2023 Ruling 2022-0923451R3 F - 55(3)(a) internal reorganization -- translation

By services, 4 December, 2023

Principal Issues: Whether the reorganization meets the requirements of paragraph 55(3)(a).

Position: Yes.

Reasons: In compliance with the law and previous positions.

XXXXXXXXXX 2022-092345

XXXXXXXXXX 2023

Dear Madam and Sir,

Subject: Request for advance income tax rulings

XXXXXXXXXX

This is in response to your letter dated XXXXXXXXXX and updated on XXXXXXXXXX, in which you requested advance income tax rulings on behalf of XXXXXXXXXX. We have also taken into account the information you sent us by email, as well as additional information submitted during telephone conversations (XXXXXXXXXX).

To the best of your knowledge and that of the taxpayers involved in the transactions, none of the proposed transactions nor any of the matters addressed in this request are the same as or materially comparable to any transaction or matter that:

i. was addressed in a previously filed tax return of the taxpayer, or a related person, that:

A. is under consideration by the Canada Revenue Agency with respect to that return;

B. is the subject of an objection by the taxpayer or a related person;

C. is the subject of am current or completed court process in relation to the taxpayer or a related person;

ii. has been the subject of an advance ruling request previously considered by the Income Tax Rulings Directorate.

Definitions

Unless otherwise indicated:

i. all statutory references are to provisions of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (the "Act");

ii. all words and expressions used in this application and defined in the Act shall have the meaning given to them in the Act;

iii. all monetary amounts are in Canadian dollars; and

iv. words importing the singular include the plural and vice versa where the context so requires.

In this letter, the parties involved in the proposed transactions (described below) will be referred to as follows:

Individuals:

"Children" refers to the children of Mr. X and Ms. X, namely Mr. A, Mr. B, Mr. C and Mr. D;

"Mr. A" means XXXXXXXXXX;

"Mr. B" means XXXXXXXXXX;

"Mr. C" means XXXXXXXXXX;

"Mr. D" means XXXXXXXXXX;

"Mr. E" means XXXXXXXXXX, brother of Mr. X;

"Ms. F" means XXXXXXXXXX, sister of Mr. X;

"Ms. G" means XXXXXXXXXX, sister of Mr. X;

"Ms. H" means XXXXXXXXXX, sister of Mr. X;

"Mr. X" means XXXXXXXXXX;

"Ms. X" means XXXXXXXXXX, spouse of Mr. X, XXXXXXXXXX;

"Mr. Z" means XXXXXXXXXX, who is not a Related Person and deals at arm's length with Mr. X;

Trusts:

"T1" means XXXXXXXXXX, which is described in Paragraphs 41 and 42 of this letter;

"T2" means XXXXXXXXXX, which is described in Paragraphs 43 and 44 of this letter;

Corporations and Partnerships:

"Aco" means XXXXXXXXXX, which is described in Paragraphs 2 to 7 of this letter;

"AH" means XXXXXXXXXX, which is described in Paragraph 50 of this letter;

"Bco" means XXXXXXXXXX, which is described in numbers 8 to 12 of this letter;

"Cco" means XXXXXXXXXX, which is described in numbers 13 to 17 of this letter;

"CD" means XXXXXXXXXX;

"Dco" means XXXXXXXXXX, which is described in numbers 31 to 34 of this letter;

"Eco" means XXXXXXXXXX, which is described in Paragraphs 35 to 38 of this letter;

"HoldcoA" means XXXXXXXXXX, which is described in Paragraph 45 of this letter;

"HoldcoB" means XXXXXXXXXX, as described in Paragraph 46 of this letter;

"HoldcoF" means XXXXXXXXXX, as described in Paragraph 47 of this letter;

"HoldcoJ" means XXXXXXXXXX, as described in Paragraph 48 of this letter;

"Ico" means XXXXXXXXXX, which is described in Paragraphs 25 to 30 of this letter;

"JH" means XXXXXXXXXX, which is described in Paragraph 50 of this letter;

"NewAco" means the corporation resulting from the amalgamation of Aco and Bco described in Paragraph 61 of this letter;

"NewAco2" refers to the corporation resulting from the amalgamation of NewAco and PB2co described in Paragraph 91 of this letter;

"NewCco" means to the corporation resulting from the amalgamation of Cco and Ico described in Paragraph 62 of this letter;

"NewDco" means the corporation resulting from the amalgamation of Dco and Eco described in Paragraph 87 of this letter;

"PB10co" means to XXXXXXXXXX;

"PB11co" means to XXXXXXXXXX;

"PB12co" means XXXXXXXXXX;

"PB13co" means XXXXXXXXXX;

"PB14co" means XXXXXXXXXX;

"PB1co" means XXXXXXXXXX, which is described in Paragraphs 21 to 24 of this letter;

"PB2co" means XXXXXXXXXX;

"PB3co" means XXXXXXXXXX;

"PB4co" means XXXXXXXXXX;

"PB5co" means XXXXXXXXXX;

"PB6co" means XXXXXXXXXX;

"PB7co" means XXXXXXXXXX;

"PB8co" means XXXXXXXXXX;

"PB9co" means XXXXXXXXXX;

"PBSEC" means XXXXXXXXXX;

"T1co" means XXXXXXXXXX;

"T2co" means XXXXXXXXXX;

"T3co" means XXXXXXXXXX;

"T4co" means XXXXXXXXXX;

"T5co" means XXXXXXXXXX;

"T6co" means XXXXXXXXXX;

"T7co" means XXXXXXXXXX;

"T8co" means XXXXXXXXXX;

"TP" means XXXXXXXXXX, a Canadian private equity fund manager;

"USB" means XXXXXXXXXX, a XXXXXXXXXX corporation formed to acquire the shares held by USco, as described in Paragraph 27 of this letter;

"USco" means XXXXXXXXXX, a XXXXXXXXXX corporation holding all the shares in the share capital of XXXXXXXXXX, a XXXXXXXXXX corporation which XXXXXXXXXX;

"USGP" means XXXXXXXXXX, a XXXXXXXXXX corporation acting as the parent corporation of USP.

"USP" means XXXXXXXXXX, a XXXXXXXXXX corporation which acts as the parent corporation of USB;

"XXXXXXXXXX Corporations" means collectively T1co, T2co, T3co, T4co, T5co, T6co, T7co and T8co;

"XXXXXXXXXX Entities" means collectively PB1co, PB3co, PB4co, PB5co, PB6co, PB7co, PB8co, PB9co, PB10co, PB11co, PB12co, PB13co and PB14co;

The following abbreviations, expressions and terms have the meanings described below.

"1997 Act" means the Income Tax Amendments Act, 1997, S.C. 1998, c. 19;

"ACB" means "adjusted cost base" as defined in section 54;

"Affiliated Persons" has the meaning assigned by the definition in subsection 251.1(1);

"Agreed Amount" has the meaning set out in subsection 85(1);

"Capital Dividend" means a dividend in respect of which an election has been made pursuant to subsection 83(2);

"Capital property" has the meaning assigned by 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);

"Cost amount" has the same meaning as in subsection 248(1);

"CRA" means the Canada Revenue Agency;

"Dco Note" means the note issued by Dco to NewCco at Paragraph 84 of this letter;

"Declaration by Mr. X in respect of T1" means the declaration made by Mr. X described in Paragraph 75 of this letter;

"Declaration by Mr. X in respect of T2" means the declaration by Mr. X described in Paragraph 51 of this letter;

"Depreciable property" has the meaning assigned by subsection 13(21);

"Direct Safe Income" or "DSI" means, in respect of a taxable dividend described in paragraph 55(2.1)(a) that is received by a Dividend Recipient from a Dividend Payor, and in respect of the share on which the dividend was received, the portion of the Safe Income that was earned or realized by the Dividend Payor itself;

"Dividend Payor" means a corporation referred to in subsection 112(1) or (2) or 138(6) from which a Dividend Recipient has received a taxable dividend described in paragraph 55(2.1)(a);

"Dividend Recipient" as defined in paragraph 55(2.1)(a);

"DR" means "dividend refund" as defined in subsection 129(1);

"Eligible Property" has the meaning assigned by the definition in subsection 85(1.1);

"ERDTOH" means "eligible refundable dividend tax on hand" as defined in subsection 129(4);

"Exempt Surplus" has the same meaning as in subsection 5907(1) of the Income Tax Regulations, C.R.C., c. 945.

"fair market value" or "FMV" means the highest price, in dollars, that would be agreed upon in an open market between two arm's length parties who are knowledgeable, informed and prudent, neither of whom is under any compulsion to act;

"foreign affiliate" has the meaning assigned by the definition in subsection 95(1);

"GRIP" means "general rate income pool" as defined in subsection 89(1);

"Indirect safe income" or "ISI" means, in respect of a taxable dividend described in paragraph 55(2.1)(a) that is received by a Dividend Recipient from a Dividend Payor, and in respect of the share on which the dividend was received, the portion of the amount of Safe Income that was earned or realized by a corporation other than the Dividend Payor;

"Mr. X Policies" means the life insurance policies on the life of Mr. X described in Paragraph 6 of this letter;

"NERDTOH" means "non-eligible refundable dividend tax on hand" as defined in subsection 129(4);

"NewAco Note" means the note issued by NewAco to PB1co in Paragraph 80 of this letter;

"NewAco Note1" means the note issued by NewAco to T1 in Paragraph 65(b) of this letter;

"NewAco Note2" means the note issued by NewAco to T1 at Paragraph 65(c) of this letter;

"NewAco Note3" means the note issued by NewAco to T1 at Paragraph 65(c) of this letter;

"NewAco Note4" means the note issued by NewAco to Dco at Paragraph 82 of this letter;

"PB1co Note" means the note issued by PB1co to NewCco at Paragraph 81 of this letter;

"Personal Trust" has the meaning assigned by subsection 248(1);

"Predecessor Corporation" has the meaning assigned by subsection 87(1);

"Preliminary Transactions" means the transactions described in Paragraph 50 below;

"private corporation" has the meaning assigned by the definition in subsection 89(1);

"Proposed Transactions" means the transactions described in Paragraphs 51 to 91 below;

"PUC" means "paid-up capital" as defined in subsection 89(1);

"Related Persons" has the meaning set out in subsection 251(2);

"Resident of Canada" means a resident of Canada for the purposes of the Act;

"Safe Income" means, in respect of a taxable dividend described in paragraph 55(2.1)(a) that is received by a Dividend Recipient from a Dividend Payor, the amount of income earned or realized by a corporation after 1971 and before the safe income determination time in respect of the transaction, event or series of transactions or events that could reasonably be considered to contribute to the capital gain that would have been realized on a disposition at FMV, immediately before the dividend, of the share on which the dividend was received;

"Taxable Dividend" has the meaning assigned by 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);

"XXXXXXXXXX Assets" means the assets held by Cco set out in Paragraph 13 of this letter;

XXXXXXXXXX

XXXXXXXXXX;

Facts

1. Mr. X, Ms. X and the Children are Residents of Canada and no one expects to cease to be Residents of Canada.

Mr. X is XXXXXXXXXX.

2. Aco, incorporated on XXXXXXXXXX under the XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. Aco's Taxation Year ends on XXXXXXXXXX. Aco is a holding corporation and its principal activity is to hold XXXXXXXXXX including all issued and outstanding shares of the capital stock of Bco and advances receivable from affiliated corporations.

