2000 Ruling 2000-0002583 - Paragraph 88(1)(c), Section 245

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: General-anti-avoidance rule; paragraphs 88(1)(c) - (c.8) and 88(1)(d)

Position: GAAR does not apply; technical requirements of paragraphs 88(1)(c) and (d) satisfied

Reasons: GAAR not applicable as there is no discernible misuse or abuse; paragraph 88(1)(c) and (d) bump is available for capital property assuming that there is no subsequent acquisition of property which is described in subparagraph 88(1)(c)(vi)

XXXXXXXXXX 		2000-000258

Attention: XXXXXXXXXX

XXXXXXXXXX, 2000

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling

We are writing in response to your letter of XXXXXXXXXX, as amended by your letter of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayers. We acknowledge receipt of your correspondence dated XXXXXXXXXX and the information provided to us during our telephone conversations.

To the best of your knowledge, and that of the taxpayers involved, none of the issues contained herein is:

(i) dealt with in an earlier return of the taxpayers or a related person;

(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayers or a related person;

(iii) under objection by the taxpayers or a related person;

(iv) subject to a ruling previously issued by the Income Tax Rulings & Interpretations Directorate; or

(v) before the courts or, if a judgement has been issued, the time limit for appeal to a higher court has not expired.

In this letter, the following terms have the meanings specified:

(a.1) "Act" means the Income Tax Act, R.S.C. 1985 c.1 (5th Supp.) as amended to the date hereof, and, unless otherwise stated, every reference herein to a Part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;

(b.1) "ACO" means XXXXXXXXXX, a corporation incorporated under XXXXXXXXXX and to be continued under the laws of XXXXXXXXXX, and its successors and assigns;

(c.1) "ACO Holdco" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, and its successors and assigns;

(d.1) "Acquireco" means XXXXXXXXXX, a corporation incorporated under XXXXXXXXXX;

(e.1) "Acquireco Newco" means a corporation to be incorporated by Acquireco prior to the Closing Date under XXXXXXXXXX;

(f.1) "adjusted cost base" has the meaning assigned in section 54 and subsection 248(1);

(g.1) "arm's length" has the meaning assigned by section 251;

(h.1) XXXXXXXXXX;

(i.1) "C1 Business" means XXXXXXXXXX;

(j.1) XXXXXXXXXX;

(k.1) XXXXXXXXXX;

(l.1) XXXXXXXXXX;

(m.1) XXXXXXXXXX;

(n.1) XXXXXXXXXX;

(o.1) XXXXXXXXXX;

(p.1) XXXXXXXXXX;

(q.1) XXXXXXXXXX;

(r.1) XXXXXXXXXX;

(s.1) XXXXXXXXXX;

(t.1) XXXXXXXXXX;

(u.1) XXXXXXXXXX;

(v.1) XXXXXXXXXX;

(w.1) XXXXXXXXXX;

(x.1) "CA1" means the XXXXXXXXXX Act, XXXXXXXXXX;

(y.1) "CA2" means the XXXXXXXXXX Act XXXXXXXXXX;

(z.1) "CA3" means the XXXXXXXXXX;

(a.2) "capital property" has the meaning assigned by section 54;

(b.2) XXXXXXXXXX;

(c.2) "Closing Date" means the day on which the completion of the Proposed Transactions takes place;

(d.2) XXXXXXXXXX;

(e.2) "cost amount" has the meaning assigned by subsection 248(1);

(f.2) "DCO" means XXXXXXXXXX ., a corporation incorporated under the laws of XXXXXXXXXX;

(g.2) "DCO Agreement" has the meaning set out in paragraph 18 hereof;

(h.2) XXXXXXXXXX;

(i.2) XXXXXXXXXX;

(j.2) "DCO Restricted Shareholder" means: (i) DCO, each of the XXXXXXXXXX (ii) any corporation of which a person referred to in (i) was, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding-up of XCO Amalco contemplated by the Proposed Transactions, a specified shareholder, provided however that paragraph (a) of the definition of specified shareholder in the Act shall be read for purposes of this definition such that only persons referred to in (i) shall be deemed not to deal with each other at arm's length; and (iii) any trust or partnership of which a person referred to in (i) was, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding-up of XCO Amalco contemplated by the Proposed Transactions, a specified shareholder, provided however that paragraph (a) of the definition of specified shareholder in the Act shall be read for purposes of this definition such that only those persons referred to in (i) shall be deemed not to deal with each other at arm's length;

(k.2) "DCO Specified Shareholder" means: (i) DCO and any person who did not, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding-up of XCO Amalco as contemplated by the Proposed Transactions, deal at arm's length with DCO; (ii) any corporation of which a person referred to in (i) was, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding up of XCO Amalco as contemplated by the Proposed Transactions, a specified shareholder; or (iii) any trust or partnership of which a person referred to in (i) was, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding-up of XCO Amalco as contemplated by the Proposed Transactions, a specified shareholder;

(l.2) "derivative property" has the meaning set out in paragraphs 24 and 68 hereof;

(m.2) XXXXXXXXXX;

(n.2) "Effective Date" has the meaning set out in paragraph 48 hereof;

(o.2) "eligible property" has the meaning assigned by subsection 85(1.1);

(p.2) "Estimated MCO Purchase Price" has the meaning set out in paragraph 50 hereof;

(q.2) XXXXXXXXXX;

(r.2) XXXXXXXXXX;

(s.2) XXXXXXXXXX;

(t.2) XXXXXXXXXX;

(u.2) XXXXXXXXXX;

(v.2) "FCO" means XXXXXXXXXX, a corporation incorporated under XXXXXXXXXX, and its successors and assigns;

