related to them;
(v) is not the subject of a ruling request previously reviewed by the Income Tax Rulings Directorate.
DEFINITIONS AND ABBREVIATIONS USED
The names and corporate names of the taxpayers are replaced by the names and corporate names listed below.
"Administrator" means XXXXXXXXXX;
"Child1" means XXXXXXXXXX;
"Child2" means XXXXXXXXXX;
"Estate" means the estate of X governed by the Will;
"Executors" means XXXXXXXXXX, executors of Estate;
"Family Trust" means XXXXXXXXXX;
"Grandchild" means XXXXXXXXXX;
"Investments" means XXXXXXXXXX;
"Legal Representatives" means Executors;
"Newco" means XXXXXXXXXX;
"Spouse" means XXXXXXXXXX;
"Trust1" means XXXXXXXXXX;
"Trust2" means XXXXXXXXXX;
"Trust3" means XXXXXXXXXX;
"Trust4" means XXXXXXXXXX;
"X" means XXXXXXXXXX.
Unless otherwise indicated, the following abbreviations have the meanings defined below.
"ACB" means "adjusted cost base" as defined in section 54;
"Arm's Length" has the meaning set out in subsection 251(1); XXXXXXXXXX;
"Capital property" has the same meaning as in section 54;
"CCPC" means "Canadian-controlled private corporation" as defined in subsection 125(7);
"CDA" means "capital dividend account" as defined in subsection 89(1);
"Completed Transactions" means the transactions referred to in paragraphs 34 through 43 of this letter;
"connected corporation" has the meaning set out in subsection 186(4);
"Cost Amount" means "cost amount" as defined in subsection 248(1);
"CRA" means the Canada Revenue Agency;
"CSV" means "cash surrender value".
"DR" means "dividend refund" as defined in subsection 129(1);
"Eligible Dividend" has the meaning assigned by the definition in subsection 89(1);
"ERDTOH" means "eligible refundable dividend tax on hand" as defined in subsection 129(4);
"FMV" means the highest price, in dollars, that would be agreed upon in the open market by two arm's length parties who are knowledgeable and prudent, neither of whom is under any compulsion to act;
"GRE" means "graduated rate estate" within the meaning of the definition in subsection 248(1);
"GRIP" means "general rate income pool" as defined in subsection 89(1);
"NERDTOH" means "non-eligible refundable dividend tax on hand" as defined in subsection 129(4);
"Note1" means a demand note as described in paragraph 37 of the Transactions;
"Note2" means a demand note as described in paragraph 38 of the Transactions;
"Note3" means a demand note as described in paragraph 39 of the Completed Transactions;
"Note4" means a demand note as described in paragraph 40 of the Completed Transactions;
"Note5" means a demand note as described in paragraph 46 of the Proposed Transactions;
"Proceeds of Disposition" has the meaning set forth in section 54;
"Proposed Transactions" means the transactions referred to in paragraphs 44 through 51 of this letter;
"PUC" means "paid-up capital" as defined in subsection 89(1);
"taxable dividend" has the meaning assigned by the definition in subsection 89(1);
"Taxation Year" has the meaning set out in subsection 249(1);
"TCC" means "taxable Canadian corporation" as defined in subsection 89(1);
"Trust Note1" means a demand note as described in paragraph 43 of the Completed Transactions;
"Trust Note2" means a demand note as described in paragraph 43 of the Completed Transactions;
"Trust Note3" means a demand note as described in paragraph 43 of the Completed Transactions;
"Trust Note4" means a demand note as described in paragraph 43 of the Completed Transactions;
"Will" means the will of X, executed on XXXXXXXXXX.
RELEVANT FACTS
Facts regarding the death of X
1. X died on XXXXXXXXXX. X was a resident of Canada for the purposes of the Act.
2. Spouse was the wife of X at the time of X's death.
3. Child1 and Child2 are the children of X and Spouse. Grandchild is the child of Child2, and the grandchild of X and Spouse.
4. Trust1 was created under the Will for the benefit of Child1 and the descendants of Child1.
5. Trust2 was created under the Will, for the benefit of Child2 and the descendants of Child2.
6. Trust3 was created under the Will for the benefit of Spouse.
7. Trust4 was created under the Will for the benefit of Grandchild.
8. Family Trust was an inter vivos personal trust within the meaning of subsections 108(1) and 248(1) and was wound up on XXXXXXXXXX.