The issued and outstanding shares of the capital stock of Aco are as follows:

(a) XXXXXXXXXX Class A shares, voting (XXXXXXXXXX vote per share), participating and entitled to receive dividends, when declared, and to share in the remaining property of the corporation upon dissolution;

3. The names of the holders of the shares of the capital stock of Aco currently issued and outstanding, the Paragraph of shares held by each and the tax attributes of such shares are as follows:

Holder	Number and class	PUC and share capital issued and paid ($)	ACB ($)	Redemption value or FMV ($)
Mr. X	XXXXXXXXXX Class E shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
Mr. X	XXXXXXXXXX Class B shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
T1	XXXXXXXXXX Class A shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX

All of the issued and outstanding shares of the capital stock of Aco constitute capital property to each shareholder.

4. On XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of Aco held by T1 was approximately $XXXXXXXXXX. Specifically, the DSI and ISI attributable to the shares of the capital stock of Aco held by T1 were approximately $XXXXXXXXXX, respectively.

5. According to Aco's financial statements as at XXXXXXXXXX, Aco's assets and liabilities are summarized as follows:

Cash and investments XXXXXXXXXX

Advances to affiliates XXXXXXXXXX

Other assets XXXXXXXXXX

Shares of the capital stock of Bco XXXXXXXXXX

Life insurance policies XXXXXXXXXX

Total assets XXXXXXXXXX

Current liabilities XXXXXXXXXX

Advances payable to affiliates XXXXXXXXXX

Loan from Mr X XXXXXXXXXX

Note payable to Mr X XXXXXXXXXX

Other liabilities XXXXXXXXXX

Total liabilities XXXXXXXXXX

At present, Aco's balance sheet is comparable to that at XXXXXXXXXX.

6. Aco is the owner and beneficiary of the Mr. X Policies, the main features of which can be summarized as follows:

Date of subscription	Policy Type	Approximate Death Benefit On XXXXXXXXXX($)
XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX

The purpose of the Mr. X Policies was to fund the purchase or redemption of Class A shares of the capital stock of Aco (exchanged for Class B shares of the capital stock of Aco upon the freeze referred to in Paragraph 42 below) or Class B shares of the capital stock of Aco upon the last-to-die of Mr. X and Ms. X.

7. On XXXXXXXXXX, the amount of Aco's GRIP was $XXXXXXXXXXX and the amount of Aco's ERDTOH and NERDTOH accounts were, respectively, $XXXXXXXXXXX. During its Taxation Year ended XXXXXXXXXX, Aco did not earn any DRs and Aco did not pay any Taxable Dividends after XXXXXXXXXX. As at XXXXXXXXXX, the amount of Aco's CDA was $XXXXXXXXXXX.

8. Bco, incorporated on XXXXXXXXXX under the XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. Bco's Taxation Year ends on XXXXXXXXXX. Bco is a corporation whose business is to hold all of the issued and outstanding shares of the capital stock of Cco and to service the payroll of certain employees of the group.

The issued and outstanding shares of the capital stock of Bco are as follows:

(a) XXXXXXXXXX Class A shares, voting (XXXXXXXXXX vote per share), non-participating and non-dividend bearing;

(b) XXXXXXXXXX Class B shares, non-voting, participating and entitled to receive dividends, when declared, and to share in the remaining property of the corporation on dissolution; and

(c) XXXXXXXXXX Class Z shares, non-voting, non-participating and entitled to receive, when declared, a non-cumulative monthly dividend preferential to dividends on the Class A shares in an amount not exceeding XXXXXXXXXX% of the redemption value. The shares are redeemable at the option of the Corporation or the holder at $XXXXXXXXXX per share.

9. The names of the holders of the shares of the capital stock of Bco currently issued and outstanding, the Paragraph of shares held by each and the tax attributes of such shares are as follows:

Holder	Number and class	PUC and share capital issued and paid ($)	ACB ($)	Redemption value or FMV ($)
Aco	XXXXXXXXXX Class A shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
Aco	XXXXXXXXXX Class B shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
Aco	XXXXXXXXXX Class Z shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX

All of the issued and outstanding shares of the capital stock of Bco constitute capital property to each shareholder.

10. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of Bco held by Aco was approximately $XXXXXXXXXX. Specifically, the DSI and ISI attributable to the shares of the capital stock of Bco held by Aco were approximately $XXXXXXXXXX, respectively.

11. According to Bco's financial statements as at XXXXXXXXXX, Bco's assets and liabilities are summarized as follows:

Current assets XXXXXXXXXX

Advances to affiliates XXXXXXXXXX

Investments in Cco XXXXXXXXXX

Other assets XXXXXXXXXX

Total assets XXXXXXXXXX

Current liabilities XXXXXXXXXX

Borrowings from affiliates XXXXXXXXXX

Total liabilities XXXXXXXXXX

Bco's balance sheet is currently comparable to that at XXXXXXXXXX.

12. As at XXXXXXXXXX, the amount of Bco's GRIP was $XXXXXXXXXXX and the amount of Bco's ERDTOH and NERDTOH account was $XXXXXXXXXX. As at XXXXXXXXXX, the amount of Bco's CDA was $XXXXXXXXXXX. Bco did not pay a Taxable Dividend after XXXXXXXXXX.

13. Cco, incorporated on XXXXXXXXXX under the XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. Cco's Taxation Year ends on XXXXXXXXXX. Cco is a holding corporation that, through the XXXXXXXXXX Entities, operates a business specializing in the XXXXXXXXXX. Specifically, Cco owns:

(a) XXXXXXXXXX% of the shares of the capital stock of of PB1co;

(b) XXXXXXXXXX% of the shares of the capital stock of PB3co, which holds XXXXXXXXXX% of the shares of the capital stock of PB11co and XXXXXXXXXX% of the shares of the capital stock of PB7co;

(d) XXXXXXXXXX% of the shares of the capital stock of PB6co, which holds XXXXXXXXXX% of the shares of the capital stock of each of PB8co and PB9co (which holds XXXXXXXXXX% of the shares of the capital stock of PB10co) and XXXXXXXXXX% of the participating shares (common shares) of the capital stock of PB12co;

(e) XXXXXXXXXX preferred shares of the capital stock of PB12co; and

(f) XXXXXXXXXX% of the shares of PB13co which holds XXXXXXXXXX% of PB14co.

Mr. B is President and works full time managing the XXXXXXXXXX Entities.

Other than the investments in the XXXXXXXXXX Entities, Cco owns XXXXXXXXXX% of the common shares of the capital stock of Ico, XXXXXXXXXX% of the units of PBSEC, XXXXXXXXXX% of the shares of the capital stock of each of PB2co and PB5co and the XXXXXXXXXX Assets, being the assets used by the XXXXXXXXXX Entities. The FMV of the XXXXXXXXXX Assets and the Entities is $XXXXXXXXXX.

14. Bco owns all of the issued and outstanding shares of capital stock of Cco, being XXXXXXXXXX common shares with a par value of $XXXXXXXXXX per share and an estimated FMV of approximately $XXXXXXXXXX. The PUC and ACB, for Bco, of the XXXXXXXXXX common shares of the capital stock of Cco is $XXXXXXXXXX. These shares of the capital stock of Cco are capital property to Bco.

15. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of Cco held by Bco was approximately $XXXXXXXXXX. Specifically, the DSI and ISI attributable to the shares of capital stock of Cco held by Bco were approximately $XXXXXXXXXX, respectively.

16. According to Cco's financial statements as at XXXXXXXXXX, Cco's assets and liabilities are summarized as follows:

Cash and investments XXXXXXXXXX

Investments in subsidiaries XXXXXXXXXX

Fixed assets XXXXXXXXXX

Total assets XXXXXXXXXX

Current liabilities XXXXXXXXXX

Future tax XXXXXXXXXX

Borrowings from an affiliated partnership XXXXXXXXXX

Total liabilities XXXXXXXXXX

At present, Cco's balance sheet is comparable to that at XXXXXXXXXX.

17. As at XXXXXXXXXX, the amount of Cco's GRIP was $XXXXXXXXXX and the amount of Cco's ERDTOH and NERDTOH accounts were $XXXXXXXXXX, respectively. During its Taxation Year ended on XXXXXXXXXX, Cco did not obtain any DR and Cco did not pay any Taxable Dividend after XXXXXXXXXX. As at XXXXXXXXXX, the amount of Cco's CDA was $XXXXXXXXXXX.

18. PB3co is a CCPC and a TCC. PB3co's Taxation Year ends on XXXXXXXXXX. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of PB3co held by Cco was approximately $XXXXXXXXXX. As at XXXXXXXXXX, the amount of PB3co's GRIP was $XXXXXXXXXXX and the amount of PB3co's ERDTOH and NERDTOH accounts were $XXXXXXXXXXX, respectively. During its Taxation Year ended XXXXXXXXXX, PB3co did not earn any DRs and PB3co did not pay any Taxable Dividends after XXXXXXXXXX.

19. PB6co is a CCPC and a TCC. PB6co's Taxation Year ends on XXXXXXXXXX. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of PB6co held by Cco was approximately $XXXXXXXXXX. As at XXXXXXXXXX, the amount of PB6co's GRIP was $XXXXXXXXXX and the amount of PB6co's ERDTOH and NERDTOH accounts was $XXXXXXXXXX, respectively. During its Taxation Year ended XXXXXXXXXX, PB6co did not earn any DRs and PB6co did not pay any Taxable Dividends after XXXXXXXXXX.

20. PB12co is a CCPC and a TCC. PB12co's Taxation Year ends on XXXXXXXXXX. During its taxation year ended XXXXXXXXXX, PB12co disposed of XXXXXXXXXX and realized a capital gain of approximately $XXXXXXXXXX. As at XXXXXXXXXX, the amount of PB12co's CDA was approximately $XXXXXXXXXX.

21. PB1co, incorporated on XXXXXXXXXX under the XXXXXXXXXX Act, is a CCPC and a TCC. PB1co's Taxation Year ends on XXXXXXXXXX. PB1co is one of the XXXXXXXXXX Entities. Previously, PB1co carried on XXXXXXXXXX activities, which are now carried on by PB3co. At present, PB1co's activities are limited. It owns the name "XXXXXXXXXX", which has historical value on the market and to Mr. X's family.

22. PB1co's authorized share capital consists of an unlimited number of Class A, B and C shares. Cco holds all of the issued and outstanding shares of the capital stock of PB1co, being XXXXXXXXXX Class A shares with a PUC and ACB, for Cco, of $XXXXXXXXXXX. These shares are capital property to Cco.

23. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of PB1co capital stock held by Cco was $XXXXXXXXXX. As at XXXXXXXXXX, the amount of PB1co's GRIP was $XXXXXXXXXX and the amount of PB1co's ERDTOH and NERDTOH account was $XXXXXXXXXX. PB1co did not pay a Taxable Dividend after XXXXXXXXXX.

24. According to PB1co's financial statements as at XXXXXXXXXX, PB1co's assets and liabilities are summarized as follows:

Current assets XXXXXXXXXX

Total assets XXXXXXXXXX

PBSEC loan XXXXXXXXXX

Total liabilities XXXXXXXXXX

At present, PB1co's balance sheet is comparable to that at XXXXXXXXXX.

25. Ico, incorporated on XXXXXXXXXX under the XXXXXXXXXX, is a CCPC and a TCC. Ico's Taxation Year ends on XXXXXXXXXX. Ico is a holding corporation that owned approximately XXXXXXXXXX% of the common shares of the capital stock of USGP, XXXXXXXXXX% of the preferred shares of the capital stock of USP and advances receivable from Affiliated Persons. Until the sale of the common shares of the capital stock of USGP, which sale is described in Paragraph 28 below, USGP was a foreign affiliate of Ico. USGP owns all of the common shares of the capital stock of USP. USGP and USP are part of a group of corporations that manufactures and distributes XXXXXXXXXX.