(w.2) "GCO" means XXXXXXXXXX, a corporation incorporated under XXXXXXXXXX, and its successors and assigns;

(x.2) XXXXXXXXXX;

(y.2) "GCO Shares" means all of the common shares of GCO owned by XCO;

(z.2) "HCO" means XXXXXXXXXX, a corporation incorporated under the laws of Canada, XXXXXXXXXX;

(a.3) "Holdco" means XXXXXXXXXX, a corporation continued under XXXXXXXXXX;

(b.3) XXXXXXXXXX;

(c.3) XXXXXXXXXX;

(d.3) XXXXXXXXXX;

(e.3) XXXXXXXXXX;

(f.3) XXXXXXXXXX;

(g.3) "XXXXXXXXXX Agreement" has the meaning set out in paragraph 17 hereof;

(h.3) "MCO" means XXXXXXXXXX, a corporation incorporated under the laws of Canada;

(i.3) "MCO XXXXXXXXXX Shares" means XXXXXXXXXX shares issued by MCO to XCO in part payment of the MCO Purchase Price;

(j.3) XXXXXXXXXX;

(k.3) XXXXXXXXXX;

(l.3) XXXXXXXXXX;

(m.3) "MCO Purchase Price" has the meaning set out in paragraph 42 hereof;

(n.3) XXXXXXXXXX;

(o.3) XXXXXXXXXX;

(p.3) XXXXXXXXXX;

(q.3) "MCO Purchased Property" has the meaning set out in paragraph 42 hereof;

(r.3) XXXXXXXXXX;

(s.3) "MCO Specified Shareholder" means: (i) MCO and any person who did not, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding-up of XCO Amalco as contemplated by the Proposed Transactions, deal at arm's length with MCO; (ii) any corporation of which a person referred to in (i) was, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding up of XCO Amalco as contemplated by the Proposed Transactions, a specified shareholder; or (iii) any trust or partnership of which a person referred to in (i) was, at any time during the course of the series of transactions that includes the acquisition of control of XCO by Acquireco and the winding-up of XCO Amalco as contemplated by the Proposed Transactions, a specified shareholder;

(t.3) XXXXXXXXXX;

(u.3) XXXXXXXXXX;

(v.3) XXXXXXXXXX;

(w.3) XXXXXXXXXX;

(x.3) XXXXXXXXXX;

(y.3) XXXXXXXXXX;

(z.4) XXXXXXXXXX;

(a.4) XXXXXXXXXX;

(b.4) XXXXXXXXXX;

(c.4) XXXXXXXXXX;

(d.4) XXXXXXXXXX;

(e.4) XXXXXXXXXX;

(f.4) XXXXXXXXXX;

(g.4) XXXXXXXXXX;

(h.4) XXXXXXXXXX;

(i.4) XXXXXXXXXX;

(j.4) XXXXXXXXXX;

(k.4) XXXXXXXXXX;

(l.4) XXXXXXXXXX;

(m.4) "NSUB" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, and its successors and assigns;

(n.4) "NSUB Amalco" means a corporation to be formed on the amalgamation of NSUB and ACO as described in paragraph 21 hereof;

(o.4) "NSUB Amalco Purchase Price" has the meaning set out in paragraph 36 hereof;

(p.4) "paid-up capital" has the meaning assigned by subsection 89(1);

(q.4) XXXXXXXXXX;

(r.4) "PCO" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, and its successors and assigns;

(s.4) "principal amount" has the meaning assigned by subsection 248(1);

(t.4) "private corporation" has the meaning assigned by subsection 89(1);

(u.4) "Proposed Transactions" means the transactions described in paragraphs 26 to 71 hereof;

(v.4) "public corporation" has the meaning assigned in subsection 89(1);

(w.4) XXXXXXXXXX;

(x.4) XXXXXXXXXX;

(y.4) XXXXXXXXXX;

(z.4) XXXXXXXXXX;

(a.5) "QCO" means XXXXXXXXXX, a corporation incorporated under the laws of XXXXXXXXXX, and its successors and assigns;

(b.5) "Regulations" means the regulations under the Act;

(c.5) XXXXXXXXXX;

(d.5) XXXXXXXXXX;

(e.5) XXXXXXXXXX;

(f.5) XXXXXXXXXX;

(g.5) XXXXXXXXXX;

(h.5) "restricted property" has the meaning set out in paragraphs 24 and 68 hereof;

(i.5) "Settlement Date" has the meaning set out in paragraph 50 hereof;

(j.5) XXXXXXXXXX;

(k.5) "specified shareholder" has the meaning assigned by subsection 248(1) as modified by paragraph 88(1)(c.2);

(l.5) XXXXXXXXXX;

(m.5) "subsidiary controlled corporation" has the meaning assigned by subsection 248(1);

(n.5) "subsidiary wholly-owned corporation" has the meaning assigned by subsection 248(1);

(o.5) "taxable Canadian corporation" has the meaning assigned in subsection 89(1);

(p.5) "Time of Closing" means the time on the Closing Date at which all of the Proposed Transactions have been completed;

(q.5) XXXXXXXXXX;

(r.5) XXXXXXXXXX;

(s.5) XXXXXXXXXX;

(t.5) XXXXXXXXXX;

(u.5) XXXXXXXXXX;

(v.5) XXXXXXXXXX;

(w.5) XXXXXXXXXX;

(x.5) XXXXXXXXXX;

(y.5) XXXXXXXXXX;

(z.5) XXXXXXXXXX;

(a.6) "XXXXXXXXXXX Business" has the meaning referred to in paragraph XXXXXXXXXX hereof;

(b.6) XXXXXXXXXX;

(c.6) XXXXXXXXXX;

(d.6) XXXXXXXXXX;

(e.6) XXXXXXXXXX;