9. Upon X's death, X's property was transferred to Estate.
10. At his death, X held shares of the capital stock of Investments (all of which had a fixed redemption value (“RV”)) and Family Trust held XXXXXXXXXX Class B shares of the capital stock of Investments.
The table below shows the shareholding of Investments immediately prior to the death of X:
|
Shareholder |
Number and Class |
ACB |
PUC |
FMV/RV (as applicable) |
|
Family Trust |
XXXXXXX B |
XXXXX |
XXXXX |
XXXXXXX |
|
Total for Family Trust |
XXXXX |
XXXXX |
XXXXXXX |
|
|
X |
XXXXXXX C |
XXXXX |
XXXXX |
XXXXXXX |
|
XXXXXXX D |
XXXXX |
XXXXX |
XXXXXXX |
|
|
XXXXXXX E |
XXXXX |
XXXXX |
XXXXXXX |
|
|
XXXXXXX F |
XXXXX |
XXXXX |
XXXXXXX |
|
|
Total for X |
XXXXX |
XXXXX |
XXXXXXX |
11. The shares of the capital stock of Investments held by X at the time of his death were Capital Property to him.
12. According to the Will, the shares of the capital stock of Investments held by X at the time of his death formed part of the residue in equal shares for Trust1, Trust2 and Trust3 and an amount of $XXXXXXXXXX was bequeathed, as a specific legacy, to Child Trust4.
13. The Legal Representatives of Estate elected pursuant to subsection 70(6.2) in X's return of income on death to have subsection 70(5) apply to the shares of the capital stock of Investments for the benefit of Trust3, so that X was deemed to have disposed of those shares for proceeds equal to their FMV immediately before his death.
14. Paragraph 70(5)(a) deemed X to have disposed, immediately before his death, of all of the shares he held in the capital stock of Investments for proceeds equal to their FMV at that time. Immediately before X's death, the FMV of the shares of the capital stock of Investments held by X was $XXXXXXXXXX.
15. Paragraph 70(5)(b) deemed Estate to have acquired the shares of the capital stock of Investments held by X at a cost equal to their FMV immediately before X's death.
16. Estate is resident in Canada for purposes of the Act. Estate's Taxation Year ends on XXXXXXXXXX.
17. Estate qualifies as a GRE.
18. The shares of the capital stock of Investments and Newco were and are, as the case may be, Capital Property to Estate.
Facts regarding Investments
19. Investments is a TCC and CCPC that was incorporated on XXXXXXXXXX under the XXXXXXXXXX. The Taxation Year of Investments ends on XXXXXXXXXX.
20. The sole business of Investments is to hold and manage various investments.
21. The principal rights, privileges, conditions and restrictions attached to the authorized classes of shares of capital stock of Investments, all without par value, are as follows:
- Class A: voting, participating, entitled to receive dividends as and when declared by the directors of the Corporation and entitled to participate in the distribution of the remaining assets of the Corporation in the event of dissolution or liquidation, and in dividends, pari passu with the Class B shares;
- Class B: non-voting, participating, entitled to receive dividends as and when declared by the directors of the Corporation and entitled to participate in the distribution of the remaining assets of the Corporation in the event of dissolution or winding-up, and as to dividends, pari passu with the Class A shares;
- Class C: voting (XXXXXXXXXX votes per share), non-participating, non-dividend bearing, purchasable by agreement and redeemable at the option of the corporation at an amount equal to the paid-up capital;
- Class D: non-voting, non-participating, entitled to receive a monthly non-cumulative dividend at a rate of XXXXXXXXXX% calculated on the redemption value, purchasable by agreement and retractable at the option of the holder and redeemable at the option of the Corporation, in an amount equal to the FMV of the consideration received for their issue;
- Class E: non-voting, non-participating, entitled to receive a non-cumulative monthly dividend at a rate of XXXXXXXXXX% calculated on the redemption value, purchasable by agreement and at the option of the Corporation, in an amount equal to the FMV of the consideration received for their issue;
- Class F: non-voting, non-participating, entitled to receive a non-cumulative monthly dividend at a rate of XXXXXXXXXX%, calculated on the redemption value, purchasable by agreement and at the option of the holder or of the Corporation, in an amount equal to $XXXXXXXXXX per share.