The issued and outstanding shares of capital stock of Ico are as follows:

(b) XXXXXXXXXX Class B shares, non-voting, non-participating and entitled to receive, when declared, a monthly non-cumulative dividend at a rate between XXXXXXXXXX% of the redemption value (as defined in the articles of incorporation). The shares are redeemable at the option of the corporation or the holder for an amount equal to the redemption value.

26. The names of the holders of the shares of capital stock of Ico presently issued and outstanding, the number of shares held by each and the tax attributes of such shares are as follows:

Holder	Number and class	PUC and share capital issued and paid ($)	ACB ($)	Redemption value or FMV ($)
Cco	XXXXXXXXXX Class A shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
PB6co	XXXXXXXXXX Class B shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX

27. On XXXXXXXXXX, TP and CD entered into an agreement with Cco to sell all of the shares of the capital stock of USco for a price of XXXXXXXXXX, subject to certain adjustments. This sale closed at the beginning of XXXXXXXXXX following the completion of the following transactions:

(a) Cco incorporated Ico on XXXXXXXXXX pursuant to the XXXXXXXXXX;

(b) Cco transferred the shares of capital stock of USco to Ico in exchange for shares of common stock of Ico. The parties have made an election pursuant to subsection 85(1) in respect of the transfer;

(c) Ico sold all of its shares of the capital stock of USco to USB. In consideration, Ico received XXXXXXXXXX in cash, preferred shares and common shares of the capital stock of USB. Ico elected pursuant to subsection 93(1) to designate an amount equal to the Exempt Surplus as a dividend on the shares of the capital stock of USco. The provisions of subsection 85.1(3) applied to this transfer of shares;

(d) Ico exchanged the preferred shares and common shares of the capital stock of USB for preferred shares and common shares of the capital stock of USP pursuant to subsection 85.1(3); and

(e) Ico exchanged common shares of the capital stock of USP for common shares in the capital stock of USGP pursuant to subsection 85.1(3).

28. On XXXXXXXXXX, CRH acquired all of the issued and outstanding shares of capital stock of USGP for a cash consideration of $XXXXXXXXXX. CRH is a XXXXXXXXXX organization. In connection with this transaction, Ico sold its common shares of the capital stock of USGP for cash consideration of approximately $XXXXXXXXXX. Ico will make an election pursuant to subsection 93(1) to designate as a dividend on the common shares in the capital stock of USGP an amount equal to the Exempt Surplus.

29. Ico currently has cash, investments and advances receivable from Affiliated Persons in excess of $XXXXXXXXXX.

30. On XXXXXXXXXX, the amount of Ico's GRIP was $XXXXXXXXXXX and the amount of Ico's ERDTOH and NERDTOH accounts were $XXXXXXXXXXX, respectively. During its Taxation Year ended XXXXXXXXXX, Ico did not earn any DRs and Ico did not pay any Taxable Dividends after XXXXXXXXXX. As at XXXXXXXXXX, the amount of Ico's CDA was XXXXXXXXXX.

During its Taxation Year ended XXXXXXXXXX, Ico realized a taxable capital gain in excess of $XXXXXXXXXX in connection with the sale of its shares of the capital stock of USPG described in Paragraph 28 above. On the date hereof, the amount of Ico's CDA is approximately $XXXXXXXXXX.

31. Dco, incorporated on XXXXXXXXXX under XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. Dco's Taxation Year ends on XXXXXXXXXX. Dco is a holding corporation and its principal activity is to hold an investment in Eco.

The issued and outstanding shares of the capital stock of Dco are as follows:

(b) XXXXXXXXXX Class B shares, non-voting, non-participating and entitled to receive, when declared, a non-cumulative monthly dividend, preferential to dividends on Class A, C and D shares, at the rate of XXXXXXXXXX% of the redemption value (as defined in the articles of incorporation). The shares are redeemable at the option of the Corporation or the holder at an amount equal to the redemption value and any declared and unpaid dividends on the shares. In the event of winding-up or dissolution of the Corporation, the holders of Class B shares are entitled, in priority to the holders of Class A, C and D shares, to payment of an amount equal to the redemption value and any dividends declared and unpaid on the shares. For greater certainty, any reduction in the amount of issued and paid-up share capital relating to this class of shares made without any consideration being paid by the Corporation does not result in a reduction in the redemption value of those shares;

(c) XXXXXXXXXX Class C shares, non-voting, non-participating and entitled to receive, when declared, a non-cumulative monthly dividend, preferential to dividends on Class A and D shares, at the rate of XXXXXXXXXX% of the redemption value (as defined in the articles of incorporation). The shares are redeemable at the option of the Corporation or the holder at an amount equal to the redemption value and any declared and unpaid dividends on the shares. In the event of winding-up or dissolution of the Corporation, the holders of Class C shares are entitled, in priority to the holders of Class A and D shares, to payment of an amount equal to the redemption value and any dividends declared and unpaid on the shares. For greater certainty, any reduction in the amount of issued and paid-up share capital relating to this class of shares made without any consideration being paid by the Corporation does not result in a reduction in the redemption value of those shares;

(d) XXXXXXXXXX Class D shares, non-voting, non-participating and entitled to receive, when declared, a monthly non-cumulative dividend, preferential to dividends on Class A shares, at a rate of XXXXXXXXXX% of the redemption value (as defined in the articles of incorporation). The shares are redeemable at the option of the Corporation or the holder at an amount equal to the redemption value and any declared and unpaid dividends on the shares. In the event of winding-up or dissolution of the Corporation, the holders of Class C shares are entitled, in priority to the holders of Class A shares, to the payment of an amount equal to the redemption value as well as any dividends declared and unpaid on the shares. For greater certainty, any reduction in the amount of issued and paid-up share capital relating to this class of shares made without any consideration being paid by the Corporation does not result in a reduction in the redemption value of those shares;

(e) XXXXXXXXXX Class E voting shares (XXXXXXXXXX votes per share), non-participating and non-dividend bearing.

32. The names of the holders of the shares of the capital stock of Dco currently issued and outstanding, the Paragraph of shares held by each and the tax attributes of such shares are as follows:

Holder	Number and class	PUC and share capital issued and paid ($)	ACB ($)	Redemption value or FMV ($)
T2	XXXXXXXXXX Class A shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
Mr. X	XXXXXXXXXX Class E shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
Cco	XXXXXXXXXX Class B shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
Cco	XXXXXXXXXX Class C shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
Cco	XXXXXXXXXX Class D shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX

All of the issued and outstanding shares of the capital stock of Dco constitute capital property to each shareholder.

33. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of Dco held by T2 was approximately $XXXXXXXXXX. More specifically, the DSI and ISI attributable to the shares of the capital stock of Dco held by T2 were approximately $XXXXXXXXXX, respectively.

34. As at XXXXXXXXXX, the amount of Dco's GRIP was $XXXXXXXXXX and the amount of Dco's ERDTOH and NERDTOH account was $XXXXXXXXXXX, respectively. During its Taxation Year ended XXXXXXXXXX, Dco did not earn any DRs and Dco did not pay any Taxable Dividends after XXXXXXXXXX. As at XXXXXXXXXX, the amount of Dco's CDA was $XXXXXXXXXX.

35. Eco, incorporated on XXXXXXXXXX under XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. Eco's Taxation Year ends on XXXXXXXXXX. Eco is a XXXXXXXXXX corporation.

Specifically, Eco owns:

(a) XXXXXXXXXX% of the shares of the capital stock of T1co;

(b) XXXXXXXXXX% of the shares of the capital stock of T2co;

(d) XXXXXXXXXX% of the shares of the capital stock of T4co;

(e) XXXXXXXXXX% of the shares of the capital stock of T5co, which holds XXXXXXXXXX% of the shares of the capital stock of T6co and XXXXXXXXXX% of the shares of the capital stock of T7co; and

(f) XXXXXXXXXX% of the shares of T8co.

Mr. A is President and works full time managing the XXXXXXXXXX Corporations. The FMV of the XXXXXXXXXX Corporations totals $XXXXXXXXXXX.

The issued and outstanding shares of the share capital of Eco are as follows:

(a) XXXXXXXXXX Class A voting shares (XXXXXXXXXX vote per share), participating and entitled to receive dividends, when declared, and to share in the remaining property of the corporation upon dissolution; and

(b) XXXXXXXXXX Class D shares, non-voting, non-participating and entitled to receive, when declared, a non-cumulative monthly dividend, preferential to dividends on Class A shares, at a rate of XXXXXXXXXX% of the redemption value (as defined in the articles of incorporation). The shares are redeemable at the option of the corporation or the holder at an amount equal to the redemption value and any declared and unpaid dividends on the shares. In the event of winding-up or dissolution of the corporation, the holders of Class D shares are entitled, in priority to the holders of Class A shares, to the payment of an amount equal to the redemption value as well as any dividends declared and unpaid on the shares.

36. Dco holds all of the issued and outstanding shares of the capital stock of Eco, which have the following tax attributes:

Number and class	PUC and share capital issued and paid ($)	ACB ($)	Redemption value or FMV ($)
XXXXXXXXXX Class A shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX
XXXXXXXXXX Class D shares	XXXXXXXXXX	XXXXXXXXXX	XXXXXXXXXX

These shares of the capital stock of Eco are capital property to Dco.

37. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of capital stock of Eco held by Dco was approximately $XXXXXXXXXX.

38. On XXXXXXXXXX, the amount of Eco's GRIP was $XXXXXXXXXXX and the amount of Eco's ERRDTOH and NERDTOH accounts were $XXXXXXXXXXX, respectively. During its Taxation Year ended XXXXXXXXXX, Eco did not earn any DRs and Eco did not pay any Taxable Dividends after XXXXXXXXXX. As at XXXXXXXXXX, the amount of Eco's CDA was $XXXXXXXXXXX.

39. T2co is a CCPC and a TCC. T2co's taxation year ends on XXXXXXXXXX. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of T2co held by Eco was approximately $XXXXXXXXXX. As at XXXXXXXXXX, the amount of T2co's GRIP was $XXXXXXXXXX.

40. T5co is a CCPC and a TCC. T5co's taxation year ends on XXXXXXXXXX. As at XXXXXXXXXX, the amount of Safe Income attributable to the shares of the capital stock of T5co held by Eco was approximately $XXXXXXXXXX. As at XXXXXXXXXX, the amount of T5co's GRIP was $XXXXXXXXXX.

41. T1 is an inter vivos trust and a Personal Trust that was created by a trust indenture on XXXXXXXXXX pursuant to the XXXXXXXXXX. It is governed by the laws in force in XXXXXXXXXX and is resident in Canada. T1 was created by the transfer, by Mr. Z as settlor, of a silver coin, which is still held by T1. The trust deed provides that the trustee may, for the duration of the trust, accept any property transferred to the trustee by the settlor or by any other person other than a person acting as trustee or a beneficiary. The silver coin referred to above is the only property transferred by the settlor to T1. T1 subscribed for shares of the capital stock of Aco and used the proceeds of a loan from a third party to finance the subscription. The loan was subsequently repaid out of T1's income.

T1's deed provides that the beneficiaries are as follows:

(a) Mr. X

(b) any corporation which has no shareholders other than Mr. X;

(d) all first-degree children of Mr. X and Ms. X, i.e.. Mr. A, Mr. B, Mr. C and Mr. D and all descendants born or to be born of Mr. X;

(e) Mr. E, Ms. F, Ms. G and Ms. H and all their descendants born or to be born;

(f) any corporation, whether existing or not on the date of the trust deed, which, at the time of determining whether such corporation qualifies as a beneficiary, has no shareholder other than a person or entity referred to in (a) to (g) of this Paragraph; and

(g) any other inter vivos trust, whether or not existing at the date of the trust deed, which, at the time when it is to be determined whether such trust qualifies as a beneficiary, has no beneficiary other than a person or entity referred to in (a) to (g) of this Paragraph.