(f.6) "XCO" means XXXXXXXXXX, a corporation incorporated under XXXXXXXXXX;

(g.6) "XXXXXXXXXX Shares" means the outstanding XXXXXXXXXX shares of XCO;

(h.6) XXXXXXXXXX;

(i.6) "XCO Amalco" means the corporation formed on the amalgamation of XCO and Acquireco Newco under XXXXXXXXXX as described in paragraph 65 hereof;

(j.6) "XCO Group" at any time means XCO and any direct or indirect subsidiary wholly-owned corporation or subsidiary controlled corporation of XCO at that time;

(k.6) "XSUBXXXXXXXXXX" means XXXXXXXXXX;

(l.6) "XSUBXXXXXXXXXX Sale Agreement" has the meaning set out in paragraph 32 hereof;

(m.6) "XSUBXXXXXXXXXX Transferee Corporation" means a corporation to which a business of XSUBXXXXXXXXXX is to be transferred as described in paragraph 33 hereof;

(n.6) "XSUBXXXXXXXXXX/XSUBXXXXXXXXXX Amalco" means the corporation to be formed on the proposed amalgamation of XSUBXXXXXXXXXX and XSUBXXXXXXXXXX as described in paragraph 34 hereof;

(o.6) XXXXXXXXXX;

(p.6) XXXXXXXXXX;

(q.6) XXXXXXXXXX;

(r.6) XXXXXXXXXX;

(s.6) XXXXXXXXXX;

(t.6) XXXXXXXXXX;

(u.6) XXXXXXXXXX;

(v.6) XXXXXXXXXX;

(w.6) XXXXXXXXXX;

(x.6) XXXXXXXXXX;

(y.6) "YCO" means XXXXXXXXXX, a company XXXXXXXXXX under the laws of XXXXXXXXXX and its successors and assigns;

(z.6) "ZCO1" means XXXXXXXXXX;

(a.7) XXXXXXXXXX;

(b.7) XXXXXXXXXX;

(c.7) "ZCO Agreement" has the meaning assigned in paragraph 19 hereof.

Our understanding of the facts, Proposed Transactions and purpose of the Proposed Transactions is as set forth below.

Facts

1. Holdco is a taxable Canadian corporation, XXXXXXXXXX . Holdco is the parent corporation for subsidiaries XXXXXXXXXX.

2. Acquireco is a taxable Canadian corporation and is a subsidiary wholly-owned corporation of Holdco. The only asset of Acquireco is shares of XCO. Acquireco holds the shares of XCO as capital property.

3. DCO is a taxable Canadian corporation XXXXXXXXXX. Holdco understands that the shareholders of DCO are, directly and/or indirectly, XXXXXXXXXX resident in Canada.

4. MCO is a taxable Canadian corporation, XXXXXXXXXX. MCO is the parent corporation for subsidiaries XXXXXXXXXX .

5. XXXXXXXXXX.

6. XXXXXXXXXX.

7. Holdco XXXXXXXXXX deals at arm's length with MCO, XXXXXXXXXX.

8. ACO is a taxable Canadian corporation and is a subsidiary wholly-owned corporation of ACO Holdco. XXXXXXXXXX.

9. XCO is a taxable Canadian corporation XXXXXXXXXX . XCO is the parent corporation for XXXXXXXXXX.

10. XXXXXXXXXX.

11. XCO owns all the issued and outstanding shares of XXXXXXXXXX.

12. XSUBXXXXXXXXXX carries on the following businesses XXXXXXXXXX.

13. GCO is a taxable Canadian corporation and a public corporation. GCO carries on the business in Canada of XXXXXXXXXX.

14. XSUB1 carries on the following businesses XXXXXXXXXX.

15. XSUB2 carries on the following businesses XXXXXXXXXX.

16. ZCO1 is a corporation incorporated XXXXXXXXXX and is an indirect, wholly-owned subsidiary of XXXXXXXXXX is a corporation incorporated XXXXXXXXXX.

17. On XXXXXXXXXX, Holdco, XXXXXXXXXX and MCO entered into XXXXXXXXXX agreement (the "XXXXXXXXXX Agreement") pursuant to which the parties agreed to implement the Proposed Transactions, subject to the fulfillment of a number of conditions set out therein, including the receipt by Holdco of an advance income tax ruling satisfactory to it. XXXXXXXXXX.

18. XXXXXXXXXX.

19. On XXXXXXXXXX, MCO, ZCO1, Holdco, XXXXXXXXXX and XCO entered into an agreement (the "ZCO Agreement") pursuant to which the parties agreed to implement the Proposed Transactions relating to the issuance ofXXXXXXXXXX Shares to XCO and the sale of such shares by XXXXXXXXXX to ZCO1XXXXXXXXXX.

ZCO1 is not a person described in any of subclauses 88(1)(c)(vi)(B)(I), (II) or (III) where such provisions are read with each reference therein to "the subsidiary" being replaced by "XCO" and each reference to "the parent" being replaced by "Acquireco".

20. XXXXXXXXXX.

21. XXXXXXXXXX.

22. XXXXXXXXXX the Underwriters will sell NCO Subscription Receipts to members of the public in the NCO Subscription Receipts Offering. XXXXXXXXXX.

23. XXXXXXXXXX.

24. XXXXXXXXXX.

25. Acquireco will incorporate Acquireco Newco prior to the Closing Date. XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation XXXXXXXXXX will be incorporated prior to the implementation of the Proposed Transactions.

Proposed Transactions

Subject to fulfillment of the conditions in the XXXXXXXXXX Agreement, including the receipt of the rulings requested below, the following transactions will be completed on the Closing Date in the following order.