22. As of XXXXXXXXXX, the tax account balances for Investments were as follows:
- CDA: $XXXXXXXXXX;
- ERDTOH: $XXXXXXXXXX;
- NERDTOH: $XXXXXXXXXX, excluding the DR in the amount of $XXXXXXXXXX for its Taxation Year ended XXXXXXXXXX and the downward adjustment to the amount of NERDTOH in the amount of $XXXXXXXXXX due to a carryback of capital losses, realized for the Taxation Year ended XXXXXXXXXX, to a previous Taxation Year;
- GRIP: $XXXXXXXXXX.
23. The table below sets out the shareholdings in Investments immediately prior to the proposed Transactions:
|
Shareholder |
Number and Class |
ACB |
PUC |
FMV/RV (as applicable) |
|
Newco |
XXXXXXX B |
XXXXX |
XXXXX |
XXXXXXX |
|
XXXXXXX C |
XXXXX |
XXXXX |
XXXXXXX |
|
|
XXXXXXX D |
XXXXX |
XXXXX |
XXXXXXX |
|
|
XXXXXXX E |
XXXXX |
XXXXX |
XXXXXXX |
|
|
XXXXXXX F |
XXXXX |
XXXXX |
XXXXXXX |
|
|
Total |
XXXXX |
XXXXX |
XXXXXXX |
Facts regarding Newco
24. Newco is a TCC and CCPC that was incorporated on XXXXXXXXXX under the XXXXXXXXXX. Newco's Taxation Year ends on XXXXXXXXXX.
25. Upon the incorporation of Newco, Estate subscribed for XXXXXXXXXX Class A shares of the capital stock of Newco for $XXXXXXX.
26. Newco's sole business is to hold the shares of the capital stock of Investments.
27. The principal rights, privileges, conditions and restrictions attached to the authorized classes of shares of Newco, all without par value, are as follows:
-
- Class A: voting, participating, entitled to receive dividends when declared by the directors of the corporation and entitled to participate in the distribution of the remaining assets of the corporation in the event of dissolution or liquidation, and as to dividends, pari passu with the Class B shares;
- Class B: non-voting, participating, entitled to receive dividends as and when declared by the directors of the Corporation and entitled to participate in the distribution of the remaining assets of the Corporation in the event of dissolution or winding-up, and as to dividends, pari passu with the Class A shares;
- Class C: voting (XXXXXXXXXX votes per share), non-participating, non-dividend bearing, purchasable by agreement and redeemable at the option of the holder at an amount equal to the paid-up capital;
- Class D: non-voting, non-participating, entitled to receive a monthly non-cumulative dividend at a rate of XXXXXXXXXX% calculated on the redemption value, purchasable by agreement and at the option of the Corporation, in an amount equal to the FMV of the consideration received for their issue;
- Class E: non-voting, non-participating, entitled to receive a monthly non-cumulative dividend at a rate of XXXXXXXXXX% calculated on the redemption value, purchasable by agreement and redeemable at the option of the holder and at the option of the Corporation, in an amount equal to the FMV of the consideration received for their issue;
- Class F: non-voting, non-participating, entitled to receive a monthly non-cumulative dividend at a rate of XXXXXXXXXX% calculated on the redemption value, purchasable by agreement and redeemable at the option of the holder and at the option of the Corporation, in an amount equal to the FMV of the consideration received for their issuance.
- Class G, H and I shares: non-voting, non-participating, entitled to a discretionary dividend pari passu with Class A and B shares, redeemable at the option of the corporation or the holder at an amount equal to the paid-up capital value.
28. The table below sets out the ownership of Newco immediately prior to the Proposed Transactions:
|
Shareholder |
Number and Class |
ACB |
PUC |
FMV/RV (as applicable) |
|
Estate |
XXXXXXX A |
XXXX |
XXXX |
XXXXXXX |
|
Spouse |
XXXXXXX E |
XXXX |
XXXX |
XXXXXXX |
|
Child1 |
XXXXXXX E |
XXXX |
XXXX |
XXXXXXX |
|
Child2 |
XXXXXXX E |
XXXX |
XXXX |
XXXXXXX |
|
Total |
XXXX |
XXXX |
29. As of XXXXXXXXXX, Newco's tax balances are as follows:
-
- CDA: $XXXXXXXXX;
- ERDTOH: $XXXXXXXXX;
- NERDTOH: $XXXXXXXXXX, excluding DR in the amount of $XXXXXXXXXX for its Taxation Year ended XXXXXXXXXX;
- GRIP: $XXXXXXXXX.