42. T1 was created in connection with the estate freeze of Mr. X's interest in Aco. In XXXXXXXXXX, Mr. X exchanged all of his Class A shares of the capital stock of Aco for Class B shares of the capital stock of Aco and T1 subscribed for XXXXXXXXXX new Class A shares for an amount of $XXXXXXXXXX financed by a temporary loan. Currently, T1's only asset in addition to the initial contribution of the silver coin is XXXXXXXXXX Class A shares in the capital stock of Aco with an estimated FMV of $XXXXXXXXXX.

43. T2 is an inter vivos trust and a personal trust created by a trust indenture dated XXXXXXXXXX pursuant to the XXXXXXXXXX. It is governed by the laws in force in XXXXXXXXXX and is resident in Canada. T2 was created by the transfer, by Mr. Z as settlor, of a piece of silver, which is still held by T2. The trust deed provides that the trustee may, for the duration of the trust, accept any property transferred to it by the settlor or by any other person other than a person acting as trustee or a beneficiary. The silver coin referred to above is the only property transferred by the settlor to T2. T2 subscribed for shares in the capital stock of Dco and used the proceeds of a loan from a third party to finance the subscription. The loan was subsequently repaid out of T2's income.

T2's deed provides that the beneficiaries are the following persons:

(a) Mr. X

(b) any corporation that has no shareholders other than Mr. X;

(d) all first-degree children of Mr. X and Ms. X. i.e. Mr. A, Mr. B, Mr. C and Mr. D and all descendants born or to be born of Mr. X;

(e) Mr. E, Ms. F, Ms. G and Ms. H and all their descendants born or to be born;

44. In XXXXXXXXXX, Cco completed a rollover freeze of its interest in the XXXXXXXXXX Corporations (or Predecessor Corporations) whereby Cco received the Class B and Class C shares of the capital stock of Dco. Prior to this transfer, Dco had issued XXXXXXXXXX Class A shares of its capital stock to T2 for an amount of $XXXXXXXXXXX financed by a temporary loan. Subsequently, Cco subscribed for Class D shares of the capital stock of Dco to finance the expansion of XXXXXXXXXX Corporations. Currently, T2's only asset in addition to the initial contribution of the silver coin is XXXXXXXXXX Class A shares of the capital stock of Dco with an estimated FMV of $XXXXXXXXXX.

45. HoldcoA, incorporated on XXXXXXXXXX under the XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. HoldcoA is a holding corporation and its principal business is XXXXXXXXXX. HoldcoA's taxation year ends on XXXXXXXXXX. Mr. D owns XXXXXXXXXX% of the issued and outstanding shares of the capital stock of HoldcoA.

46. HoldcoB, incorporated on XXXXXXXXXX under the XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. HoldcoB is a holding corporation and its principal business is XXXXXXXXXX. HoldcoB's taxation year ends on XXXXXXXXXX. Mr. B owns XXXXXXXXXX% of the issued and outstanding shares of the capital stock of HoldcoB.

47. HoldcoF, incorporated on XXXXXXXXXX under the XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. HoldcoF is a holding corporation and its principal business is XXXXXXXXXX. HoldcoF's taxation year ends on XXXXXXXXXX. Mr. A holds XXXXXXXXXX% of the issued and outstanding shares of the capital stock of HoldcoF.

48. HoldcoJ, incorporated on XXXXXXXXXX under the XXXXXXXXXX and currently governed by the XXXXXXXXXX, is a CCPC and a TCC. HoldcoJ is a holding corporation and its principal business is XXXXXXXXXX. HoldcoJ's taxation year ends on XXXXXXXXXX. Mr. C. owns XXXXXXXXXX% of the issued and outstanding shares of the capital stock of HoldcoJ.

49. Mr. X has and always has had legal control of Aco, Bco, Cco, Dco, Eco, Ico and PB1co. Mr. X, Ms. X, Aco, Bco, Cco, Dco, Eco, Ico and PB1co are Affiliated Persons. Mr. X, Ms. X, Mr. A, Mr. B, Mr. C, Mr. D, Aco, Bco, Cco, Dco, Eco, Ico, PB1co, HoldcoA, HoldcoB, HoldcoF and HoldcoJ are Related Persons.

Preliminary Transactions

50. On XXXXXXXXXX, AH and JH were incorporated by Mr. X pursuant to the XXXXXXXXXX. Each of AH and JH is a private corporation, a CCPC and a TCC. No shares of the capital stock of AH and JH were issued on incorporation. The Taxation Year of each of AH and JH is expected to end on XXXXXXXXXX.

The authorized share capital of each of AH and JH consists of XXXXXXXXXX Class A shares, XXXXXXXXXX Class B shares and XXXXXXXXXX Class D shares. The principal rights, privileges, conditions and restrictions for the Class A and B shares are as follows:

(a) the XXXXXXXXXX Class A shares are voting (XXXXXXXXXX vote per share), participating and entitled to receive dividends, when declared, and to share in the remaining property of the corporation upon dissolution; and

(b) the XXXXXXXXXX Class B shares are voting (XXXXXXXXXX votes per share), non-participating and not entitled to any dividends. The shares are redeemable at the corporation's option at the amount paid into the issued and paid-up share capital account relating to those shares. In the event of winding-up or dissolution of the corporation, the holders of the Class B shares are entitled, in priority to the holders of the Class A shares, to payment of the amount paid into the issued and paid-up share capital account in respect of those shares.

Proposed Transactions

The Proposed Transactions will be carried out in the order set out below. The Proposed Transactions described in Paragraphs 51 to 60 below will take place on the same day and immediately before the amalgamations described in Paragraphs 61 and 62, which will take place at the same time. The proposed Transactions described in Paragraphs 63 to 84 below will take place after the amalgamations described in Paragraphs 61 and 62 and before the winding-up described in Paragraph 85 below. The winding-up described in 85 below will take place after the first end of the NewAco and NewCco Taxation Year. The Proposed Transactions described in Paragraphs 86 to 89 below will take place shortly after the winding-up described in Paragraph 85 below. Finally, the Proposed Transaction described in 90 below will occur in 2023 and the amalgamation described in 91 below will occur on XXXXXXXXXX.

51. Mr. X will exercise his discretion under Article 4 of the T2 Deed to allocate and distribute to HoldcoF the capital of T2, being XXXXXXXXXX Class A shares of the capital stock of Dco (the "Declaration of Mr. X in respect of T2"). This T2 determination to allocate and distribute will supersede all other T2 allocation and distribution documents that may have been made previously.

52. The T2 Trustees will exercise the power conferred on them by the T2 Deed and wind up T2. In accordance with the Declaration of Mr X in respect of T2 described in Paragraph 51 above and the terms of its deed, T2 will distribute all of its shares of the capital stock of Dco to HoldcoF. This distribution will be made in satisfaction of all or part of HoldcoF's beneficial interest in the capital of T2.

53. Mr. X will subscribe to XXXXXXXXXX Class B shares of the capital stock of AH for an amount of $XXXXXXXXXX. Subsequently, Mr. C will subscribe to XXXXXXXXXX Class A shares of the capital stock of JH for an amount of $XXXXXXXXXXX.

54. Mr. X will subscribe to XXXXXXXXXX Class B shares of the capital stock of JH for an amount of $XXXXXXXXXX. Subsequently, Mr. D will subscribe to XXXXXXXXXX Class A shares of the capital stock of AH for an amount of $XXXXXXXXXXX.

55. Ico will redeem the XXXXXXXXXX Class B shares of its capital stock held by PB6co. In consideration, Ico will issue to PB6co a non-interest bearing demand promissory note with a principal amount equal to the redemption value of the XXXXXXXXXX Class B shares of the capital stock of Ico being redeemed. PB6co will accept the note as final, full and absolute payment for the redemption of the said Class B shares of the capital stock of Ico. Upon redemption of such shares, Ico will not be deemed to have paid, and PB6co will not be deemed to have received, any dividends pursuant to subsection 84(3) since the amount paid for the redemption will be equal to the PUC of the XXXXXXXXXX Class B shares of the capital stock of Ico redeemed. Immediately after the redemption, all of the issued and outstanding shares of the capital stock of Ico will be held by Cco.

56. Cco will transfer to PB6co its XXXXXXXXXX preferred shares of the capital stock of PB12co. In return, PB6co will issue XXXXXXXXXX common shares of its capital stock to Cco.

Cco and PB6co will make the election provided for in subsection 85(1) in the prescribed form and within the period provided for in subsection 85(6), in respect of the preferred shares of the capital stock of PB12co that will be transferred to PB6co.

The Agreed Amount of Cco and PB6co for the preferred shares of the capital stock of PB12co so transferred will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (namely, respectively, their FMV at the time of the transfer and the ACB, to Cco, at the time of the transfer).

PB6co will add to the issued and paid-up share capital account for its common shares an amount not exceeding the Agreed Amount for the XXXXXXXXXX preferred shares of the capital stock of PB12co transferred.

57. PB12co will be wound up into PB6co and dissolved. Subsection 88(1) will apply to the winding-up of PB12co.

58. Each of PB3co and PB6co will declare and pay, out of its surplus cash, a Taxable Dividend on the shares of its capital stock held by Cco. The amount of the dividend will not exceed the amount of Safe Income attributable to the shares of the capital stock of, as the case may be, PB3co or PB6co held by Cco and will be less than the GRIP of, as the case may be, PB3co or PB6co. Each of PB3co and PBC6co will make the designation provided for in subsection 89(14) so that the total amount of the dividend constitutes an eligible dividend. The dividend will be paid by each of PB3co and PB6co by the issue to Cco of a non-interest bearing note payable on demand, which will be repaid shortly after its issue. Cco will accept the note issued by each of PB3co and PB6co as final, full and absolute payment of such dividends.

Cco will include the amount of the Taxable Dividend received from each of PB3co and PB6co in computing its income and deduct a corresponding amount in computing its taxable income in accordance with subsection 112(1). In addition, the amount of the Taxable Dividend received from each of PB3co and PB6co will be included in Cco's GRIP.

Each of PB3co and PB6co will be connected with Cco pursuant to subsection 186(2) and paragraph 186(4)(a). Cco will be subject to Part IV tax to the extent provided by paragraph 186(1)(b) in respect of the Taxable Dividend received from each of PB3co and PB6co.

Cco will include in its ERDTOH the amount determined under subparagraph 129(4)(a)(ii) of the definition of ERDTOH.

59. PB6co will increase the issued and paid-up share capital of the common shares of its capital stock held by Cco, without any amount being paid to Cco. The increase in issued and paid-up share capital will be effected by capitalizing a portion of the value of the common shares of the capital stock of PB6co held by Cco. The amount of the increase in issued and paid-up share capital (approximately $XXXXXXXXXX) will not exceed the amount of PB6co's CDA immediately prior to that time.

Pursuant to subsection 84(1), PB6co will be deemed to have paid, and Cco will be deemed to have received, a dividend on the common shares in an amount equal to the increase in PUC.

PB6co will elect pursuant to subsection 83(2) to have the full amount of such dividend constitute a Capital Dividend. Such election pursuant to subsection 83(2) will be made in the prescribed form and manner.