26. Acquireco will transfer all of the XCO XXXXXXXXXX shares and XCO XXXXXXXXXX shares it owns to Acquireco Newco in consideration for common shares of Acquireco Newco. Acquireco and Acquireco Newco will elect jointly, in prescribed form and within the time limits referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to this transaction. The amount agreed upon in such election in respect of each class of shares so transferred will be Acquireco's adjusted cost base of such shares which amount will not be greater than the fair market value of the particular shares. In addition, Acquireco Newco will obtain financing as necessary in order to enable it to complete the Proposed Transactions referred to below.

27. The directors of PCO will resolve to reduce the stated capital of the shares of PCO pursuant to the CA1 without any payment being made to the shareholders of PCO. Immediately following such reduction, the paid-up capital of such shares will equal the adjusted cost base of such shares to XSUBXXXXXXXXXX.

28. PCO will be continued so as to be governed by the CA2 and XSUBXXXXXXXXXX and PCO will amalgamate to form XSUBXXXXXXXXXX Amalco. On the amalgamation, the issued shares of PCO will be canceled and the issued shares of XSUBXXXXXXXXXX will be converted into common shares of XSUBXXXXXXXXXX Amalco. Under the terms of the amalgamation:

(a) all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of a particular predecessor corporation immediately before the amalgamation will become property of the amalgamated corporation by virtue of the amalgamation;

(b) all of the liabilities (except amounts payable to any predecessor corporation) of a particular predecessor corporation will become liabilities of the amalgamated corporation by virtue of the amalgamation; and

(c) all of the shareholders (except any predecessor corporation) of the predecessor corporations immediately before the merger will receive shares of the capital stock of the new corporation because of the amalgamation.

29. The amount of any debt owing by XSUBXXXXXXXXXX to XCO and by XSUBXXXXXXXXXX to XCO will be settled by way of the issuance by XSUBXXXXXXXXXX and XSUBXXXXXXXXXX, respectively, of common shares of XSUBXXXXXXXXXX and XSUBXXXXXXXXXX to XCO.

30. Pursuant to agreements of purchase and sale entered into by XSUBXXXXXXXXXX Amalco and each XSUBXXXXXXXXXX Transferee Corporation (each a "XSUBXXXXXXXXXX Sale Agreement"), XSUBXXXXXXXXXX Amalco will sell to the XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation for a purchase price equal to the fair market value thereof all of the assets, XXXXXXXXXX.

XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation will be a taxable Canadian corporation which will, in consideration of the assets transferred to it by XSUBXXXXXXXXXX Amalco as described herein, assume all liabilities directly related to the business acquired by it and issue XXXXXXXXXX shares in its capital stock to XSUBXXXXXXXXXX Amalco. Immediately following the transfer,XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation will be a subsidiary wholly-owned corporation of XSUBXXXXXXXXXX Amalco, the assets of which will consist of the assets XXXXXXXXXX. The shares of XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation will be capital property to XSUBXXXXXXXXXX Amalco.

31. With respect to XXXXXXXXXX transfer by XSUBXXXXXXXXXX Amalco to XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation as described in paragraph 30 hereof, XSUBXXXXXXXXXX Amalco and the XSUBXXXXXXXXXX Transferee Corporation will elect jointly, in prescribed form and within the limits referred to in subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of each eligible property. The amount agreed upon in such election in respect of each eligible property transferred will be equal to the greater of the amount of liabilities assumed by XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation that is allocated to that property as part of the purchase price therefor and: (i) in the case of capital property (other than depreciable property of a prescribed class) an amount equal to the least of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii); (ii) in the case of depreciable property of a prescribed class, an amount equal to the least of the amounts described in subparagraphs 85(1)(e)(i), (ii) and (iii); and (iii) in the case of eligible capital property, an amount equal to the least of the amounts described in subparagraphs 85(1)(d)(i), (ii) and (iii).

32. XXXXXXXXXX.

33. XXXXXXXXXX.

34. XXXXXXXXXX.

35. XSUBXXXXXXXXXX Amalco will be wound-up into XCO XXXXXXXXXX. On the winding-up, XCO will assume all of the liabilities of XSUBXXXXXXXXXX Amalco and will receive all of the property of XSUBXXXXXXXXXX Amalco, XXXXXXXXXX XSUBXXXXXXXXXX Amalco will not be immediately dissolved but will remain in existence until outstanding litigation and potential litigation is resolved. XSUBXXXXXXXXXX Amalco will not own any property or carry on any activity (other than in relation to any litigation) after the distribution of its property. As soon as possible following the resolution of such matters, XSUBXXXXXXXXXX Amalco will be dissolved.

36. XXXXXXXXXX MCO will sell, and Acquireco Newco will purchase, all of the XXXXXXXXXX shares of NSUB Amalco. The aggregate purchase price payable by Acquireco Newco for all of the shares of NSUB Amalco will be $XXXXXXXXXX, subject to certain adjustments described in XXXXXXXXXX Agreement (the "NSUB Amalco Purchase Price"), the principal ones of which are described hereafter, and will be paid in cash by Acquireco Newco on the Closing Date to the vendors. Acquireco Newco will not acquire control of XCO as a result of its acquisition of all of the shares of NSUB Amalco described herein.

37. XXXXXXXXXX.

38. XXXXXXXXXX.

39. XXXXXXXXXX.

40. NSUB Amalco will be wound-up pursuant to the provisions of the CA2. On the winding-up, the shares of XCO held by NSUB Amalco will be distributed to Acquireco Newco and Acquireco Newco will assume any liabilities of NSUB Amalco. XXXXXXXXXX. As soon as possible following the resolution of such matters, NSUB Amalco will be dissolved.

41. XXXXXXXXXX.

42. MCO will purchase from XCO the MCO Purchased Property. The MCO Purchased Property consists of shares of XXXXXXXXXX owned directly by XCO and, accordingly, will consist of all of the shares of XSUBXXXXXXXXXX Amalco, XXXXXXXXXX.

43. XXXXXXXXXX.

44. XXXXXXXXXX.

45. XXXXXXXXXX.

46. XXXXXXXXXX.

47. XXXXXXXXXX.

48. XXXXXXXXXX.

49. XXXXXXXXXX.

50. On the Closing Date, MCO will be required to pay to XCO the Estimated MCO Purchase Price. XXXXXXXXXX.

51. XXXXXXXXXX.

52. MCO is required to pay to XCO the Estimated MCO Purchase Price on the Closing Date in a combination XXXXXXXXXX Shares, and cash. XXXXXXXXXX.

53. XXXXXXXXXX.

54. XXXXXXXXXX.

55. MCO and XCO will elect jointly, in prescribed form and within the time limits referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the purchase and sale of any eligible property included in the MCO Purchased Property. The amount agreed upon in such election in respect of each eligible property included in the MCO Purchased Property will be equal to the lesser of (i) the fair market value of the property at the time of the sale and (ii) the adjusted cost base to XCO of the property at that time, except that the agreed amount shall not be less than the portion of the sum of the cash paid by MCO in part payment of the MCO Purchase Price and the aggregate amount of the XXXXXXXXXX Liabilities assumed by MCO that is allocated to that property as part of the purchase price therefor. This election will take into account the payments made as a consequence of a purchase price adjustment.

56. XXXXXXXXXX.

57. XXXXXXXXXX.

58. XXXXXXXXXX.

59. XXXXXXXXXX.

60. XXXXXXXXXX.

61. XXXXXXXXXX.

62. XXXXXXXXXX.

63. XXXXXXXXXX.

64. DCO XXXXXXXXXX will sell, and Acquireco Newco will purchase, all of the shares of XCO owned by XXXXXXXXXX at the price ofXXXXXXXXXX payable in cash.XXXXXXXXXX As a result of the acquisitions described in this paragraph, Acquireco will acquire control of XCO for purposes of paragraph 88(1)(c) of the Act.

The shares of each of the XSUBXXXXXXXXXX Transferee Corporation, the MCO XXXXXXXXXX Shares XXXXXXXXXX held by XCO at the time control of XCO is acquired by Acquireco, will be capital property of XCO.

65. Acquireco Newco and XCO will amalgamate pursuant to the CA3 to form XCO Amalco. XXXXXXXXXX.

66. XCO Amalco will be wound-up pursuant to the provisions of the CA3. On the winding-up, Acquireco will receive all of the property of XCO Amalco, including shares of XXXXXXXXXX the XSUBXXXXXXXXXX Transferee Corporation, MCO XXXXXXXXXX Shares XXXXXXXXXX and will assume all of the liabilities of XCO Amalco, other than liabilities assumed by XXXXXXXXXX MCO prior to the time of the winding-up. XCO Amalco will not be immediately dissolved but will remain in existence until outstanding litigation and potential litigation is resolved. XCO Amalco will not own any property or carry on any activity (other than in relation to any litigation) after the distribution of its property. As soon as possible following the resolution of such matters, XCO Amalco will be dissolved.

Acquireco will designate (in its return of income for the taxation year in which XCO is wound up) in respect of the non-depreciable capital property owned by XCO Amalco at the time Acquireco last acquired control of XCO Amalco and which will be distributed by XCO Amalco to Acquireco on the winding-up, an amount not exceeding the maximum amount permitted under paragraph 88(1)(d).

67. Pursuant to XXXXXXXXXX the ZCO Agreement, Acquireco will sell to ZCO1 on the Closing Date the XXXXXXXXXX Shares it acquires on the winding-up of XCO Amalco at a price of XXXXXXXXXX

68. The ZCO Agreement contains representations, warranties and covenants of MCO, XXXXXXXXXX and ZCO1 as described hereafter. For purposes of the ZCO Agreement, "XXXXXXXXXX" means (A) ZCO1 and (B) any person related to ZCO1 which has a significant direct or indirect interest in ZCO1 (as the term "related" is defined in the Act and as the phrase "significant direct or indirect interest" is used in the Act). In XXXXXXXXXX of the ZCO Agreement, MCO represents and warrants to Holdco, among other things, that: (i) no XXXXXXXXXX ZCO Company is a MCO Specified Shareholder; and (ii) no XXXXXXXXXX ZCO Company is a corporation of which a person who owned all of the shares of XXXXXXXXXX ZCO Companies owned by each of MCO XXXXXXXXXX and each person who does not deal at arm's length with each of MCO XXXXXXXXXX would be a specified shareholder. In XXXXXXXXXX. In XXXXXXXXXX the ZCO Agreement, ZCO1 represents and warrants to Holdco and MCO, among other things, that: XXXXXXXXXX ZCO1 acts at arm's length with each of MCO, XXXXXXXXXX; (iv) ZCO1 is agreeing to purchase MCO XXXXXXXXXX shares for investment only and not with any present intention of reselling or distributing any of such shares; and (v) other than XXXXXXXXXX. and entities which are directly or indirectly wholly-owned by XXXXXXXXXX, there is no person which has a significant direct or indirect interest in ZCO1. Under XXXXXXXXXX Agreement (XXXXXXXXXX), XXXXXXXXXX MCO XXXXXXXXXX covenants, represents or warrants, as applicable, that neither it, nor, respectively, any MCO Specified Shareholder XXXXXXXXXX: (i) will acquire, as part of the series of transactions that includes the winding-up of XCO Amalco, MCO XXXXXXXXXX Shares to be acquired by ZCO1 pursuant to the ZCO Agreement; (ii) will acquire, as part of the series of transactions that includes the winding-up of XCO Amalco, shares of ZCO1 or of any person that directly or indirectly owns shares of ZCO1 and with whom ZCO1 does not deal at arm's length; (iii) will acquire, as part of the series of transactions that includes the winding-up of XCO Amalco, any property (the "derivative property") the fair market value of which is wholly or partly attributable to, or the fair market value of which is determined primarily by reference to, the fair market value of, or to any proceeds from a disposition of, any of the property (the "restricted property") referred to in (i) or (ii), where the purpose of acquiring the derivative property is to acquire an interest in the restricted property; or (iv) has or will have at the Time of Closing any intention or plan to acquire any property referred to in (i), (ii) or (iii) at any time.

69. XXXXXXXXXX.

70. XXXXXXXXXX.

71. XXXXXXXXXX.

Purpose of the Proposed Transactions

72. The purposes of the Proposed Transactions are:

(a) with respect to the Proposed Transactions described in paragraph 29 relating to the capitalization of debt owing to XCO, to increase the adjusted cost base to XCO of the shares of XSUBXXXXXXXXXX and the shares of XSUBXXXXXXXXXX respectively by the relevant amount of the debt so capitalized;

(b) with respect to the Proposed Transactions described in paragraph 33, to combine the adjusted cost base to XCO of shares of XSUBXXXXXXXXXX and the adjusted cost base to XCO of shares of XSUBXXXXXXXXXX in shares of XXXXXXXXXX (i.e., XSUBXXXXXXXXXX Amalco) and thereby to enable MCO to obtain recognition of such combined adjusted cost base on a winding up of XSUBXXXXXXXXXX Amalco into MCO, to the extent permitted by the Act (including the provisions of paragraphs 88(1)(c) and 88(1)(d)) after the Time of Closing;

(c) with respect to the Proposed Transactions described in paragraphs 41 through 63 hereof, to achieve a transfer of the XXXXXXXXXX MCO Purchased Property from XCO to, XXXXXXXXXX MCO XXXXXXXXXX on a XXXXXXXXXX tax-rollover basis, XXXXXXXXXX; and

(d) with respect to the balance of the Proposed Transactions, to enable Acquireco to acquire all the assets of XCO Amalco, in a manner that gives recognition after the winding-up of XCO Amalco for the adjusted cost base to Acquireco at the time of the winding-up of its shares of XCO Amalco, to the extent permitted by the Act (including the provisions of paragraphs 88(1)(c) and (d)).

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and the purpose of the proposed transactions, and provided that the proposed transactions are undertaken in the manner described above, our rulings are as set forth below.

A. The provisions of subsection 85(1) will apply to the transfer of the shares of XCO by Acquireco to Acquireco Newco as described in paragraph 26 hereof, in respect of which an election under subsection 85(1) is made, such that the agreed amount in respect of each transfer of such shares will be deemed to be the proceeds of disposition thereof to Acquireco and the cost thereof to Acquireco Newco pursuant to paragraph 85(1)(a).

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

B. Each of the amalgamations of XXXXXXXXXX, will be an amalgamation for the purposes of section 87 by virtue of subsection 87(1) and any indebtedness settled on the amalgamation shall be deemed to have been settled immediately before the time that is immediately before the amalgamation for purposes of the Act by a payment made by the debtor and received by the creditor of an amount as determined by the provisions of subsection 80.01(3).

C. The provisions of subsection 87(11) will apply to the amalgamation of XSUBXXXXXXXXXX and its subsidiary wholly-owned corporation, PCO, as described in paragraph 28 hereof, with the result that:

(a) the shares of PCO will be deemed to have been disposed of by XSUBXXXXXXXXXX for purposes of the Act immediately before the amalgamation for proceeds equal to the proceeds that would be determined under paragraph 88(1)(b) if subsections 88(1) and (1.7) applied, with any modifications that the circumstances require; and

(b) subject to paragraph 87(2)(e.3), the cost to XSUBXXXXXXXXXX Amalco of the shares of QCO shall be deemed to be the cost to XSUBXXXXXXXXXX Amalco of such shares if such shares had been distributed at that time to XSUBXXXXXXXXXX on a winding-up of PCO and subsections 88(1) and (1.7) had applied.

D. The provisions of subsection 85(1) will apply (subject to the application of subsections 13(21.2) and 69(11) and of subsections 20(1.2) and 26(5) of the Income Tax Application Rules) to the transfer of each eligible property by XSUBXXXXXXXXXX Amalco to XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation as described in paragraphs 30 and 31 hereof in respect of which an election under subsection 85(1) is made such that the agreed amounts in respect of each transfer of such property will be deemed to be the proceeds of disposition thereof to XSUBXXXXXXXXXX Amalco and the cost thereof to XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation pursuant to paragraph 85(1)(a) and, in respect of depreciable property, XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation's cost of such property will be determined in accordance with subsection 85(5). For the purposes of determining the agreed amounts of depreciable property of a prescribed class transferred to XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation, the reference to "the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition". . . in subparagraph 85(1)(e)(i) will be interpreted to mean "the proportion of the undepreciated capital cost to XSUBXXXXXXXXXX Amalco that the capital cost of the assets of such class so transferred to XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation is of the capital cost to XSUBXXXXXXXXXX Amalco of all property of that class at such time."

E. Provided that the condition specified in paragraph 1100(2.2)(g) of the Regulations is satisfied with respect to depreciable property owned by XSUBXXXXXXXXXX and acquired by XSUBXXXXXXXXXX Amalco, subsection 1100(2.2) of the Regulations will apply such that no amount will be included under paragraph 1100(2)(a) of the Regulations in respect of depreciable property acquired by XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation from XSUBXXXXXXXXXX Amalco.

F. By virtue of paragraph 1102(14)(d) of the Regulations, depreciable property of a prescribed class or a separate prescribed class of XSUBXXXXXXXXXX that is acquired by XSUBXXXXXXXXXX Amalco upon the amalgamation of XSUBXXXXXXXXXX and PCO will be deemed to be property of the same prescribed class or separate class, as the case may be, of XSUBXXXXXXXXXX Amalco and, by virtue of the same provision, where such property is acquired by XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation from XSUBXXXXXXXXXX Amalco, the property will be deemed to be property of that same prescribed class or separate prescribed class, as the case may be, of XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation.

G. Provided that XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation continues to use the property transferred to it as described in paragraph 30 hereof, or any property substituted therefor, for the purpose of gaining or producing income from its business or from property (other than income which is exempt from taxation) and provided that XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation has a legal obligation to pay interest on the liabilities assumed by it on the purchase of the property (other than liabilities in respect of which XSUBXXXXXXXXXX Amalco was not entitled to deduct interest), any such amount paid in the year or payable in respect of the year (depending on the method regularly followed by XXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation) as interest, or a reasonable amount in respect thereof, whichever is the lesser, on such liabilities will be deductible byXXXXXXXXXX XSUBXXXXXXXXXX Transferee Corporation, pursuant to paragraph 20(1)(c), in computing its income for the year for purposes of the Act.

H. The provisions of subsection 88(1) will apply, subject to the application of subsection 69(11), to the winding-up of XSUBXXXXXXXXXX Amalco as described in paragraph 35 hereof such that, for purposes of the Act:

(a) except as provided in paragraphs 88(1)(a.1) and (a.3), each property (other than any interests in a partnership) of XSUBXXXXXXXXXX Amalco that is distributed to XCO on the winding-up will be deemed to have been disposed of by XSUBXXXXXXXXXX Amalco for proceeds of disposition equal to (a) in the case of properties described in subparagraph 88(1)(a)(i), nil and (b) in the case of any other property, the cost amount to XSUBXXXXXXXXXX Amalco of the property immediately before the winding-up;

(b) each interest of XSUBXXXXXXXXXX Amalco in a partnership, XXXXXXXXXX, that was distributed to XCO on the winding-up will, except for the purpose of paragraph 98(5)(g), be deemed not to have been disposed of by XSUBXXXXXXXXXX Amalco;

(c) the shares of XSUBXXXXXXXXXX Amalco owned by XCO immediately before the winding-up will be deemed to have been disposed of by XCO on the winding-up for proceeds of disposition equal to the greater of the amounts determined in subparagraphs 88(1)(b)(i) and (ii);

(d) subject to paragraph 87(2)(e.3), the cost to XCO of each property of XSUBXXXXXXXXXX Amalco distributed to XCO on the winding-up will be deemed to be:

(i) in the case of a property that is an interest in a partnership (XXXXXXXXXX), the amount that but for paragraph 88(1)(c) would be the cost to XCO of the property (as determined pursuant to paragraph 88(1)(e.2) and paragraph 87(2)(e.1)), and

(ii) in any other case, the cost amount to XSUBXXXXXXXXXX Amalco of the property immediately before the winding-up;

(e) a debt or other obligation of XSUBXXXXXXXXXX Amalco to pay an amount to XCO that is settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of such debt or other obligation shall be deemed to be settled in accordance with the provisions of paragraphs 80.01(4)(c) and (d).

I. The provisions of subsection 88(1) will apply, subject to the application of subsection 69(11), to the winding-up of NSUB Amalco as described in paragraph 40 hereof such that, for purposes of the Act:

(a) except as provided in paragraphs 88(1)(a.1) and (a.3), the shares of XCO that are distributed to Acquireco Newco on the winding-up will be deemed to have been disposed of by NSUB Amalco for proceeds of disposition equal to the cost amount to NSUB Amalco of the shares immediately before the winding-up;

(b) the shares of NSUB Amalco owned by Acquireco Newco immediately before the winding-up will be deemed to have been disposed of by Acquireco Newco on the winding-up for proceeds of disposition equal to the greater of the amounts determined in subparagraphs 88(1)(b)(i) and (ii);

(c) subject to paragraph 87(2)(e.3), the cost to Acquireco Newco of the shares of XCO distributed to Acquireco Newco on the winding-up will be deemed to be the amount deemed by paragraph 88(1)(a) to be the proceeds of disposition of the XCO shares to NSUB Amalco plus, where the property is capital property (other than ineligible property) of NSUB Amalco at the time of the purchase of shares of NSUB Amalco by Acquireco Newco from XXXXXXXXXX MCO as described in paragraph 36 hereof and is owned by NSUB Amalco thereafter without interruption until such time as it is distributed to Acquireco Newco on the winding-up, the amount determined under paragraph 88(1)(d) in respect of the property.

J. The provisions of subsection 85(1) will apply, subject to the application of subsection 69(11), to the transfer of any eligible property included in the MCO Purchased Property by XCO to MCO, in respect of which an election under subsection 85(1) is made as described in paragraphs 42 to 55 such that the agreed amount in respect of each property included in the MCO Purchased Property will be deemed to be the proceeds of disposition thereof to XCO and cost thereof to MCO for purposes of paragraph 85(1)(a).

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

K. The provisions of subsection 88(1) will apply, subject to the application of subsection 69(11), to the winding-up of XCO Amalco as described in paragraph 66 such that, for purposes of the Act:

(a) except as provided in paragraphs 88(1)(a.1) and (a.3), each property (other than any interests in a partnership) of XCO Amalco that is distributed to Acquireco on the winding-up will be deemed to have been disposed of by XCO Amalco for proceeds of disposition equal to (a) in the case of properties described in subparagraph 88(1)(a)(i), nil and (b) in the case of any other property, the adjusted cost base to XCO Amalco of the property immediately before the winding-up;

(b) each interest of XCO Amalco in a partnership, XXXXXXXXXX, that was distributed to Acquireco on the winding-up will, except for the purpose of paragraph 98(5)(g), be deemed not to have been disposed of by XCO Amalco;

(c) the shares of XCO Amalco owned by Acquireco immediately before the winding-up will be deemed to have been disposed of by Acquireco on the winding-up for proceeds of disposition equal to the greater of the amounts determined in subparagraphs 88(1)(b)(i) and (ii);

(d) subject to paragraph 87(2)(e.3), the cost to Acquireco of each property of XCO Amalco distributed to Acquireco on the winding-up will be deemed to be:

(i) in the case of property that is an interest in a partnership the amount that but for paragraph 88(1)(c) would be the cost to Acquireco of the property (as determined pursuant to paragraph 88(1)(e.2) and paragraph 87(2)(e.1)), and

(ii) in any other case, the amount deemed by paragraph 88(1)(a) to be the proceeds of disposition of the property to XCO Amalco,

plus, where the property is capital property (other than an ineligible property) of XCO at the time of the purchase of shares of XCO by Acquireco Newco from DCO XXXXXXXXXX and is owned by XCO or XCO Amalco thereafter without interruption until such time as it is distributed to Acquireco on the winding-up of XCO Amalco, the amount as is designated by Acquireco under paragraph 88(1)(d) in respect of the property in its return of income under Part I of the Act for its taxation year in which XCO is wound up, as described in paragraph 66 hereof

L. Provided that no person who acquires XXXXXXXXXX Shares of XXXXXXXXXX is a person described in any of subclauses 88(1)(c)(vi)(B)(I), (II) or (III) where such provisions are read with each reference therein to "the subsidiary" being replaced by "XCO" and each reference to "the parent" being replaced by "Acquireco", the MCO XXXXXXXXXX Shares, XXXXXXXXXX and the shares of the XXXXXXXXXX Subsidiaries distributed to Acquireco on the winding up will not be ineligible property for the purposes of paragraph 88(1)(c) solely as a result of any fact or transaction described herein or by virtue of the acquisition of the shares of XCO by NSUB prior to the Closing Time.

M. Provided that Acquireco continues to use the property acquired by it on the winding-up of XCO Amalco as described in paragraph 66, or any property substituted therefor, for the purpose of gaining or producing income from its business or from property (other than income which is exempt from taxation) and provided that Acquireco has a legal obligation to pay interest on the liabilities of XCO Amalco (other than liabilities in which XCO Amalco was not entitled to deduct interest) any such amount paid in the year or payable in respect of the year (depending on the method regularly followed by Acquireco) as interest on liabilities assumed by it on the winding-up as described in paragraph 66, or a reasonable amount in respect thereof, whichever is the lesser, will be deductible by Acquireco, pursuant to paragraph 20(1)(c), in computing its income for the year for purposes of the Act.

N. The provisions of subsection 69(11) will not apply to the transfer of the MCO Purchased Property described in paragraphs 42 to 55 hereof XXXXXXXXXX unless there is a subsequent disposition of the MCO Purchased Property XXXXXXXXXX within 3 years after such transfer and where it may reasonably be considered that one of the main purposes of the series of transactions or events (which includes the subsequent disposition of these properties or properties substituted therefor) is to obtain a benefit of any item described in paragraphs 69(11)(a) or (b) which is available to a person (other than a person that is affiliated with XCO immediately before the series began).

O. The provisions of subsections 15(1), 56(2), 69(4), 69(5) and 246(1) will not apply as a result of the Proposed Transactions described herein, in and by themselves.

P. Subsection 245(2) will not be applied, as a result of the Proposed Transactions in and of themselves, to redetermine the tax consequences confirmed in the rulings given above.

The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act which, if enacted into law, could affect the rulings provided herein.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 and are binding on the Canada Customs and Revenue Agency ("CCRA") provided that the Proposed Transactions are completed by XXXXXXXXXX.

Caveat

(a) Nothing in this ruling should be construed as implying the CCRA has made a determination or is providing an opinion in respect of:

(i) the cost, adjusted cost base or fair market value of any particular asset;

(ii) whether any property described herein is capital property; however, the CCRA agrees that, for the purposes of the rulings provided herein, that the MCO XXXXXXXXXX Shares XXXXXXXXXX, acquired by XCO will be capital property to XCO where such shares are acquired in exchange for capital property of XCO;

(iii) the paid-up capital of any shares referred to herein;

(iv) the tax consequences relating to the conversion of the outstanding debts of XSUBXXXXXXXXXX and XSUBXXXXXXXXXX into shares as described in paragraph 29;

(v) whether the acquisition of shares by any person described in this letter results in an acquisition of control of any corporation; or

(vi) any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.

(b) Property described in ruling L may become ineligible property as a consequence of future events or transactions that may not be known at the time of this letter. For example, any property of XCO Amalco distributed to Acquireco on the winding up of XCO Amalco could become ineligible property if any such property is acquired, as part of the series of transactions or events which includes the winding up, by a person (other than a member of the Holdco group) who was a specified shareholder of XCO at any time during the series and before control of XCO was acquired by Acquireco Newco. Whether such an acquisition would be considered to be part of the series of transactions or events that includes the winding up of XCO Amalco is a question of fact that will depend on all of the surrounding circumstances including the interrelationship between the acquisition and the winding-up.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
25
- -