30. Newco and Investments are related corporations.
Additional facts
31. On or about XXXXXXXXXX, Administrator will resign as a director of Investments and Spouse will become the sole director of Investments.
32. On or about XXXXXXXXXX, Administrator will resign as a director of Newco and Spouse will become the sole director of Newco.
33. On or about XXXXXXXXXX, Spouse, Child1 and Child2 will agree to indemnify Administrator for any tax (or other) claims of Investments, Newco or Estate.
COMPLETED TRANSACTIONS
34. On XXXXXXXXXX, Investments redeemed XXXXXXXXXX Class F shares of its capital stock then held by Estate for an amount equal to their FMV and RV, i.e. $XXXXXXXXXX, payable by the issuance of a demand note.
35. On XXXXXXXXXX, Investments redeemed XXXXXXXXXX Class F shares of its capital stock then held by Estate for an amount equal to their FMV and RV, i.e. $XXXXXXXXXX, payable by the issuance of a demand note.
36. Upon the redemption of Class F shares of the capital stock of Estate described above in paragraphs 34 and 35 of the Completed Transactions, Estate was deemed to have paid and Estate was deemed to have received a dividend pursuant to subsection 84(3) in respect of each redemption of shares. The total amount of such dividends was the amount by which the amount paid for the shares redeemed exceeded the PUC of such shares.
In addition, as a result of the redemption of Class F shares of the capital stock of Estate, Estate incurred a capital loss equal to the difference between the proceeds of disposition and the ACB of the shares so redeemed. In this regard and taking into account the application of subsection 112(3.2), the Legal Representatives of X elected, pursuant to subsection 164(6), to treat the capital loss of Estate resulting from the above-described disposition of the Class F shares of the capital stock of Investments as a capital loss of X resulting from the disposition of such shares by X in his last taxation year.
37. The principal amount of Note1 of $XXXXXXXXXX represents the total of the amounts paid by Investments and received by Estate as a result of the redemption of Class F shares of the capital stock of Investments described above in paragraphs 34 and 35 of the Completed Transactions, being $XXXXXXXXXX, less the amount owed by X to Estate upon his death of $XXXXXXXXXX and amounts refunded by Investments to Estate (to pay, inter alia, taxes arising from the death) totaling $XXXXXXXXXX. As of XXXXXXXXXX, the principal amount of Note1 was $XXXXXXXXXX.
38. On XXXXXXXXXX, Estate disposed of all of the shares of the capital stock of Investments that it held at that time to Newco for proceeds of disposition equal to their FMV, which was $XXXXXXXXXX at that time (i.e., $XXXXXXXXXX upon the death of X less the value attributable to the Class F shares of the capital stock of Investments redeemed on XXXXXXXXXX and XXXXXXXXXX. In consideration, Newco issued to Estate, XXXXXXXXXX Class A shares of its capital stock having a FMV of $XXXXXXXXXX each and a non-interest bearing demand note with a principal amount of $XXXXXXXXXX (Note2). On XXXXXXXXXX, the principal amount of Note2 was $XXXXXXXXXX.
39. On XXXXXXXXXX, Investments declared dividends totaling $XXXXXXXXXX, payable to Newco by the issuance of a non-interest bearing demand note with a principal amount of $XXXXXXXXXX (Note3). These dividends were Taxable Dividends. On XXXXXXXXXX, the principal amount of Note3 was $XXXXXXXXXX.
40. On XXXXXXXXXX, Newco declared a dividend in the amount of $XXXXXXXXXX, payable to Estate through the issuance of a non-interest bearing demand note with a principal amount of $XXXXXXXXXX (Note4). This dividend was a Taxable Dividend. As of XXXXXXXXXX, the principal amount of Note4 was $XXXXXXXXXX.
41. On XXXXXXXXXXX, each of Trust1, Trust2, Trust3 and Trust4 opened a bank account and an account with the broker.
42. On XXXXXXXXXX, Investments disposed of substantially all of its investments with unrealized capital losses.
43. On XXXXXXXXXX and XXXXXXXXXX, Investments transferred all of its exchange-traded shares investments and cash (less approximately $XXXXXXXXXX of cash that it retained) to Trust1, Trust2, Trust3 and Trust4 for proceeds of disposition equal to their FMV.