60. Cco will amend its articles of incorporation to change the attributes of the common shares of its capital stock so that they become without par value.

61. Aco and Bco will amalgamate by way of a short-form vertical amalgamation pursuant to the XXXXXXXXXX to form NewAco. NewAco will not issue any shares upon the amalgamation and the shares of the capital stock of Bco held by Aco will be cancelled without repayment of the capital represented thereby.

The amalgamation of Aco and Bco will constitute an "amalgamation" within the meaning of subsection 87(1).

The NewAco Taxation Year will end shortly after the share repurchases described in Paragraphs 80, 81, 82 and 84 below and before the winding-up of NewCco into NewAco described in Paragraph 85 below.

62. Cco and Ico will merge by way of a simplified vertical amalgamation pursuant to XXXXXXXXXX in order to form NewCco. NewCco will not issue shares upon the amalgamation and the shares of the capital stock of Ico held by Cco will be cancelled without repayment of the capital represented thereby.

The amalgamation of Cco and Ico will constitute an "amalgamation" within the meaning of subsection 87(1).

The NewCco Taxation Year will end shortly after the share repurchases described in Paragraphs 80, 81, 82 and 84 and before the winding-up of NewCco into NewAco described in Paragraph 85 below.

63. NewCco shall effect an increase in the issued and paid-up share capital of the XXXXXXXXXX common shares of its share capital held by NewAco, without any amount being paid to NewAco. The increase in issued and paid-up share capital will be effected by capitalization of part of the value of the XXXXXXXXXX common shares of the capital stock of NewCco. The amount of the increase in issued and paid-up share capital (approximately $XXXXXXXXXX) will not exceed the amount of NewCco's GRIP at the end of its Taxation Year and the amount of Safe Income attributable to the XXXXXXXXXX common shares of the capital stock of NewCco held by NewAco.

Pursuant to subsection 84(1), NewCco will be deemed to have paid and NewAco will be deemed to have received a dividend on the XXXXXXXXXX common shares in an amount equal to the increase in PUC.

NewCco will make the designation provided for in subsection 89(14) so that the total amount of such dividend constitutes an eligible dividend.

NewAco will include the amount of the Taxable Dividend deemed to have been received from NewCco in computing its income and deduct a corresponding amount in computing its taxable income in accordance with subsection 112(1). In addition, the amount of the Taxable Dividend deemed to have been received from NewCco will be included in NewAco's GRIP.

NewCco will be connected to NewAco pursuant to subsection 186(2) and paragraph 186(4)(a). NewAco will be subject to Part IV tax to the extent provided in paragraph 186(1)(b) in respect of the Taxable Dividend deemed to have been received from NewCco.

NewAco will include in its ERDTOH the amount determined under subparagraph 129(4)(a)(ii) of the definition of ERDTOH.

64. NewCco will effect an increase in the issued and paid-up share capital of the XXXXXXXXXX common shares of its capital stock held by NewAco, without any amount being paid to NewAco. The increase in issued and paid-up share capital will be effected by capitalization of part of the value of the XXXXXXXXXX common shares of the capital stock of NewCco. The amount of the increase in share capital issued and paid (approximately $XXXXXXXXXX) will not exceed the amount of NewCco's CDC immediately prior to that time.

Pursuant to subsection 84(1), NewCco will be deemed to have paid and NewAco will be deemed to have received a dividend on the XXXXXXXXXX common shares in an amount equal to the increase in the PUC.

NewCco will elect pursuant to subsection 83(2) to have the full amount of such dividend deemed to be a Capital Dividend. This election pursuant to subsection 83(2) will be made in the prescribed form and manner.

65. NewAco will declare and pay the following dividends:

(a) A dividend of $XXXXXXXXXX on the XXXXXXXXXX Class B shares of its capital stock held by Mr. X.. The dividend will be paid in cash. NewAco will elect pursuant to subsection 83(2) to have the full amount of the dividend deemed to be a Capital Dividend. This election pursuant to subsection 83(2) will be made in the prescribed form and manner.

(b) A dividend of approximately $XXXXXXXXXX on the XXXXXXXXXX Class A shares of its capital stock held by T1. The dividend will be paid by the issuance of a non-interest bearing note payable on demand (the "NewAco Note1"). NewAco will elect pursuant to subsection 83(2) to have the full amount of the dividend deemed to be a Capital Dividend. This election pursuant to subsection 83(2) will be made in the prescribed form and manner.

(c) A dividend of approximately $XXXXXXXXXX on the XXXXXXXXXX Class A shares of its capital stock held by T1. The amount of the dividend will not exceed the amount of Safe Income attributable to the XXXXXXXXXX Class A shares of the capital stock of NewAco held by T1. NewAco will make the designation provided for in subsection 89(14) so that the total amount of the dividend constitutes an eligible dividend. The Taxable Dividend will be paid by the issuance of two notes in equal amounts, which will not bear interest and will be payable on demand (the "NewAco Note2" and "NewAco Note3").

NewAco Note1, NewAco Note2 and NewAco Note3 (issued by NewAco to T1) will constitute a final, complete and absolute payment of such dividends.

66. In accordance with the T1 Deed, the Trustees will pay the dividends received from NewAco to the T1 Beneficiaries as follows:

(a) the transfer of NewAco Note1 to Mr. X;

(b) the transfer of NewAco Note2 to AH; and

The transfer of these notes will constitute an amount paid by T1 and received by the beneficiaries.

Pursuant to subsection 104(6), T1 will deduct the amount of the Taxable Dividend received from NewAco and paid to AH and JH in computing its income for its Taxation Year ending in the year in which such Taxable Dividend is paid.

T1 will make a designation pursuant to subsection 104(19) in respect of the amount of the Taxable Dividend received from NewAco and paid to AH and JH such that the amount of such Taxable Dividend will be deemed to have been received by AH and JH (in equal shares) and will be deemed, for certain purposes, not to have been received by T1.

Each of AH and JH will include the amount of the Taxable Dividend deemed to have been received from NewAco in computing its income for its Taxation Year in which T1's year ends, and deduct a corresponding amount in computing its taxable income pursuant to subsection 112(1).

In addition, the amount of the Taxable Dividend deemed to have been received from NewAco by each of AH and JH will be included in the GRIP of, as the case may be, AH or JH.

To the extent that NewAco is connected with AH and JH at the end of T1's taxation year in which T1 receives the Taxable Dividend from NewAco, each of AH and JH will be subject to Part IV tax to the extent provided by paragraph 186(1)(b) in respect of the Taxable Dividend deemed to have been received from NewAco. If applicable, each of AH and JH will include in its ERDTOH the amount determined under subparagraph 129(4)(a)(ii) of the definition of ERDTOH.

67. Mr. X will use the amount received in Paragraph 66(a) above to make an interest-free loan to NewAco.

68. PBSEC will be restructured and will cease to exist so that PB6co will continue as sole owner the operation of the business previously carried on by PBSEC. This will be achieved through the following transactions in sequence:

(a) the XXXXXXXXXX% interest in PBSEC held by PB3co will be redeemed for an amount payable in cash equal to FMV;

(b) PB4co's XXXXXXXXXX% interest in PBSEC will be redeemed for an amount payable in cash equal to the FMV;

(d) NewCco will transfer to PB6co its XXXXXXXXXX% interest in PBSEC and its shares of the capital stock of PB5co. In consideration, PB6co will issue XXXXXXXXXX common shares of its capital stock and a non-interest bearing note with a principal amount equal to the lesser of the FMV of the assets at the time of the transfer and NewCco's ACB of the transferred assets.

NewCco and PB6co shall make the election provided for in subsection 85(1) in the prescribed form and within the time period provided for in subsection 85(6), in respect of the interest in PBSEC and the shares of the capital stock of PB5co to be transferred to PB6co.

The Agreed Amount of NewCco and PB6co for the interest in PBSEC and the shares of the capital stock of PB5co so transferred will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (namely, respectively, their FMV at the time of the transfer and the ACB, to NewCco, at the time of the transfer).

PB6co will add to the issued and paid-up share capital account for its common shares an amount equal to the excess of the Agreed Amount for the interest in PBSEC and the shares of the capital stock of PB5co transferred over the principal amount of the note issued on the Transfer; and

(e) PB5co, a wholly-owned subsidiary of PB6co, will be wound up into PB6co. Section 88(1) will apply to the winding-up of PB5co.

Immediately following these transactions, PB6co will become the sole partner of PBSEC and PBSEC will be wound up. Accordingly, all of the assets of PBSEC will be transferred to PB6co and the liabilities of PBSEC will be assumed by PB6co.

69. NewCco will transfer to PB1co all of the shares it holds of the capital stock of each of PB3co, PB4co, PB6co and PB13co as well as the XXXXXXXXXX Assets. In consideration, PB1co will issue XXXXXXXXXX Class A shares of its capital stock to NewCco.

NewCco and PB1co will make the election provided for in subsection 85(1) in the prescribed form and within the time period provided for in subsection 85(6), in respect of each property transferred to PB1co that will constitute Eligible Property.

The Agreed Amount of NewCco and PB1co for each transferred property that will be a Capital Property other than a Depreciable Property, will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (namely, respectively, their FMV at the time of the transfer and their ACB, to NewCco, at the time of the transfer).

The Agreed Amount of NewCco and PB1co for each transferred property that will be a Depreciable Property of a prescribed class will be equal to the least of the amounts described in subparagraphs 85(1)((e)(i), (ii) and (iii) (namely, the undepreciated capital cost to NewCco of all the properties of this class immediately prior to the transfer, their capital cost to NewCco and their FMV at the time of the transfer).

If applicable, the Agreed Amount of NewCco and PB1co for each Transferred Property that is inventory (within the meaning of the definition of "inventory" in subsection 248(1)), other than property described in paragraph 85(1)(c.2), will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (namely, respectively, their FMV at the time of the Transfer and the cost amount, to NewCco, at the time of the transfer).

PB1co will add to the issued and paid-up share capital account of its Class A Shares an amount not exceeding the Agreed Amounts for the Eligible Property.

Following this transaction, PB1co will become the parent corporation of the XXXXXXXXXX Entities.

70. PB1co will amend its articles of incorporation to cancel the Class B and Class C shares and add the following classes of shares:

(a) XXXXXXXXXX Class V shares, voting (XXXXXXXXXX vote per share), non-participating and non-dividend bearing. In the event of winding-up, dissolution or winding-up of the corporation, the holders of the Class V shares will be entitled, in priority to the holders of the common shares, to payment of the amount paid into the issued and paid-up share capital account in respect of such shares; and

(b) XXXXXXXXXX Class C preferred shares, non-voting, non-participating and entitled to receive, when declared, an annual dividend not exceeding XXXXXXXXXX% of the redemption value (as defined below). The shares will be redeemable at the option of the holder or the corporation at an amount equal to the redemption value. In the event of winding-up, dissolution or winding-up of the corporation, the holders of the Class C preferred shares will be entitled, in priority to the holders of the common shares and the Class V shares, to payment of an amount equal to the redemption value.

The redemption value will correspond to the total FMV of the assets received by the corporation when the Class C preferred shares were issued. A redemption value adjustment clause will apply in the event of a disagreement with the CRA or any other tax authority as to the valuation of the FMV of one or more properties forming part of the consideration received by the corporation upon the issuance of the Class C preferred shares.

71. Mr. X will subscribe to XXXXXXXXXX Class V shares of the capital stock of PB1co for an amount of $XXXXXXXXXX.

72. As part of the amendment to the articles of PB1co described in 70 above, NewCco will exchange its XXXXXXXXXX Class A shares of the capital stock of PB1co for XXXXXXXXXX Class C preferred shares of the capital stock of PB1co.

NewCco and PB1co will not make an election pursuant to subsection 85(1) in respect of the exchange.

An amount equal to the PUC of the XXXXXXXXXX Class A preferred shares of the capital stock of NewCco exchanged will be added to the stated capital account of the Class C preferred shares of the capital stock of NewCco.

The FMV of the XXXXXXXXXX Class A shares of the capital stock of PB1co exchanged will correspond to the FMV of the XXXXXXXXXX Class C preferred shares of the capital stock of PB1co received on the exchange.

73. NewAco will amend its articles of incorporation to add the following classes of shares:

(a) XXXXXXXXXX Class AA shares, non-voting, participating and entitled to receive dividends, when declared, and to share in the remaining property of the corporation upon its dissolution;

(b) XXXXXXXXXX Class C preferred shares, non-voting, non-participating and entitled to receive, when declared, an annual non-cumulative dividend not exceeding XXXXXXXXXX% of the Redemption Value (as defined below). The shares will be redeemable at the corporation's option at a price equal to the Redemption Value. The Redemption Value will be equal to the aggregate FMV, immediately prior to the Proposed Transaction described in 81 below, of the XXXXXXXXXX Class C preferred shares in the capital stock of PB1co held by NewCco;

(c) XXXXXXXXXX Class CC preferred shares, non-voting, non-participating and entitled to receive, when declared, an annual non-cumulative dividend not exceeding XXXXXXXXXX% of the Redemption Value (as defined below). The shares will be redeemable at the corporation's option at a price equal to the Redemption Value. The Redemption Value will be equal to the redemption value of all Class B, Class C and Class D shares of the capital stock of Dco immediately prior to the Proposed Transaction described in Paragraph 84 below;

(d) XXXXXXXXXX Class AH preferred shares, non-voting and entitled to an annual dividend in an amount declared by the Board of Directors. In the event of winding-up, dissolution or winding-up of the Corporation, the holders of the Class AH preferred shares will be entitled, ranking pari passu with the holders of the Class JH shares, after the holders of the Class B shares and the Class C and CC preferred shares, but before the other outstanding shares, to payment of the redemption value (as defined below) and to any dividends declared and unpaid on the shares. The shares will be redeemable at the option of the holder or the corporation at an amount equal to the redemption value and any declared and unpaid dividends on the shares. The redemption value of the shares will be $XXXXXXXXXX per share; and

(e) XXXXXXXXXX class JH preferred shares, non-voting and entitled to an annual dividend of an amount declared by the Board of Directors. In the event of winding-up, dissolution or winding-up of the corporation, the holders of the Class JH preferred shares will be entitled, ranking pari passu with the holders of the Class AH shares, after the holders of the Class B shares and the Class C and CC preferred shares, but before the other outstanding shares, to payment of the redemption value (as defined below) and to any dividends declared and unpaid on the shares. The shares will be redeemable at the option of the holder or the corporation at an amount equal to the redemption value and any declared and unpaid dividends on the shares. The redemption value of the shares will be $XXXXXXXXXX per share.

74. In connection with the amendment to NewAco's articles of association described in 73 above, T1 will exchange its XXXXXXXXXX Class A shares of the capital stock of NewAco for XXXXXXXXXX Class AA shares, XXXXXXXXXX Class E shares, XXXXXXXXXX Class C preferred shares and XXXXXXXXXX CC preferred shares of the capital stock of NewAco. The XXXXXXXXXX Class A shares of the capital stock of NewAco exchanged will be cancelled.

T1 and NewAco will not make an election pursuant to subsection 85(1) in respect of the exchange.

An amount equal to the PUC of the XXXXXXXXXX Class A shares of the capital stock of NewAco exchanged will be added to the issued and paid-up share capital account of the Class AA, Preferred C, Preferred CC and E shares of the capital stock of NewAco, as the case may be.

The FMV of the XXXXXXXXXX Class A shares of the capital stock of NewAco exchanged will correspond to the FMV of the XXXXXXXXXX Class AA shares, XXXXXXXXXX Class E shares, XXXXXXXXXX Class C preferred shares and XXXXXXXXXX Class CC preferred shares of the capital stock of NewAco received upon the exchange.

75. Mr. X will exercise his discretion under Article 4 of the T1 Deed to allocate and distribute the entire capital of T1, being the XXXXXXXXXX Class AA Shares, XXXXXXXXXX Class E Shares, XXXXXXXXXX Class C Preferred Shares and XXXXXXXXXX Class CC Preferred Shares in the capital stock of NewAco referred to in Paragraph 74 above (the "Declaration of Mr. X in respect of T1"), to the following beneficiaries:

(a) HoldcoB, XXXXXXXXXX Class AA Shares, XXXXXXXXXX Class C Preferred Shares and XXXXXXXXXX Class E Shares in the capital stock of NewAco;

(b) HoldcoF, XXXXXXXXXX Class AA shares, XXXXXXXXXX Class CC preferred shares and XXXXXXXXXX Class E shares in the capital stock of NewAco;

(d) JH, XXXXXXXXXX Class AA shares and XXXXXXXXXX Class E shares in the capital stock of NewAco.

This declaration of distribution of T1 property will supersede all other property distribution declarations of T1 that may have been made previously.

76. The T1 Trustees will exercise the power conferred on them by the T1 Deed and wind up T1. In accordance with the Declaration of Mr. X in respect of T1 described in Paragraph 75 above and the terms of its trust deed, T1 will distribute its property as follows to its beneficiaries:

(a) XXXXXXXXXX Class AA Shares, XXXXXXXXXX Class C Preferred Shares and 3 Class E Shares of the capital stock of NewAco will be delivered to HoldcoB;

(b) XXXXXXXXXX Class AA shares, XXXXXXXXXX Class CC preferred shares and XXXXXXXXXX Class E shares of the capital stock of NewAco will be delivered to HoldcoF;

(d) XXXXXXXXXX Class AA shares and XXXXXXXXXX Class E shares of the capital stock of NewAco will be distributed to JH.

These distributions will be made in settlement of all or part of the beneficiaries' interest in the capital of T1.

T1 will be wound-up and will cease to exist once it has distributed all its assets and settled all its liabilities, including taxes payable, if any.

77. Each of AH and JH will transfer to NewAco its NewAco Note2 or NewAco Note3, as the case may be. In consideration, NewAco will issue XXXXXXXXXX Class AH preferred shares of its capital stock to AH and XXXXXXXXXX Class JH preferred shares of its capital stock to JH.

Subsequently, in order to fund the Part IV tax payable by each of AH and JH in respect of the Taxable Dividend deemed to have been received from NewAco described in Paragraphs 66(b) or 66(c), as the case may be, each of AH and JH will request the redemption of a given number of, as the case may be, its Class AH preferred shares of the capital stock of NewAco or its Class JH preferred shares of the capital stock of NewAco.

78. HoldcoB will transfer to PB1co its XXXXXXXXXX Class C preferred shares of the capital stock of NewAco. In consideration, PB1co will issue XXXXXXXXXX Class A shares of its capital stock to HoldcoB.

The FMV of the XXXXXXXXXX Class A shares of the capital stock of PB1co issued to HoldcoB will be equal to the FMV of the XXXXXXXXXX Class C preferred shares of the capital stock of NewAco transferred.

HoldcoB and PB1co shall make the election provided for in subsection 85(1) in the prescribed form and within the period provided for in subsection 85(6), in respect of the Class C Preferred Shares of the capital stock of NewAco to be transferred to PB1co.

The Agreed Amount of HoldcoB and PB1co for the Class C preferred shares of the capital stock of NewAco so transferred will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (namely, respectively, their FMV at the time of the transfer and their ACB, to HoldcoB, at the time of the transfer).

PB1co shall add to the issued and paid-up share capital account for its Class A shares an amount not exceeding the Agreed Amount for the XXXXXXXXXX Class C preferred shares of the capital stock of NewAco transferred.

79. HoldcoF shall transfer to Dco its XXXXXXXXXX Class CC preferred shares of the capital stock of NewAco. In consideration, Dco will issue XXXXXXXXXX Class A shares of its capital stock to HoldcoF.

HoldcoF and Dco will make the election provided for in subsection 85(1) in the prescribed form and within the period provided for in subsection 85(6), in respect of the Class CC preferred shares of the capital stock of NewAco that will be transferred to Dco.

The Agreed Amount of HoldcoF and Dco for the Class CC Preferred Shares of the capital stock of NewAco so transferred will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (namely, respectively, their FMV at the time of the transfer and their ACB, to HoldcoF, at the time of the transfer).

Dco shall add to the issued and paid-up share capital account for its Class A Shares an amount not exceeding the Agreed Amount for the XXXXXXXXXX Class CC Preferred Shares of the capital stock of NewAco transferred.

80. NewAco shall redeem the XXXXXXXXXX Class C preferred shares of its capital stock held by PB1co. In consideration therefor, NewAco will issue to PB1co a non-interest bearing note payable on demand with a principal amount equal to the redemption value of the XXXXXXXXXX Class C preferred shares of the capital stock of NewAco being redeemed (the "NewAco Note"). PB1co will accept the NewAco Note as final, complete and absolute payment for the redemption of said Class C preferred shares of NewAco's share capital.

Upon the redemption of such shares, NewAco will be deemed to have paid and PB1co will be deemed to have received a dividend pursuant to subsection 84(3) in an amount equal to the amount by which the redemption value of the Class C preferred shares of the capital stock of NewAco redeemed exceeds their PUC. This dividend will be a Taxable Dividend.

NewAco will not make the designation provided for in subsection 89(14).

81. PB1co will redeem the XXXXXXXXXX Class C preferred shares of its capital stock held by NewCco. In consideration therefor, PB1co will issue to NewCco a non-interest bearing note payable on demand, the principal amount of which will be equal to the redemption value of the XXXXXXXXXX Class C preferred shares of the capital stock of PB1co being redeemed (the "PB1co Note"). NewCco will accept the PB1co Note as final, full and absolute payment for the redemption of said Class C preferred shares in the capital stock of PB1co.

Upon redemption of such shares, PB1co will be deemed to have paid and NewCco will be deemed to have received a dividend pursuant to subsection 84(3) in an amount equal to the amount by which the redemption value of the Class C preferred shares of the capital stock of PB1co redeemed exceeds their PUC. This dividend will be a Taxable Dividend.

PB1co will not make the designation provided for in subsection 89(14).

82. NewAco will redeem the XXXXXXXXXX Class CC preferred shares of its capital stock held by Dco. In consideration, NewAco will issue to Dco a non-interest bearing note payable on demand with a principal amount equal to the redemption value of the XXXXXXXXXX Class CC Preferred Shares of the capital stock of NewAco being redeemed (the "NewAco Note4"). Dco will accept the NewAco Note4 as final, complete and absolute payment for the redemption of such Class CC preferred shares of the capital stock of NewAco.

Upon redemption of such shares, NewAco shall be deemed to have paid and Dco shall be deemed to have received a dividend pursuant to subsection 84(3) in an amount equal to the amount by which the redemption value of the Class CC Preferred Shares of the capital stock of NewAco redeemed exceeds their PUC. This dividend will be a Taxable Dividend.

NewAco will not make the designation provided for in subsection 89(14).

83. Immediately prior to the Proposed Transaction described in Paragraph 84 below, the issued and paid-up share capital amount of the XXXXXXXXXX Class B shares, XXXXXXXXXX Class C shares and XXXXXXXXXX Class D shares of the share capital of Dco held by NewCco will be reduced to a nominal amount, without any consideration being paid by Dco.

84. Dco will redeem the XXXXXXXXXX Class B Shares, XXXXXXXXXX Class C Shares and XXXXXXXXXX Class D Shares of its capital stock held by NewCco. In consideration, Dco will issue to NewCco a non-interest bearing note payable on demand with a principal amount equal to the redemption value of all XXXXXXXXXX Class B Shares, XXXXXXXXXX Class C Shares and XXXXXXXXXX Class D Shares subject to the redemption (the "Dco Note"). NewCco will accept the Dco Note as full and absolute payment for the redemption of such Class B, C and D shares of the capital stock of Dco.

Upon redemption of such shares, Dco will be deemed to have paid and NewCco will be deemed to have received a dividend pursuant to subsection 84(3) in an amount equal to the amount by which the redemption value of the redeemed Class B, C and D shares of the capital stock of Dco exceeds their PUC. This dividend will be a Taxable Dividend.

Dco will not make the designation provided for in subsection 89(14).

85. NewCco will be wound up into NewAco and dissolved. Subsection 88(1) will apply to the winding-up of NewCco. For greater certainty, this Proposed Transaction will be carried out immediately after the first end of the Taxation Year of each of NewCco and NewAco indicated in Paragraphs 62 and 61 above, respectively.

86. The NewAco Note and the PB1co Note will be cancelled by way of set-off. The NewAco Note4 and the Dco Note will also be cancelled by way of set-off.

87. Dco and Eco will amalgamate by means of a simplified vertical amalgamation pursuant to XXXXXXXXXX in order to form NewDco. NewDco will not issue any shares upon the amalgamation and the shares of the capital stock of Eco held by Dco will be cancelled without repayment of the capital they represent.

The amalgamation of Dco and Eco will constitute an "amalgamation" within the meaning of subsection 87(1).

NewDco's Taxation Year will end on XXXXXXXXXX.

88. Mr. C will transfer to HoldcoJ his XXXXXXXXXX Class A shares of the capital stock of JH. In consideration, HoldcoJ will issue Class A shares (participating shares) of its capital stock to Mr. C.

Mr. C. and HoldcoJ will make the election provided for in subsection 85(1) in the prescribed form and within the period provided for in subsection 85(6), in respect of the Class A shares of the capital stock of JH that will be transferred to HoldcoJ.

The Agreed Amount of Mr. C. and HoldcoJ for the Class A shares of the capital stock of JH so transferred will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (namely, respectively, their FMV at the time of the transfer and the ACB, to Mr. C., at the time of the transfer).

HoldcoJ will add to the issued and paid-up share capital account for its participating shares an amount equal to the Agreed Amount for the XXXXXXXXXX Class A shares of the capital stock of JH transferred.

89. Mr. D will transfer to HoldcoA his XXXXXXXXXX Class A shares of the capital of AH. In consideration, HoldcoA will issue Class A shares (participating shares) of its capital stock to Mr. D.

Mr. D and HoldcoA will make the election referred to in subsection 85(1) in the prescribed form and within the prescribed time set out in subsection 85(6), in respect of the Class A shares of the capital of AH to be transferred to HoldcoA.

The Agreed Amount of Mr. D and HoldcoA for the Class A shares of the capital stock of AH so transferred will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) (being, respectively, their FMV at the time of the transfer and their ACB, to Mr. D, at the time of the transfer).

HoldcoA will add to the issued and paid-up capital account for its participating shares an amount equal to the Agreed Amount for the XXXXXXXXXX Class A shares in the capital of AH transferred.

90. There will be an amendment to Mr. X's will to provide, among other things, for bequests to Ms. X of XXXXXXXXXX Class E shares of the capital stock of NewAco (or any corporation by which NewAco shall be replaced), XXXXXXXXXX Class E shares in the capital stock of NewDco, XXXXXXXXXX Class B shares in the capital stock of JH, XXXXXXXXXX Class B shares in the capital stock of AH and XXXXXXXXXX Class V shares in the capital stock of PB1co.

At the latest upon her death, Ms. X will transfer the XXXXXXXXXX Class E shares of the capital stock of NewDco, XXXXXXXXXX Class B shares of the capital stock of JH, XXXXXXXXXX Class B shares of the capital stock of AH and XXXXXXXXXX Class V shares of the capital stock of PB1co as follows:

(a) the XXXXXXXXXX Class B shares of the capital stock of AH will be bequeathed to Mr. D;

(b) the XXXXXXXXXX Class V shares of the capital stock of PB1co will be bequeathed to Mr. B;

(d) the XXXXXXXXXX Class B shares of the capital stock of JH will be bequeathed to Mr. C.

In the event of Ms. X predeceasing, the XXXXXXXXXX Class E shares of the capital stock of NewDco, the XXXXXXXXXX Class B shares of the capital stock of JH, the XXXXXXXXXX Class B shares of the capital stock of AH and the XXXXXXXXXX Class V shares of the capital stock of PB1co will be bequeathed by Mr. X as follows:

(a) the XXXXXXXXXX Class B shares of the capital stock of AH will be bequeathed to Mr. D;

(b) the XXXXXXXXXX Class V shares of the capital stock of PB1co will be bequeathed to Mr. B;

(d) the XXXXXXXXXX Class B shares of the capital stock of JH will be bequeathed to Mr. C.

On the date hereof, the bequest of the XXXXXXXXXX Class E shares of the capital stock of NewAco (or any corporation by which NewAco will be replaced) has not yet been decided.

91. On XXXXXXXXXX, NewAco and PB2co will amalgamate by way of a vertical short-form amalgamation pursuant to XXXXXXXXXX to form NewAco2. NewAco2 will not issue shares upon the amalgamation and the shares of the capital stock of PB2co held by NewAco will be cancelled without repayment of the capital they represent.

The amalgamation of NewAco and PB2co will constitute an "amalgamation" within the meaning of subsection 87(1).

NewAco2's Taxation Year will end on XXXXXXXXXX.

Purpose of the Proposed Transactions

92. The purpose of the Proposed Transactions as a whole is the estate planning of Mr. X and Ms. X. More specifically, it is intended that:

(a) the participating shares of the capital stock of the XXXXXXXXXX Entities whose business is managed by Mr. B be transferred to his holding corporation, HoldcoB;

(b) the participating shares of the share capital of the XXXXXXXXXX Corporations whose business is managed by Mr. A be transferred to his holding corporation, HoldcoF;

(c) the investments held by Aco, Bco, Cco and Ico be held directly or indirectly by Mr. X and his Children's holding corporations, HoldcoA, HoldcoB, HoldcoF and HoldcoJ; and

(d) control of NewAco2, AH, JH, NewDco and PB1co (the owners of the properties referred to in (a) to (c) above) remain in the hands of Mr. X. and pass to the Children on the death of the survivor of Mr. X and Ms. X.

Additional Information

93. The main contact details for the taxpayers covered by the advance ruling are:

XXXXXXXXXX

Advance Rulings Issued

Provided that the statement of relevant facts, the Preliminary Transactions, the Proposed Transactions and the Additional Information constitutes full disclosure of all relevant facts, all preliminary transactions and all proposed transactions and that the Proposed Transactions are carried out as described above, our rulings are as follows:

A. To the extent that:

(a) each of T1 and T2 (referred to in this decision as a "distributing trust") will, at the time of the distribution described in Paragraphs 76 and 52 above, be a Personal Trust;

(b) no distributing trust will have made an election pursuant to subsection 107(2.001) in respect of the distribution described in Paragraphs 76 and 52 above;

(c) subsection 107(4.1) will not apply to any distributing trust at the time of the distributions described in Paragraphs 76 and 52 above; and

(d) each of HoldcoB, AH, JH and HoldcoF, as the case may be, will be resident in Canada at the time the distributing trust makes a distribution to it,

the rules described in subsection 107(2) will apply to each distributing trust at the time it makes its distribution to HoldcoB, AH, JH and HoldcoF, as the case may be, in satisfaction of all or part of its capital interest in the distributing trust, as described in Paragraphs 76 and 52 above.

B. Provided that:

(a) the dividend paid by NewAco to T1 described in Paragraph 65(c) above constitutes a Taxable Dividend;

(b) NewAco makes a designation pursuant to subsection 89(14) in respect of the Taxable Dividend described in Paragraph 65(c) above; and

(c) T1 makes a designation pursuant to subsection 104(19) in respect of the amount of the Taxable Dividend received from NewAco, as described in Paragraph 65(c) above, and paid to AH and JH, as described in Paragraphs 66(b) and (c) above,

such Taxable Dividend:

(d) will be deemed, to the extent of the part of the Taxable Dividend distributed to AH or JH, as the case may be, to be a Taxable Dividend received by AH or JH, as the case may be, and will, by operation of subsection 104(19), be included in computing their income pursuant to paragraph 12(1)(j) and subsection 82(1);

(e) will be included in T1's income without reference to paragraph 82(1)(b) and T1 will be entitled to a corresponding deduction pursuant to paragraph 104(6)(b);

(f) will, to the extent of the portion of the Taxable Dividend distributed to AH or JH, as the case may be, be deductible in computing AH's or JH's, as the case may be, taxable income pursuant to subsection 112(1) for the Taxation Year in which the dividend is received, and for greater certainty, the deduction will not be prohibited by subsections 112(2.1), (2.2), (2.3) or (2.4);

(g) will not be subject to tax under Parts IV.1 and VI.1;

(h) will, to the extent of the portion of the Taxable Dividend distributed to AH or JH, as the case may be, and provided that NewAco is connected to AH and JH at the end of the taxation year of T1 in which T1 receives the Taxable Dividend from NewAco, subject to Part IV tax in respect of AH or JH, as the case may be, to the extent provided by paragraph 186(1)(b) and such Part IV tax will be included in AH's and JH's ERDTOH account by virtue of subparagraph 129(4)(a)(ii) of the definition of ERDTOH;

(i) will give rise to a DR to NewAco within the limits set out in subparagraph 129(1)(a)(i) and this DR will reduce its ERDTOH account in the subsequent taxation year under Paragraph 129(4)(c) of the definition of ERDTOH;

(j) be included, to the extent of the portion of the Taxable Dividend allocated to AH or JH, as the case may be, in computing AH's or JH's, as the case may be, GRIP under the description of E in the definition of GRIP in subsection 89(1);

(k) will be deducted in computing NewAco's GRIP in its subsequent taxation year under the description of G in the definition of GRIP in subsection 89(1); and

(l) subsection 55(2) will not apply to the dividend provided that the amount of the dividend is less than the Safe Income attributable to the Class A shares of the capital stock of NewAco held by T1 immediately before the payment of the dividend.

C. Provided that:

(a) NewAco files the subsection 83(2) election in respect of the dividend described in Paragraph 65(b) above; and

(b) T1 makes the designation pursuant to subsection 104(20) in respect of the amount of the Capital Dividend received from NewAco, as described in Paragraph 65(b) above, and paid to Mr. X, as described in Paragraph 66 (a) above,

this Capital Dividend will not be included in the income of T1 and Mr. X.

D. The provisions of subsection 88(1) will apply to the winding-up of PB12co into PB6co described in Paragraph 57 above and to the winding-up of NewCco into NewAco described in Paragraph 85 above.

E. As a result of the increases in the PUC of the shares in the share capital of PB6co and NewCco described in Paragraphs 59, 63 and 64 above, subsection 84(1) will apply so that:

(a) PB6co will be deemed to have paid and Cco will be deemed to have received at that time a dividend equal to the amount of the PUC increase described in Paragraph 59 above;

(b) NewCco will be deemed to have paid and NewAco will be deemed to have received at that time a first dividend equal to the amount of the PUC increase described in Paragraph 63 above; and

(c) NewCco shall be deemed to have paid and NewAco shall be deemed to have received at that time a second dividend equal to the amount of the PUC increase described in Paragraph 64 above.

F. The provisions of subsection 86(1) will apply to the share exchange described in Paragraphs 70 and 72 above and the share exchange described in Paragraphs 73 and 74 above, provided that:

(a) NewCco or T1, as the case may be (referred to in this letter as the "Transferor") holds, as the case may be, its XXXXXXXXXX Class A shares in the capital stock of PB1co or its XXXXXXXXXX shares of the capital stock of NewAco (referred to in this decision as the "Old Shares") as capital property; and

(b) the Transferor and, as the case may be, PB1co and NewAco do not file an election pursuant to subsection 85(1) in respect of the Exchange,

such that:

(c) pursuant to paragraph 86(1)(b), the cost to the Transferor of, as the case may be, the XXXXXXXXXX Class C shares of the capital stock of PB1co or the XXXXXXXXXX Class AA shares, XXXXXXXXXX Class E shares, XXXXXXXXXX Class C preferred shares and XXXXXXXXXX Class CC preferred shares of the capital stock of NewAco (referred to in this decision as the "New Shares") that it will receive in exchange for the Old Shares will be deemed to be the portion of the ACB, if any, to the Transferor, immediately prior to the exchange, of the Old Shares over the FMV at that time of the consideration receivable (if any) in exchange for the Old Shares (other than the New Shares), represented by the ratio of:

(i) the FMV, immediately after the exchange, of those New Shares of that class, to

(ii) the FMV, immediately after the exchange, of all the New Shares of the capital stock of the Corporation that he will receive in exchange for the Old Shares;

(d) pursuant to paragraph 86(1)(c), the transferor will be deemed to dispose of the Old Shares for proceeds of disposition equal to the cost to the transferor of all New Shares and other property (if any) received by the transferor in exchange for the Old Shares; and

(e) the total PUC of the New Shares will be equal to the excess of the PUC of the Old Shares over the FMV of the consideration (excluding the New Shares), if any, that the Corporation will pay for the Old Shares on the exchange and subsection 86(2.1) will not apply to adjust the PUC of those shares.

For greater certainty, the provisions of subsection 86(2) will not apply.

G. Subject to the application of subsection 69(11), the provisions of subsection 85(1) will apply to transfers of Eligible Property by transferors to transferee corporations as described in Paragraphs 56, 68, 69, 78, 79, 88 and 89 above, with the result that the Agreed Amount in respect of the transferred property will be deemed to be the transferor's proceeds of disposition of that property and the transferee corporation's cost of acquiring that property. The cost of the shares of the capital stock of the transferee corporation received by the transferor as consideration for the disposition will be determined in accordance with paragraph 85(1)((g) or (h), as the case may be.

For greater certainty, the provisions of paragraph 85(1)(e.2) will not apply.

H. Upon the amalgamation of Aco and Bco described in Paragraph 61 above, the amalgamation of Cco and Ico described in Paragraph 62 above, the amalgamation of Dco and Eco described in Paragraph 87 above and the amalgamation of NewAco and PB2co described in Paragraph 91 above:

(a) section 87 will apply to the amalgamations;

(b) the provisions of subsection 87(4) (other than paragraphs 87(4)(c) to (e)) will apply in respect of each shareholder of Aco, Cco, Dco and NewAco, as the case may be, who will own, immediately before the amalgamation, shares of the capital stock of those corporations that will constitute Capital Property to that holder (referred to in this decision as "Old Shares"), so that each such shareholder will be deemed:

(i) to have disposed of the Old Shares in the capital stock of the Predecessor Corporation for proceeds of disposition equal to the aggregate of the ACBs, to the shareholder, of such shares immediately before the Amalgamation, and

(ii) to have acquired the new shares of the capital stock of the amalgamated corporation in consideration for the Old Shares, at a cost equal to the proceeds of disposition of the shares described in (i); and

(c) the cancellation of shares of the capital stock of a predecessor corporation held by another predecessor corporation without any return of capital will not constitute a disposition within the meaning of paragraph (n) of the definition "disposition" in subsection 248(1); and

(d) For the purposes of applying the transitional measure in paragraph 131(11)(b) of the 1997 Act, the XXXXXXXXXX Class B shares of the capital stock of NewAco2 that will be held by Mr. X following the amalgamation of NewAco and PB2co will be deemed to be the same shares as the XXXXXXXXXX Class B shares of the capital stock of Aco.

For greater certainty, the provisions of paragraph 87(4)(c) will not apply.

I. Upon the redemption of

(a) the XXXXXXXXXX Class C preferred shares of the capital stock of NewAco held by PB1co described in Paragraph 80 above;

(b) the XXXXXXXXXX class C preferred shares of the capital stock of PB1co held by NewCco described in Paragraph 81 above;

(c) the XXXXXXXXXX Class CC preferred shares of the capital stock of NewAco held by Dco described in Paragraph 82 above; and

(d) the XXXXXXXXXX Class B Shares, XXXXXXXXXX Class C Shares and XXXXXXXXXX Class D Shares of the capital stock of Dco held by NewCco described in Paragraph 84 above;

the provisions of subsection 84(3) will apply such that NewAco, PB1co or Dco, as the case may be, will be deemed to have paid, and PB1co, NewCco or Dco, as the case may be, will be deemed to have received, a dividend in an amount equal to the amount, if any, by which the amount paid by the corporation on the redemption exceeds the PUC of such shares immediately prior to such time.

J. Each of the dividends described in ruling I above, to the extent that it constitutes a Taxable Dividend:

(a) will be included in computing the income of the corporation deemed to have received it by virtue of subsection 82(1) and paragraph 12(1)(j);

(b) will be deductible in computing the taxable income of the corporation deemed to have received it pursuant to subsection 112(1) and, for greater certainty, such deduction will not be prohibited by subsections 112(2.1), (2.2), (2.3) or (2.4);

(c) will not be included in the proceeds of disposition of the shares by virtue of paragraph (j) of the definition "proceeds of disposition" in section 54;

(d) any loss resulting from the disposition of those shares will be reduced by the amount of those dividends pursuant to subsection 112(3);

(e) will not be subject to tax under Parts IV.1 and VI.1;

(f) will be subject to tax under Part IV to the extent provided by paragraph 186(1)(b); and

(g) will give rise to a DR to the corporation deemed to have paid it within the limits set out in subparagraph 129(1)(a)(ii) and that DR will reduce its NERDTOH account in the subsequent taxation year pursuant to paragraph 129(4)((d) of the definition of NERDTOH.

K. By virtue of paragraph 55(3)(a), the provisions of subsection 55(2) will not apply to the Taxable Dividends arising from the redemptions described in Ruling I above, to the extent that no disposition of property or significant increase in interest described in any of subparagraphs 55(3)(a)(i) to (v) occurs as part of the series of transactions that includes the Proposed Transactions.

For greater certainty, the Proposed Transactions, in and of themselves, will not be considered to result in a disposition of property or a significant increase in interest described in any of subparagraphs 55(3)(a)(i) to (v).

L. The settlement of the PB1co Note and the NewAco Note and the settlement of the Dco Note and NewAco Note4 described in Paragraph 86 above will not result in a "forgiven amount" as defined in subsection 80(1).

M. Subsections 15(1), 56(2) and 246(1) will not apply in respect of the Proposed Transactions described above.

N. The provisions of subsection 245(2) will not apply as a result of and because of the Proposed Transactions described above to redetermine the tax consequences confirmed in the rulings above.

These rulings are subject to the limitations and general conditions set out in Information Circular 70-6R12 dated April 1, 2022, issued by the CRA and are binding on the CRA provided that the Proposed Transactions described in Paragraphs 51 to 90 are completed before XXXXXXXXXX. The proposed transaction described in Paragraph 91 must be completed by XXXXXXXXXX. These decisions are based on the current Act and do not take into account the proposed amendments thereto.

Other Comments

General comments

These rulings should in no way be construed as an acquiescence on the part of the CRA that:

(a) we have considered the tax consequences arising from the transactions described in Paragraphs 27 and 28 of this letter;

(b) we have considered the other tax consequences that may result from the Proposed Transactions set out herein;

(c) the amount attributed to a property in the Statement of Facts and the Proposed Transactions truly represents the FMV or ACB of a property, or the PUC amount of a share;

(d) the amount allocated to Safe Income, Direct Safe Income and Indirect Safe Income attributable to shares of the capital stock of a corporation held by a shareholder truly represents Safe Income, Direct Safe Income and Indirect Safe Income;

(e) the amount of the dividends provided for in Paragraphs 58, 63 and 65 (c) of the Proposed Transactions does not exceed the amount of Safe Income attributable to the shares in question; and

(f) the amount allocated to the CDA, the GRIP, the ERDTOH or the NERDTOH of a corporation truly represents the CDA, the GRIP, the ERDTOH or the NERDTOH of such corporation.

In addition, since the application and operation of price adjustment clauses are not proposed transactions, we do not issue rulings on these clauses. Income Tax Folio S4-F3-C1, Price Adjustment Clauses, sets out the CRA's administrative position with respect to price adjustment clauses.

Allocation of Safe Income following the Proposed Transactions

In 2020-086103, we described a formula for the allocation of DSI between the transferor corporation ("Transferor") and the transferee corporation ("Transferee") following the reorganization illustrated therein (the "DSI Allocation Formula"). Generally speaking, this involved a reorganization carried out on a tax-deferred basis in the traditional manner, that is, first involving a transfer by Transferor of shares of the capital stock of another corporation ("Opco") to Transferee in exchange for shares of the capital stock of Transferee, followed by cross-share repurchases between Transferor and Transferee.

Here, the application of the DSI Allocation Formula would lead to a disadvantageous result for the taxpayers involved since it would result in an undue loss of ACB/DSI. More specifically, the ACB, to, as the case may be, HoldcoB or HoldcoF, of the shares of the capital stock of NewAco transferred to, as the case may be, PB1co or Dco (the transactions described in Paragraphs 78 and 79 above), will be nominal and the ACB, to NewCco, of the shares of the capital stock of, as the case may be, PB1co or Dco will be eliminated.

Accordingly, in this particular case, we are of the opinion that the DSI would be calculated as follows:

A. Transferor's DSI that has accrued on the shares of its capital stock held by shareholders other than Transferee, determined immediately after the Reorganization, will be calculated in accordance with the following formula:

DSI on shares of capital stock of Transferor held by all shareholders immediately after the reorganization = DSI immediately before the reorganization X total net cost amount of property retained by Transferor / total net cost amount of all property of Transferor immediately before the reorganization.

B. The DSI of the shares of capital stock of Transferee held by shareholders immediately prior to the Reorganization shall be increased in accordance with the following formula:

DSI of the shares of the capital stock of Transferor held by all of its shareholders immediately prior to the Reorganization - DSI of the shares of the capital stock of Transferor held by the remaining shareholders immediately after the Reorganization as calculated under item A above.

A statement of our fees for the time spent on your case will be sent to you under separate cover.

Best regards,

XXXXXXXXXX.
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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2023 Ruling 2022-0923451R3 F - 55(3)(a) internal reorganization -- translation

Definitions

Individuals:

Trusts:

Corporations and Partnerships:

The following abbreviations, expressions and terms have the meanings described below.

Facts

Preliminary Transactions

Proposed Transactions

Purpose of the Proposed Transactions

Additional Information

Advance Rulings Issued

Other Comments

General comments

Allocation of Safe Income following the Proposed Transactions

Term Tree