This transaction was carried out in the following manner:
-
- the transfer by Investments to Trust1 for proceeds of disposition equal to the FMV: XXXXXXXXXX of exchange-traded shares and XXXXXXXXXX of the cash balance in excess of $XXXXXXXXXX ($XXXXXXXXXX that Investments wished to retain plus $XXXXXXXXXX that it assigned to Trust4) in consideration for a demand note bearing interest at XXXXXXXXXX% per annum with a principal amount equal to the FMV of the property transferred to Trust1, i.e., $XXXXXXXXXX (the Trust-Note1). On XXXXXXXXXX, the principal amount of Trust-Note1 was $XXXXXXXXXX;
- the transfer by Investments to Trust2 for proceeds of disposition equal to the FMV: XXXXXXXXXX of exchange-traded shares and XXXXXXXXXX of the cash balance in excess of $XXXXXXXXXX ($XXXXXXXXXX which Investments wished to retain plus $XXXXXXXXXX which it transferred to Trust4) in consideration for a demand note bearing interest at the rate of XXXXXXXXXX% per annum, the principal amount of which was equal to the FMV of the property transferred to Trust2, i.e., $XXXXXXXXXX (Trust-Note2). On XXXXXXXXXX, the principal amount of Trust-Note2 was $XXXXXXXXXX;
- the transfer by Investments to Trust3 for proceeds of disposition equal to the FMV: XXXXXXXXXX of the exchange-traded shares and XXXXXXXXXX of the cash balance in excess of $XXXXXXXXXX ($XXXXXXXXXX which Investments wished to retain plus $XXXXXXXXXX which it transferred to Trust4) in consideration of a demand note bearing interest at the rate of XXXXXXXXXX% per annum, the principal amount of which was equal to the FMV of the property transferred to Trust3, i.e., $XXXXXXXXXX (Trust-Note3). On XXXXXXXXXX, the principal amount of Trust-Note3 was $XXXXXXXXXX;
- the transfer by Investments to Trust4 of $XXXXXXXXXX of cash in consideration for a demand note bearing interest at XXXXXXXXXX% per annum with a principal amount of $XXXXXXXXXX (Trust-Note4). On XXXXXXXXXX, the principal amount of the Trust-Note4 was $XXXXXXXXXX.
PROPOSED TRANSACTIONS
44. On or about XXXXXXXXXX, Investments will be wound up into Newco. The provisions of subsection 88(1) will apply to the winding-up.
On the winding up of Investments into Newco, the provisions of subsection 80.01(4) will apply in respect of the settlement of Note3. The prescribed form will be filed in the prescribed manner under subsection 80.01(4) so that Note3 will be deemed to have been settled for an amount equal to its Cost Amount.
45. On or about XXXXXXXXXX, Newco will redeem all of the Class E shares of its capital stock held by Spouse, Child1 and Child2, for a redemption price equal to their FMV and RV, payable in cash.
46. On or about XXXXXXXXXX, but after Investments has been wound up into Newco as described in paragraph 44 of the Proposed Transactions, Newco will declare a dividend in the amount of approximately $XXXXXXXXXX. This dividend will be payable on the Class A shares of its capital stock by the issuance to Estate of a non-interest bearing demand note, the principal amount of which will be equal to the dividend declared (Note5).
This dividend will be a Taxable Dividend and Newco will designate a portion of this Taxable Dividend as an Eligible Dividend in accordance with the provisions of subsection 89(14).
47. On or about XXXXXXXXXX, the Executors will make a substantial distribution of Estate's assets. Each of Trust1, Trust2, Trust3 will receive, inter alia, an equal share of a portion of Note1 and XXXXXXXXXX of Note2 totaling a value of approximately $XXXXXXXXXX each. Trust4 will receive a share of Note1 (approximately $XXXXXXXXXX), Note4 and Note5, totaling a value of $XXXXXXXXXX. The Executors of Estate will retain for Estate a cash balance and a portion of Note1 in an amount necessary to satisfy all debts and obligations of Estate.
48. As soon as Estate has distributed the portion of Note1, Note2, Note4 and Note5, to Trust1, Trust2, Trust3 and Trust4, respectively, as described in paragraph 47 of the Proposed Transactions, an agreement for the payment of the interest payable on Trust-Note1, Trust-Note2, Trust-Note3 and the Trust-Note4 will take effect between Newco and Trust1, Trust2, Trust3 and Trust4, so that each of Trust1, Trust2, Trust3 and Trust4 will use part of the principal of Note1, Note2, Note4 or Note5 as the case may be, to pay the interest payable on Trust-Note1, Trust-Note2, Trust-Note3 and Trust-Note4, respectively.
The agreement will also provide for the offsetting of the notes in the following manner:
-
- the set-off of Trust-Note1 against the portion of Note1 and Note2 to be held by Trust1;
- the set-off of Trust-Note2 against the portion of Note1 and Note2 to be held by Trust2;
- the set-off of Trust-Note3 against the portion of Note1 and Note2 that Trust3 will hold;
- the set-off of Trust-Note4 against the portion of Note1, Note4 and Note5 that Trust4 will hold and the additional amount that Trust4 will pay to Newco corresponding to the amount of interest paid by Trust4 on the Trust-Note4 from the portion of Note1, Note4 or Note5 as the case may be.
49. On or before XXXXXXXXXX, but after the transaction described in paragraph 47 of the Proposed Transactions, Newco will be wound up. Section 88(2) will apply to the winding up of Newco.
At that time, Newco will distribute its net assets to Estate. A portion of the net assets of Newco distributed to Estate will be applied in payment of the Note1 amount payable by Newco to Estate at that time. In accordance with subsection 84(2), Newco will be deemed to have paid, and Estate will be deemed to have received, at such time a dividend in an amount equal to the excess of the value of the net assets distributed by Newco to Estate that has not been applied in payment of Note1, over the amount of the PUC of the XXXXXXXXXX Class A shares of the capital stock of Newco held by Estate.
Such dividend shall be a Taxable Dividend and Newco shall designate a portion of such Taxable Dividend as an Eligible Dividend in pursuant to the provisions of subsection 89(14), as applicable.
50. Investments and Newco will be dissolved in due course.
51. The Executors will distribute the remaining property of Estate to the heirs in accordance with the Will in due course.
PURPOSE OF COMPLETED AND PROPOSED TRANSACTIONS
52. The purpose of the Completed Transactions and the Proposed Transactions is to deliver to X's heirs property with a FMV equal to the ACB resulting from the application of subsection 70(5) to the shares of the capital stock of Investments that were acquired by Estate as a result of X's death, while benefiting from the existing CDA, ERDTOH and NERDTOH tax balances of Investments.
ADDITIONAL INFORMATION
XXXXXXXXXX
RULINGS ISSUED
Provided that the statement of facts, the Completed Transactions, the Proposed Transactions and the Additional Information constitutes full disclosure of all relevant facts, all Completed Transactions and all Proposed Transactions and that the Proposed Transactions are implemented as described above, our rulings are as follows:
A. The provisions of subsection 84(2) will not apply as a result of and by reason of the Completed Transactions and the Proposed Transactions described above to cause Investments to be deemed to have paid to, and its heirs to be deemed to have received, a dividend on the shares of the capital stock of Investments held by Estate.
B. The provisions of subsection 245(2) will not apply as a result of and by reason of the Completed Transactions and the Proposed Transactions described above to redetermine the tax consequences confirmed in the above ruling.
These rulings are subject to the limitations and general conditions set out in Information Circular 70-6R10, dated September 29, 2020, issued by the CRA and are binding on the CRA provided that the Proposed Transactions described in paragraphs 44 to 49 are completed before XXXXXXXXXX. The transactions described in paragraphs 50 and 51 may be completed as provided in this letter. These determinations are based on the current Act and do not take into account the proposed amendments to the Act.
OTHER COMMENTS
The decisions rendered should in no way be construed as an acquiescence on the part of the CRA that:
(a) we have considered the other tax consequences that may result from the Completed Transactions and the Proposed Transactions set forth herein;
(b) Estate qualifies as a GRE;
(c) the amount allocated to a property in the Statement of Facts, the Completed Transactions, the Proposed Transactions truly represents the FMV or ACB of a property, or the amount of the PUC of a stock;
(d) the amount attributed to the CDA, GRIP, ERDTOH, NERDTOH and DR as the case may be, of a corporation truly represents the CDA, GRIP, ERDTOH, NERDTOH and DR as the case may be, of such corporation.
The statement of our fees for the time spent studying your case will be sent to you under separate cover.
Yours sincerely,
XXXXXXXXXX
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch