2006 Ruling 2006-0203981R3 - Butterfly reorganization

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.

Principal Issues: Sequential split-up butterflies of two private corporations

Position: Favourable rulings given.

Reasons: Meets the requirements of the law.

XXXXXXXXXX 								2006-020398

XXXXXXXXXX, 2006

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers. We acknowledge the numerous e-mails sent in respect of this advance income tax ruling request.

To the best of your knowledge and that of each of the taxpayers, none of the issues involved in this ruling request is:

1. in an earlier return of any of the taxpayers or a related person;

2. being considered by a tax services office or taxation centre in connection with a previously filed tax return of any of the taxpayers or a related person;

3. under objection by any of the taxpayers or a related person;

4. before the courts; or

5. the subject of a ruling previously issued by the Income Tax Rulings Directorate.

DEFINITIONS

In this letter, all references to monetary amounts are in Canadian dollars and the following terms or expressions have the meaning specified:

• "A Co" means XXXXXXXXXX;
• "A Co Class A Preference Shares" means the Class A Preference Shares of Aco, as described in Paragraph 80;
• "A Co Class B Preference Shares" means the Class B Preference Shares of A Co, as described in Paragraph 80;
• "A Co Note" means the non-interest-bearing demand promissory note to be issued by A Co, as described in Paragraph 86;
• "A Co Transfer Proportion" means the proportion that the FMV of all the shares in the capital of DC1 owned by A Co immediately before the transfers of property described in Paragraph 84 is of the FMV of all the issued shares in the capital of DC1 immediately before the transfers of property described in Paragraph 84;
• "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended from time to time and consolidated to the date of this letter and, unless otherwise expressly stated, every reference herein to a part, section or subsection, paragraph or subparagraph and clause or subclause is a reference to the relevant provision in the Act, and the Income Tax Regulations thereunder are referred to as the "Regulations";
• "adjusted cost base" ("ACB") has the meaning assigned by section 54;
• "agreed amount" means the amount agreed on in respect of a property in an election filed pursuant to subsection 85(1);
• "arm's length" has the meaning assigned by subsection 251(1);
• "B Co" means XXXXXXXXXX;
• "B Co Class A Preference Shares" means the Class A Preference Shares of B Co, as described in Paragraph 80;
• "B Co Class B Preference Shares" means the Class B Preference Shares of B Co, as described in Paragraph 80;
• "B Co Note" means the non-interest-bearing demand promissory note to be issued by B Co, as described in Paragraph 86;
• "B Co Transfer Proportion" means the proportion that the FMV of all the shares in the capital of DC1 owned by B Co immediately before the transfers of property described in Paragraph 84 is of the FMV of all the issued shares in the capital of DC1 immediately before the transfers of property described in Paragraph 84;
• "BCA" means the XXXXXXXXXX;
• "BN" means the tax identification number assigned by CRA to the particular entity;
• "C Co" means XXXXXXXXXX;
• "C Co Class A Preference Shares" means the Class A Preference Shares of C Co, as described in Paragraph 80;
• "C Co Class B Preference Shares" means the Class B Preference Shares of C Co, as described in Paragraph 80;
• "C Co Note" means the non-interest-bearing demand promissory note to be issued by C Co, as described in Paragraph 86;
• "C Co Transfer Proportion" means the proportion that the FMV of all the shares in the capital of DC1 owned by C Co immediately before the transfers of property described in Paragraph 84 is of the FMV of all the issued shares in the capital of DC1 immediately before the transfers of property described in Paragraph 84;
• "XXXXXXXXXX Co" means XXXXXXXXXX;
• "Canadian-controlled private corporation" ("CCPC") has the meaning assigned by subsection 125(7);
• "capital dividend account" ("CDA") has the meaning assigned by subsection 89(1);
• "capital property" has the meaning assigned by section 54;
• "CRA" means the Canada Revenue Agency;
• "DC1" means XXXXXXXXXX;
• "DC1 Class B Preference Shares" means the Class B Preference Shares of DC1, as described in Paragraph 22(b);
• "DC1 Common Shares" means the Common Shares of DC1, as described in Paragraph 22(a);
• "DC2" means XXXXXXXXXX, the corporation formed on the amalgamation of Predecessor 1 and Predecessor 2;
• "DC2 Class A Preference Shares" means the Class A Preference Shares of DC2, as described in Paragraph 50(b);
• "DC2 Class B Preference Shares" means the Class B Preference Shares of DC2, as described in Paragraph 50(e);
• "DC2 Class C Preference Shares" means the Class C Preference Shares of DC2, as described in Paragraph 50(f);
• "DC2 Common Shares" means the Common Shares of DC2, as described in Paragraph 50(a);
• DC2 Group" means DC2 and the corporations and partnerships over which DC2 has the ability to exercise significant influence, as described in Paragraph 97;
• "depreciable property" has the meaning assigned by subsection 13(21);
• "distribution" has the meaning assigned by subsection 55(1);
• "dividend refund" has the meaning assigned by subsection 129(1);
• "dividend rental arrangement" has the meaning assigned by subsection 248(1);
• "XXXXXXXXXX Co" means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "Effective Date" means XXXXXXXXXX;
• "eligible property" has the meaning assigned by subsection 85(1.1);
• "excess DC2 unallocated liabilities" means the excess unallocated liabilities, as described in Paragraph 98(b)(iv);
• "fair market value" ("FMV") means the highest price available in an open and unrestricted market, between informed, prudent parties, acting at arm's length and with no compulsion to act, expressed in terms of cash;
• "forgiven amount" has the meaning assigned by subsections 80(1) and 80.01(1);
• "GP Inc." means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "Holdco(s)" means A Co, B Co and C Co, either singularly or collectively;
• "Holdco Class A Preference Shares" means the A Co Class A Preference Shares, B Co Class A Preference Shares and the C Co Class A Preference Shares, either singularly or collectively;
• "Holdco Note(s)" means the A Co Note, B Co Note and the C Co Note, either singularly or collectively;
• "Investco" means XXXXXXXXXX, which is a taxable Canadian corporation, XXXXXXXXXX;
• "LP1 Inc." means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "LP2 Inc." means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "LP3 Inc." means XXXXXXXXXX., which is a taxable Canadian corporation and a CCPC;
• "M Co" means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "Numberco" means XXXXXXXXXX;
• "paid-up capital" ("PUC") has the meaning assigned by subsection 89(1);
• "Paragraph" refers to a numbered paragraph in this advance income tax ruling;
• "Partnership 1" means the XXXXXXXXXX, a limited partnership established under the laws of XXXXXXXXXX;
• "Partnership 2" means the XXXXXXXXXX, a general partnership established under the laws of XXXXXXXXXX;
• "permitted redemption" has the meaning assigned by subsection 55(1);
• "pre-1972 CSOH" means "pre-1972 capital surplus on hand" as that expression is defined in subsection 88(2.1);
• "Predecessor 1" means XXXXXXXXXX, a predecessor corporation which amalgamated with Predecessor 2 to form DC2;
• "Predecessor 2" means XXXXXXXXXX, a predecessor corporation which amalgamated with Predecessor 1 to form DC2;
• "proceeds of disposition" has the meaning assigned by section 54;
• "Proposed Transactions" means the transactions described in Paragraphs 79 to 112;
• "Real Co" means XXXXXXXXXX;
• "Recently Completed Transactions" means the transactions described in Paragraphs 74 to 77;
• "refundable dividend tax on hand" ("RDTOH") has the meaning assigned by subsection 129(3);
• "related person" has the meaning assigned by section 251;
• "series of transactions or events" includes the transactions or events referred to in subsection 248(10);
• "Sib1" means XXXXXXXXXX;
• "Sib2" means XXXXXXXXXX;
• "Sib3" means XXXXXXXXXX;
• "significant influence" has the meaning assigned by section 3050 of the CICA Handbook;
• "SIN" means Social Insurance Number;
• "XXXXXXXXXX Co" means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "specified class" has the meaning assigned to that term by subsection 55(1);
• "specified investment business" has the meaning assigned by subsection 125(7);
• "stated capital" has the meaning assigned by the BCA;
• "taxable Canadian corporation" has the meaning assigned by subsection 89(1);
• "taxable dividend" has the meaning assigned by subsection 89(1);
• "TC1" means the taxable Canadian corporation incorporated by A Co, as described in Paragraph 74;
• "TC1-Sub" means the taxable Canadian corporation incorporated by TC1, as described in Paragraph 76;
• "TC1-Sub Note" means the non-interest-bearing demand promissory note to be issued by TC1-Sub, as described in Paragraph 103;
• TC2" means the taxable Canadian corporation incorporated by B Co and C Co, as described in Paragraph 74;
• "TC2-Sub" means the taxable Canadian corporation incorporated by TC2, as described in Paragraph 76;
• "TC2-Sub Note" means the non-interest-bearing demand promissory note to be issued by TC2-Sub, as described in Paragraph 103;
• "TC3" means the taxable Canadian corporation incorporated by Real Co, as described in Paragraph 74;
• "TC3-Sub" means the taxable Canadian corporation incorporated by TC3, as described in Paragraph 76;
• "TC3-Sub Note" means the non-interest-bearing demand promissory note to be issued by TC3-Sub, as described in Paragraph 103;
• "TC4" means XXXXXXXXXX;
• "TC4-Sub" means the taxable Canadian corporation to be incorporated by TC4, as described in Paragraph 76;
• "TC4-Sub Note" means the non-interest-bearing demand promissory note to be issued by TC4-Sub, as described in Paragraph 103;
• "TC-Sub Class A Preference Shares" means the Class A Preference Shares of the Transferee2-Subs, either singularly or collectively;
• "TC-Sub Common Shares" means the Common Shares of the Transferee2-Subs, either singularly or collectively;
• "TC-Sub Note(s)" means the TC1-Sub Note, the TC2-Sub Note, the TC3-Sub Note and the TC4-Sub Note, either singularly or collectively;
• "Transferee2-Corp(s)" means TC1, TC2, TC3 and TC4, either singularly or collectively;
• "Transferee2-Sub(s)" means TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, either singularly or collectively;
• "Transferred Assets 1" means all of the assets of DC1 to be transferred by DC1 to the Holdcos, as described in Paragraph 84;
• "Transferred Assets 2" means all of the assets of DC2 to be transferred by DC2 to the Transferee2-Subs, as described in Paragraph 100;
• "Trust1" means an irrevocable inter vivos trust that will be settled by the spouse of Sib1, who is a resident of Canada, under the laws of XXXXXXXXXX, for the purpose of effecting an estate freeze, as described in Paragraph 110. The only beneficiaries of Trust1 will be the children, grandchildren and more remote issue of Sib1. The trustees of Trust1 will be Sib1 and an arm's length person who resides in Canada. The trustees of Trust1 will have complete discretion over income and capital distributions to the beneficiaries of Trust1. Under no circumstances will any property of Trust1 be able to revert to the settlor;
• "Trust2" means an irrevocable inter vivos trust that will be settled by the spouse of Sib2, who is a resident of Canada, under the laws of XXXXXXXXXX, for the purpose of effecting an estate freeze, as described in Paragraph 111. The only beneficiaries of Trust2 will be the children, grandchildren and more remote issue of Sib2. The trustees of Trust2 will be Sib2 and an arm's length person who resides in Canada. The trustees of Trust2 will have complete discretion over income and capital distributions to the beneficiaries of Trust2. Under no circumstances will any property of Trust2 be able to revert to the settlor;
• "Trust3" means an irrevocable inter vivos trust that will be settled by the spouse of Sib3, who is a resident of Canada, under the laws of XXXXXXXXXX, for the purpose of effecting an estate freeze, as described in Paragraph 112. The only beneficiaries of Trust3 will be the children, grandchildren and more remote issue of Sib3. The trustees of Trust3 will be Sib3 and an arm's length person who resides in Canada. The trustees of Trust3 will have complete discretion over income and capital distributions to the beneficiaries of Trust3. Under no circumstances will any property of Trust3 be able to revert to the settlor;
• "US Co" means XXXXXXXXXX, a U.S. private corporation;
• "W Co" means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "XXXXXXXXXX" means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "XXXXXXXXXX Subco" means XXXXXXXXXX, which is a taxable Canadian corporation, a CCPC and a wholly-owned subsidiary of XXXXXXXXXX; and
• "XXXXXXXXXX Co" means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC.

Our understanding of the facts, Proposed Transactions and purposes of the Proposed Transactions is as follows:

FACTS

Facts Relating to the Holdcos

1. A Co is a taxable Canadian corporation and a CCPC incorporated under the BCA.

2. A Co's issued share capital is comprised of XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX.

3. The sole shareholder of A Co is Sib1.

4. A Co's taxation year-end is XXXXXXXXXX. A Co has a RDTOH balance of $XXXXXXXXXX.

5. The shares of A Co are capital property to Sib1.

6. B Co is a taxable Canadian corporation and a CCPC incorporated under the BCA.

7. B Co's issued share capital is comprised of XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX.

8. The sole shareholder of B Co is Sib2.

9. B Co's taxation year-end is XXXXXXXXXX . B Co has a RDTOH balance of $XXXXXXXXXX.

10. The shares of B Co are capital property to Sib2.

11. C Co is a taxable Canadian corporation and a CCPC incorporated under the BCA.

12. C Co's issued share capital is comprised of XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX
XXXXXXXXXX.

13. The sole shareholder of C Co is Sib3.

14. C Co's taxation year-end is XXXXXXXXXX. C Co has a RDTOH balance of $XXXXXXXXXX.

15. The shares of C Co are capital property to Sib3.

Facts Relating to Numberco

16. Numberco is a taxable Canadian corporation and a CCPC incorporated under the BCA.

17. Numberco's issued share capital is comprised of XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX.

18. The shareholders of Numberco are:

(a) A Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by A Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of Numberco.

(b) B Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by B Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of Numberco.

(c) C Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by A Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of Numberco.

19. Numberco's taxation year-end is XXXXXXXXXX.

20. The shares of Numberco are capital property to A Co, B Co and C Co.

Facts Relating to DC1

21. DC1 is a taxable Canadian corporation and a CCPC incorporated under the BCA. DC1 is an investment holding company whose primary assets are its investments in DC2, Real Co and XXXXXXXXXX Co.

22. DC1's issued share capital is comprised of:

(a) XXXXXXXXXX Common Shares (the "DC1 Common Shares"); and

(b) XXXXXXXXXX non-voting Class B Preference Shares (the "DC1 Class B Preference Shares").

23. The shareholders of DC1 are:

(a) A Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by A Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of DC1.

(b) B Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by B Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of DC1.

(c) C Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by C Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of DC1.

(d) A Co: XXXXXXXXXX Class B Preference Shares having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Class B Preference Shares held by A Co represent XXXXXXXXXX% of the issued and outstanding Class B Preference Shares of DC1.

(e) B Co: XXXXXXXXXX Class B Preference Shares having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Class B Preference Shares held by B Co represent XXXXXXXXXX% of the issued and outstanding Class B Preference Shares of DC1.

(f) C Co: XXXXXXXXXX Class B Preference Shares having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Class B Preference Shares held by C Co represent XXXXXXXXXX% of the issued and outstanding Class B Preference Shares of DC1.

24. DC1's taxation year-end is XXXXXXXXXX.

25. The shares of DC1 are capital property to A Co, B Co and C Co and have been held by A Co, B Co and C Co since XXXXXXXXXX.

26. DC1 owns XXXXXXXXXX% of the outstanding Common Shares of each of XXXXXXXXXX Co, Real Co and DC2, and as such, DC1 has, and will have, the ability to exercise significant influence over each of XXXXXXXXXX Co, Real Co, DC2, and any entity over which any of XXXXXXXXXX Co, Real Co and DC2 has the ability to exercise significant influence, at the time of the proposed distribution described in Paragraph 84.

DC1 has loans and advances receivable from two related corporations, without any specific terms of repayment. DC1 does not have, nor will DC1 have, the ability to exercise significant influence over either of these corporations, nor any entity over which either of these corporations has the ability to exercise significant influence, at the time of the proposed distribution described in Paragraph 84.

27. DC1 has, or is expected to have, at the time the Proposed Transactions are carried out, a balance of CDA of $XXXXXXXXXX ; RDTOH of approximately $XXXXXXXXXX; no balance of pre-1972 CSOH; and no capital losses for purposes of the Act and for provincial income tax purposes.

Facts Relating to XXXXXXXXXX Co

28. XXXXXXXXXX Co is a taxable Canadian corporation and a CCPC incorporated under the BCA.

29. XXXXXXXXXX Co's issued share capital is comprised of:

(a) XXXXXXXXXX Common Shares; and

(b) XXXXXXXXXX non-voting Class B Preference Share.

30. The shareholders of XXXXXXXXXX Co are:

(a) DC1: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by DC1 represent XXXXXXXXXX% of the issued and outstanding Common Shares of XXXXXXXXXX Co.

(b) Real Co: XXXXXXXXXX Class B Preference Share having a redemption value of $XXXXXXXXXX, a PUC of $XXXXXXXXXX and an ACB of $XXXXXXXXXX. The Class B Preference Share held by Real Co represents the only issued and outstanding Class B Preference Share of XXXXXXXXXX Co.

31. XXXXXXXXXX Co's taxation year-end is XXXXXXXXXX.

32. XXXXXXXXXX Co is an investment company that owns shares of, and has made advances to, numerous corporations.

33. The shares of XXXXXXXXXX Co are capital property to DC1 and Real Co.

Facts Relating to Real Co

34. Real Co is a taxable Canadian corporation and a CCPC incorporated under the BCA.

35. Real Co's issued share capital is comprised of

(a) XXXXXXXXXX Common Shares;

(b) XXXXXXXXXX non-voting Class A Preference Shares; and

(c) XXXXXXXXXX non-voting Class B Preference Shares.

36. The shareholders of Real Co are:

(a) DC1: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by DC1 represent XXXXXXXXXX% of the issued and outstanding Common Shares of Real Co.

(b) Numberco: XXXXXXXXXX Class A Preference Shares having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Class A Preference Shares held by Numberco represent XXXXXXXXXX% of the issued and outstanding Class A Preference Shares of Real Co.

(c) C Co: XXXXXXXXXX Class B Preference Shares having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Class B Preference Shares held by C Co represent XXXXXXXXXX% of the issued and outstanding Class B Preference Shares of Real Co.

37. Real Co's taxation year-end is XXXXXXXXXX.

38. Real Co XXXXXXXXXX real estate development properties, either directly or indirectly through various unincorporated joint ventures or tenancy in common arrangements or through its interest in Partnership 1, and shares of, and advances to, numerous private corporations.

39. The shares of Real Co are capital property to DC1, Numberco and C Co.

Facts Relating to TC4

40. TC4 is a taxable Canadian corporation and a CCPC, and was incorporated in XXXXXXXXXX pursuant to Letters Patent dated XXXXXXXXXX.

41. TC4's issued share capital is comprised of XXXXXXXXXX Common Shares having an aggregate PUC of $XXXXXXXXXX and an aggregate ACB of $XXXXXXXXXX.

42. The mother of Sib1, Sib2 and Sib3 owned all of the Common Shares of TC4, until her death on XXXXXXXXXX. Pursuant to the terms of their mother's will, Sib1, Sib2, and Sib3 each received XXXXXXXXXX Common Share of TC4.

43. TC4's taxation year-end is XXXXXXXXXX.

44. The shares of TC4 are capital property to Sib1, Sib2, and Sib3.

Facts Relating to DC2

45. DC2, formed as a result of the amalgamation of Predecessor 1 and Predecessor 2 on XXXXXXXXXX, is a corporation governed by the BCA and is a taxable Canadian corporation and a CCPC for purposes of the Act.

46. Prior to the amalgamation, Predecessor 1 owned XXXXXXXXXX% of the Common Shares of Predecessor 2. The amalgamation was undertaken in order to simplify the existing corporate structure. Pursuant to the amalgamation agreement:

(a) all of the property (except amounts receivable from a predecessor corporation or shares of the capital stock of a predecessor corporation) of the predecessor corporations immediately before the merger became property of DC2 by virtue of the merger;

(b) all of the liabilities (except amounts payable to a predecessor corporation) of the predecessor corporations immediately before the merger became liabilities of DC2 by virtue of the merger;

(c) the shares of Predecessor 1 and Predecessor 2 were cancelled without any repayment of capital in respect of those shares; and

(d) shares of the capital stock of DC2 were issued to the shareholders of Predecessor 1 and Predecessor 2 in connection with the amalgamation.

47. Prior to the amalgamation, each of Predecessor 1 and Predecessor 2 was a taxable Canadian corporation and a CCPC incorporated under the BCA. Predecessor 1 was an investment holding company whose primary assets were its investments in Predecessor 2, XXXXXXXXXX Co, XXXXXXXXXX Co and XXXXXXXXXX Co, which are described in Paragraph 54. Predecessor 2 XXXXXXXXXX revenue-producing industrial and commercial real properties, revenue-producing industrial and commercial real properties under construction, and numerous parcels of land which were held for many years and were either currently under development, or held for future development, as revenue-producing industrial and commercial real properties; either directly or indirectly through various unincorporated joint ventures or tenancy in common arrangements or through its interests in Partnership 1 and Partnership 2. Predecessor 2 had more than five full-time employees and did not carry on a specified investment business.

48. DC2's issued share capital is comprised of XXXXXXXXXX Common Shares (the "DC2 Common Shares"), XXXXXXXXXX non-voting Class A Preference Shares, XXXXXXXXXX non-voting Class B Preference Shares, and XXXXXXXXXX non-voting Class C Preference Shares.

49. Under the terms and conditions of the Class A Preference Shares, the Class A Preference Shares are non-voting, redeemable for an amount not in excess of the amount paid up thereon, together with all dividends plus any declared but unpaid dividends. The Class A Preference Shares are not convertible into or exchangeable for any other class of shares. The Class A Preference Shares are shares of a specified class.

50. The shareholders of DC2 are:

(a) DC1: XXXXXXXXXX Common Shares (referred to as the "DC2 Common Shares") having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by DC1 represent XXXXXXXXXX% of the issued and outstanding DC2 Common Shares.

(b) Sib1: XXXXXXXXXX Class A Preference Shares (referred to as the "DC2 Class A Preference Shares") having a total redemption value of $XXXXXXXXXX, a total stated capital and PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The DC2 Class A Preference Shares held by Sib1 represent XXXXXXXXXX % of the issued and outstanding DC2 Class A Preference Shares.

(c) Sib2: XXXXXXXXXX DC2 Class A Preference Shares having a total redemption value of $XXXXXXXXXX, a total stated capital and PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The DC2 Class A Preference Shares held by Sib2 represent XXXXXXXXXX% of the issued and outstanding DC2 Class A Preference Shares.

(d) Sib3: XXXXXXXXXX DC2 Class A Preference Shares having a total redemption value of $XXXXXXXXXX, a total stated capital and PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The DC2 Class A Preference Shares held by Sib3 represent XXXXXXXXXX % of the issued and outstanding DC2 Class A Preference Shares.

(e) Real Co: XXXXXXXXXX Class B Preference Shares (referred to as the "DC2 Class B Preference Shares") having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The DC2 Class B Preference Shares held by Real Co represent XXXXXXXXXX % of the issued and outstanding DC2 Class B Preference Shares.

(f) TC4: XXXXXXXXXX Class C Preference Shares (referred to as the "DC2 Class C Preference Shares") having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The DC2 Class C Preference Shares held by TC4 represent XXXXXXXXXX % of the issued and outstanding DC2 Class C Preference Shares.

51. DC2's taxation year-end is XXXXXXXXXX.

52. The shares of DC2 are capital property to each of DC1, Sib1, Sib2, Sib3, Real Co, and TC4. The shares of Predecessor 1 had been held by each of its shareholders since XXXXXXXXXX or earlier.

53. DC2 XXXXXXXXXX revenue-producing industrial and commercial real properties located primarily in Southern Ontario, either directly or indirectly through various unincorporated joint ventures or tenancy in common arrangements or through its interests in Partnership 1 and Partnership 2. DC2's real estate assets also include interests in revenue-producing industrial and commercial real properties under construction, and numerous parcels of land which have been held for many years and are either currently under development, or held for future development, as revenue-producing industrial and commercial real properties; either directly or indirectly through various unincorporated joint ventures or tenancy in common arrangements or through its interests in Partnership 1 and Partnership 2. Each revenue-producing industrial or commercial real property and each parcel of commercial or industrial land under development, or held for future development, is capital property of DC2.

DC2 has more than five full-time employees and does not carry on a specified investment business.

The main assets of DC2 also include its shares of XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX Co, and XXXXXXXXXX described in Paragraph 54.

The other assets of DC2 consist mainly of cash, accounts receivable, rights arising from the prepayment of certain expenses ("prepaid expenses"), unamortized tenant inducements, furniture and equipment, computer equipment, various loans and mortgages receivable, and various non-interest bearing advances to related entities. All amounts receivable from related persons have no specific terms of repayment.

54. DC2 owns XXXXXXXXXX % of the Common Shares of each of the following corporations:

(a) XXXXXXXXXX Co;

(b) XXXXXXXXXX Co; and

(c) XXXXXXXXXX Co.

The remaining XXXXXXXXXX% of the Common Shares of each of the above corporations are owned by several persons, each of which is not related to, and deals at arm's length with, DC2 and DC2's shareholders.

In addition, DC2 and the other shareholders of each of XXXXXXXXXX Co, XXXXXXXXXX Co and XXXXXXXXXX Co have advanced funds to each of XXXXXXXXXX Co, XXXXXXXXXX Co and XXXXXXXXXX Co, respectively. The bulk of the advances have been outstanding since the time of the acquisition and development of the revenue-producing real property owned by the respective corporation.

Each of XXXXXXXXXX Co, XXXXXXXXXX Co and XXXXXXXXXX Co XXXXXXXXXX single revenue-producing industrial real property located in Canada. Each of XXXXXXXXXX Co, XXXXXXXXXX Co and XXXXXXXXXX Co does not employ more than five full-time employees and could not reasonably be expected to require more than five full-time employees in carrying on its XXXXXXXXXX business and, therefore, carries on a specified investment business.

DC2 also owns XXXXXXXXXX% of the Common Shares of XXXXXXXXXX owns a single revenue-producing industrial real property located in Canada, as well as the shares of XXXXXXXXXX Subco. XXXXXXXXXX does not employ more than five full-time employees and could not reasonably be expected to require more than five full-time employees in carrying on its XXXXXXXXXX business and, therefore, carries on a specified investment business. XXXXXXXXXX Subco's primary asset is a loan receivable.

DC2 has, and will have, the ability to exercise significant influence over each of XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX Co, and XXXXXXXXXX and any entity over which any of XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX Co, and XXXXXXXXXX has the ability to exercise significant influence, at the time of the proposed distribution described in Paragraph 100.

55. DC2 also owns shares of Investco. DC2's shareholding represents approximately XXXXXXXXXX% of Investco's outstanding share capital. The combined Investco shareholdings of all persons related to each of Sib1, Sib2 and Sib3 represent less than XXXXXXXXXX% of Investco's outstanding share capital. None of Sib1, Sib2 and Sib3, nor any persons related to any of them, are on the board of directors of Investco or participate in the decision process of this XXXXXXXXXX company. DC2 has significantly less than a XXXXXXXXXX% interest in Investco and it does not otherwise have the ability to exercise significant influence over the company. The Investco shares are held by DC2 as a long-term investment.

56. The liabilities of DC2 consist of accounts payable and accrued liabilities, various deposits, including tenants' last month rent deposits, tenant deposits in respect of contributions to prepaid common area operating costs, tenants' security deposits, income and other taxes payable, mortgages payable on revenue-producing real properties, other loans payable related to certain specific revenue-producing real properties, bank indebtedness, banker's acceptances payable, and inter-company loans payable and shareholders advances.

All amounts owing to related persons have no specific terms of repayment.

In the normal course of business, DC2 has made numerous commitments to municipal and regional authorities related to the satisfaction of future obligations, such as the completion of certain municipal work, over a specified period of time. In addition, from time to time and in the normal course of business, DC2 has made commitments to financial institutions in order to obtain or renew financing where a particular revenue-producing real property has significant vacancies. In order to provide security for the future obligations under certain of these commitments, DC2 has issued a letter of credit (or security bond, as the case may be) to each of a number of obligees in amounts sufficient to fund the corresponding obligation, should DC2 fail to satisfy its commitment and the conditions for funding be met. The letters of credit are secured by the general credit worthiness of DC2, and no assets of DC2 have been assigned or otherwise held as security for the letters of credit. As of the current date, DC2 believes that there are no legally enforceable claims outstanding related to the issued letters of credit.

57. DC2 has, or is expected to have, at the time the Proposed Transactions are carried out, a balance of CDA of $XXXXXXXXXX; RDTOH of approximately $XXXXXXXXXX; no balance of pre-1972 CSOH; and no capital losses for purposes of the Act and for provincial income tax purposes.

Facts Relating to Partnership 1

58. Partnership 1 is a limited partnership that was formed under the laws of XXXXXXXXXX , by a partnership agreement dated XXXXXXXXXX.

59. The partners of Partnership 1 , along with their respective income/loss sharing ratios, are as follows:

GP Inc. (general partner)				  XXXXXXXXXX %
DC2 (limited partner)					  XXXXXXXXXX %
LP1 Inc. (limited partner)				XXXXXXXXXX %
LP2 Inc. (limited partner)				XXXXXXXXXX %
LP3 Inc. (limited partner)				XXXXXXXXXX %
Real Co (limited partner)				XXXXXXXXXX %
Sib1 (limited partner)					  XXXXXXXXXX %
Sib2 (limited partner)					  XXXXXXXXXX %
Sib3 (limited partner)					  XXXXXXXXXX %

60. DC2 is related to the general partner of Partnership 1.

61. DC2, together with Real Co and other related entities, has, and will have, the ability to exercise significant influence over Partnership 1 and any entity that Partnership 1 has the ability to exercise significant influence over at the time of the proposed distribution described in Paragraph 100.

62. The fiscal year-end of Partnership 1 is XXXXXXXXXX.

63. Partnership 1 was formed to XXXXXXXXXX land under development and revenue-producing real property located primarily in XXXXXXXXXX.

In addition, Partnership 1 owns XXXXXXXXXX% of the Common Shares of M Co, which in turn owns XXXXXXXXXX% of the Common Shares of XXXXXXXXXX, which is described in Paragraph 54. Partnership 1 has the ability to exercise significant influence over XXXXXXXXXX, through Partnership 1's significant influence over Partnership 2, which has significant influence over XXXXXXXXXX . In turn, XXXXXXXXXX has significant influence over XXXXXXXXXX Subco.

64. DC2 holds the limited partnership interest in Partnership 1 as capital property and the FMV of its limited partnership interest exceeds the ACB of such interest.

Facts Relating to Partnership 2

65. Partnership 2 is a general partnership that was formed under the laws of XXXXXXXXXX, by a partnership agreement dated XXXXXXXXXX.

66. The partners of Partnership 2, along with their respective income/loss sharing ratios, are as follows:

Partnership 1				XXXXXXXXXX %
DC2						  XXXXXXXXXX %

67. DC2 has, and will have, the ability to exercise significant influence over Partnership 2 at the time of the proposed distribution described in Paragraph 100, since DC2 has the ability to exercise significant influence over Partnership 1, as described in Paragraph 61, and Partnership 2 is an entity over which Partnership 1 has the ability to exercise significant influence.

68. The fiscal year-end of Partnership 2 is XXXXXXXXXX.

69. Partnership 2 was formed to XXXXXXXXXX land under development and revenue-producing real property located primarily in XXXXXXXXXX.

In addition, Partnership 2 owns XXXXXXXXXX% of the Common Shares of W Co, which in turn owns XXXXXXXXXX% of the Common Shares of XXXXXXXXXX, which is described in Paragraph 54. Partnership 2 exercises significant influence over XXXXXXXXXX and XXXXXXXXXX Subco.

70. DC2 holds the partnership interest in Partnership 2 as capital property and the FMV of its partnership interest exceeds the ACB of such interest.

Additional Facts

71. Sib1, Sib2 and Sib3 are adult siblings. Each of these individuals is a resident of Canada for the purposes of the Act. Sib1, Sib2 and Sib3 are not related for the purposes of section 55, by virtue of subparagraph 55(5)(e)(i).

72. Sib1, Sib2 and Sib3 file their personal income tax returns at the XXXXXXXXXX Taxation Centre and their affairs are administered by the XXXXXXXXXX Tax Services Office. The SIN of each of Sib 1, Sib 2 and Sib 3 is as follows:

(a) Sib1				XXXXXXXXXX;
(b) Sib2				XXXXXXXXXX;
(c) Sib3				XXXXXXXXXX.

73. Each of the corporate taxpayers files its corporate income tax returns at the XXXXXXXXXX Taxation Centre and its tax affairs are administered by the XXXXXXXXXX Tax Services Office. The taxpayers' address is XXXXXXXXXX. The BN of each corporate taxpayer is as follows:

(a) A Co				XXXXXXXXXX;
(b) B Co				XXXXXXXXXX;
(c) C Co				XXXXXXXXXX;
(d) XXXXXX  Co 			XXXXXXXXXX;
(e) DC1				XXXXXXXXXX;
(f) DC2				XXXXXXXXXX;
(g) XXXXXX  Co			XXXXXXXXXX;
(h) Numberco 			XXXXXXXXXX;
(i) Predecessor 1 		XXXXXXXXXX;
(j) Predecessor 2		XXXXXXXXXX;
(k) Real Co			XXXXXXXXXX;
(l) XXXXXX  Co 			XXXXXXXXXX;
(m) TC4 				XXXXXXXXXX;
(n) XXXXXX  Co 			XXXXXXXXXX.

RECENTLY COMPLETED TRANSACTIONS

Incorporation of TC1, TC2 and TC3

74. Each of A Co and Real Co incorporated a new wholly-owned subsidiary corporation under the BCA. A Co's wholly-owned subsidiary corporation will be referred to as "TC1" and Real Co's wholly-owned subsidiary corporation will be referred to as "TC3". B Co and C Co incorporated a new corporation under the BCA, which will be referred to as "TC2". Each of TC1, TC2 and TC3 is a taxable Canadian corporation.

75. The Articles of Incorporation of each of TC1, TC2 and TC3 provide that such corporation's authorized capital will include an unlimited number of voting, fully participating Common Shares.

On incorporation, A Co subscribed for at least XXXXXXXXXX Common Share of TC1 for nominal consideration. Similarly, Real Co subscribed for at least XXXXXXXXXX Common Share of TC3 for nominal consideration. Each of B Co and C Co subscribed for at least XXXXXXXXXX Common Share of TC2 for nominal consideration. On incorporation, none of TC1, TC2 or TC3 acquired any assets, or incurred any liabilities other than the nominal consideration each such corporation received for issuing its Common Shares.

Incorporation of New Subsidiaries of Transferee2-Corps

76. Each of the Transferee2-Corps incorporated a new wholly-owned subsidiary corporation under the BCA. TC1's wholly-owned subsidiary corporation will be referred to as "TC1-Sub"; TC2's wholly-owned subsidiary corporation will be referred to as "TC2-Sub"; TC3's wholly-owned subsidiary corporation will be referred to as "TC3-Sub"; and TC4's wholly-owned subsidiary corporation will be referred to as "TC4-Sub", and all such corporations shall be sometimes collectively referred to as the "Transferee2-Subs" or singularly as a "Transferee2-Sub". Each of the Transferee2-Subs is a taxable Canadian corporation.

77. The Articles of Incorporation of each of the Transferee2-Subs provide that such Transferee2-Sub's authorized capital includes an unlimited number of the following separate classes of shares.

(a) Voting, fully participating Common Shares ("TC-Sub Common Shares"); and

(b) Non-voting, redeemable, retractable Class A Preference Shares ("TC-Sub Class A Preference Shares").

The TC-Sub Class A Preference Shares are non-voting and redeemable and retractable at an amount per share equal to the result obtained when the FMV of the property transferred to the particular Transferee2-Sub on the date of issuance of the TC-Sub Class A Preference Shares less the amount of the non-share consideration, if any, paid, assumed, or delivered by the Transferee2-Sub for the acquisition of such property is divided by the number of TC-Sub Class A Preference Shares issued as consideration therefor. The TC-Sub Class A Preference Shares are entitled to a non-cumulative dividend at the rate of XXXXXXXXXX% per quarter of the redemption amount.

On incorporation, TC1 subscribed for at least XXXXXXXXXX TC1-Sub Common Share for nominal consideration. Similarly, TC2 subscribed for at least XXXXXXXXXX TC2-Sub Common Share for nominal consideration, TC3 subscribed for at least XXXXXXXXXX TC3-Sub Common Share and TC4 subscribed for at least one TC4-Sub Common Share for nominal consideration. On incorporation, none of the Transferee2-Subs acquired any assets, or incurred any liabilities other than the nominal consideration each such corporation received for issuing its TC-Sub Common Shares.

78. [Reserved]

PROPOSED TRANSACTIONS

Redemption of Class A Preference Shares of DC2

79. DC2 will redeem all of its Class A Preference Shares held by Sib 1, Sib 2 and Sib 3 for an amount, payable in cash, equal to the redemption amount of such shares. As consideration therefor, DC2 will pay $ XXXXXXXXXX to Sib1, $ XXXXXXXXXX to Sib2 and $XXXXXXXXXX to Sib3.

Butterfly Reorganization of DC1

Creation of Preference Shares by Holdcos

80. The articles of A Co will be amended to create two new classes of preference shares. The "A Co Class A Preference Shares" will be non-voting and will be redeemable and retractable at an amount equal to the result obtained when the FMV of the property transferred to A Co on the date of issuance of the A Co Class A Preference Shares less the amount of the non-share consideration, if any, paid, assumed or delivered by A Co for the acquisition of such property is divided by the number of A Co Class A Preference Shares issued as consideration therefor. The A Co Class A Preference Shares will be entitled to a non-cumulative dividend at the rate of XXXXXXXXXX% per quarter of the redemption amount.

The "A Co Class B Preference Shares" will be voting and will be redeemable and retractable at an amount equal to the result obtained when the FMV of the property transferred to A Co on the date of issuance of the A Co Class B Preference Shares less the amount of the non-share consideration, if any, paid, assumed or delivered by A Co for the acquisition of such property is divided by the number of A Co Class B Preference Shares issued as consideration therefor. The A Co Class B Preference Shares will be entitled to a non-cumulative dividend at the rate of XXXXXXXXXX% per quarter of the redemption amount, in priority to any dividends on the common shares. There will be a provision restricting the payment of dividends on, and the redemptions of, other classes of shares so that no dividends may be paid on any other class of shares of A Co and no redemptions of other classes of shares of A Co may be made if the resulting realizable value of the net assets of A Co after payment of the dividends or redemption of the shares would be less than the aggregate of the redemption amounts of all of the Class B Preference Shares then outstanding. The holder of each Class B Preference Share will be entitled, upon the liquidation, dissolution or winding-up of A Co, to a payment in priority to the common shares of A Co of an amount equal to the redemption amount therefor to the extent of the amount or value of property available under applicable law for payment to shareholders upon dissolution, but will be entitled to no more than the amount of that payment.

The articles of B Co will be amended to create two new classes of preference shares. The "B Co Class A Preference Shares" and the "B Co Class B Preference Shares" will have the same attributes as the A Co Class A Preference Shares and A Co Class B Preference Shares, respectively.

The articles of C Co will be amended to create two new classes of preference shares. The "C Co Class A Preference Shares" and the "C Co Class B Preference Shares" will have the same attributes as the A Co Class A Preference Shares and A Co Class B Preference Shares, respectively.

Types of Property Analysis - DC1

81. Immediately before the transfers of property described in Paragraph 84, the property owned by DC1, other than its shares of XXXXXXXXXX Co, Real Co and DC2, will be classified into the following three types of property on a net FMV basis for the purposes of the definition of "distribution" in subsection 55(1), as follows:

(a) cash or near-cash property, comprising all of the current assets of DC1, including any cash, deposits, marketable securities, accounts receivable, inventory, rights arising from prepaid expenses, and loans and advances to related corporations without any specific terms of repayment;

(b) investment property, comprising all of the assets of DC1, other than any cash or near-cash property, any income from which would, for the purposes of the Act, be income from property or a specified investment business; and

(c) business property, comprising all of the assets of DC1, other than cash or near-cash property, any income from which would for the purposes of the Act, be income from a business (other than a specified investment business).

82. DC1's liabilities will consist solely of current liabilities, which include accounts payable, accrued liabilities, amounts owing to related persons, and income taxes payable owing by DC1. In determining the net FMV of each of the three types of property of DC1, immediately before the transfers of property described in Paragraph 84, these current liabilities will be allocated to the cash or near-cash property of DC1 in the proportion that the FMV of each such property is of the FMV of all cash or near-cash property owned by DC1. Since the current liabilities of DC1 will not exceed the FMV of its cash or near-cash properties, no liabilities will remain after the allocation described in the preceding sentence is made.

For greater certainty, DC1's advances to related persons will be considered to be cash or near-cash property, while amounts owing by DC1 to related persons will be considered to be current liabilities.

For purposes of determining each of the three types of property of DC1 as described in Paragraph 81 and this Paragraph:

(a) any tax accounts, such as the balance of any non-capital losses, capital losses, RDTOH, deferred taxes, or CDA of DC1, or of any entity over which DC1 has the ability to exercise significant influence, will not be considered property; and

(b) no amount will be considered to be a liability unless it represents a true legal liability which is capable of quantification.

83. For greater certainty, although DC1, as described in Paragraph 26, has significant influence over each of XXXXXXXXXX Co, Real Co, and DC2, it will not use the consolidated look-through method for determining the appropriate proportion of each of the three types of property that such shares of each of XXXXXXXXXX Co, Real Co, and DC2 would represent.

For the purposes of this distribution DC1 will only be considered to have cash or near-cash property, as described in Paragraphs 81 and 82, and the types of property represented by the Common Shares of each of XXXXXXXXXX Co, Real Co, and DC2 held by DC1 immediately before the proposed distribution.

84. On the Effective Date, DC1 will contemporaneously transfer to each of A Co, B Co and C Co, the A Co Transfer Proportion, the B Co Transfer Proportion and the C Co Transfer Proportion, respectively, of

(a) the net FMV of its cash or near-cash property;

(b) its Common Shares of XXXXXXXXXX Co;

(c) its Common Shares of Real Co, and

(d) its Common Shares of DC2,

(collectively referred to as the "Transferred Assets 1").

As consideration for the transfer of the Transferred Assets 1 transferred to each Holdco, each Holdco will:

(e) assume an appropriate portion of the liabilities of DC1 outstanding at that time; and

(f) issue a number of its Holdco Class A Preference Shares to DC1, which will have an aggregate FMV and redemption amount equal to the amount by which the aggregate FMV of the Transferred Assets 1 that are transferred to that particular Holdco exceeds the aggregate amount of liabilities of DC1 assumed by that particular Holdco, such that immediately following such property transfers and liability assumptions, the net FMV of each of the three types of property of DC1 so transferred to each of A Co, B Co and C Co, as the case may be, will for greater certainty, be equal to that proportion of the net FMV of all property of that type owned by DC1 determined immediately before such transfers that:

(i) the aggregate FMV of the DC1 shares owned by the particular Holdco immediately before the transfer,

is of

(ii) the aggregate FMV of all of the outstanding shares of DC1 immediately before the transfer.

85. In respect of the transfers of Transferred Assets 1 described in Paragraph 84, DC1 and each of A Co, B Co or C Co, as the case may be, will jointly elect, in prescribed form and within the time determined under subsection 85(6), for the provisions of subsection 85(1) to apply to each transfer of property included in the Transferred Assets 1 and so transferred to such Holdco, provided that such property is an eligible property. The agreed amount in each joint election will be equal to the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii), in the case of property described in paragraph 85(1)(c.1).

In each case, the agreed amount will not exceed the FMV of each such property and it will not be less than the amount permitted under paragraph 85(1)(b).

For the purposes of the Act, the increase to the PUC of the Holdco Class A Preference Shares issued to DC1 by a particular Holdco as consideration for the property transferred to it, as described in Paragraph 84, will not exceed the amount by which the aggregate of the agreed amounts under subsection 85(1) in respect of such property transferred to that particular Holdco exceeds the aggregate amount of liabilities of DC1 assumed by that particular Holdco.

Redemptions

86. On the Effective Date, each of A Co, B Co and C Co, as the case may be, will, on a contemporaneous basis, redeem all of its Holdco Class A Preference Shares held by DC1 for an amount equal to the aggregate of the redemption amounts of such shares. As consideration therefor, each of A Co, B Co and C Co, as the case may be, will issue to DC1 in consideration therefor a non-interest-bearing demand promissory note having a principal amount and FMV equal to the aggregate redemption amounts of such Holdco's shares so redeemed. In particular, A Co's demand promissory note will be referred to as the "A Co Note"; B Co's demand promissory note will be referred to as the "B Co Note"; and C Co's demand promissory note will be referred to as "C Co Note" (collectively referred to as the "Holdco Notes", and sometimes singularly as a "Holdco Note"). DC1 will accept each such Holdco Note as full and absolute payment of the redemption amounts in respect of such Holdco's redeemed shares, with the risk of the notes being dishonoured.

Winding-up of DC1

87. At the end of the day on which the redemptions described in Paragraph 86 above occur, each Holdco will have its normal fiscal year-end on the Effective Date. On the day following the Effective Date, the Holdcos, as the shareholders of DC1, will, by special resolution, resolve to liquidate and dissolve DC1 pursuant to the provisions of the BCA. Under the terms of the winding-up, DC1 will assign and distribute the A Co Note to Aco, the B Co Note to Bco and the C Co Note to C Co. As a result of the assignment and distribution of the Holdco Notes by DC1, the obligation of each Holdco under its Holdco Note will be cancelled. No agreement or resolution relating to the winding-up of DC1 or the distribution of its property will provide for the cancellation of any shares of DC1.

88. [Reserved]

89. [Reserved]

90. As soon as practicable, DC1 will file final tax returns, and, after the receipt of any dividend refund or other tax refunds, and attending to other administrative matters, file articles of dissolution. Upon receipt of the Certificate of Dissolution, DC1 will be formally dissolved.

91. [Reserved]

92. [Reserved]

Butterfly Reorganization of DC2

Transfer of DC2 Shares to TC1, TC2 and TC3

93. Subsequent to the transfers described in Paragraph 84, the following transfers will occur contemporaneously:

(a) A Co will transfer to TC1 all of its DC2 Common Shares for sole consideration consisting of Common Shares of TC1 having a FMV equal to the FMV of the DC2 Common Shares so transferred.

(b) Each of B Co and C Co will transfer to TC2 all of its respective DC2 Common Shares for sole consideration consisting of Common Shares of TC2 having a FMV equal to the FMV of the DC2 Common Shares so transferred by it.

(c) Real Co will transfer to TC3 all of its DC2 Class B Preference Shares for sole consideration consisting of Common Shares of TC3 having a FMV equal to the FMV of the DC2 Class B Preference Shares so transferred.

94. Each of A Co, B Co, C Co and Real Co, as the case may be, and the particular transferee will jointly elect, in prescribed form and within the time determined under subsection 85(6), for the provisions of subsection 85(1) to apply to the transfers described in Paragraph 93 above. The agreed amount in respect of each such transfer will not be less than the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii). The agreed amount in respect of each such transfer will not exceed the FMV of the shares transferred to the particular transferee corporation.

Each of TC1, TC2 and TC3 will add to the stated capital account maintained for the Common Shares of the particular transferee corporation an amount not to exceed the aggregate PUC of the DC2 shares transferred to the particular transferee corporation in consideration for the Common Shares of such transferee corporation. None of TC1, TC2 or TC3 will issue any of its shares to any persons under the Proposed Transactions, other than as set out in Paragraph 93.

95. [Reserved]

96. [Reserved]

Types of Property Analysis - DC2

97. Immediately before the transfer of property described in Paragraph 100, the property of DC2 will be determined on a consolidated look-through basis by including the appropriate pro-rata share of the assets of any corporation or any partnership over which DC2 has the ability to exercise significant influence (DC2 and such corporations and partnerships being referred to herein as the "DC2 Group") and all such property will be classified into the following three types of property for purposes of the definition of "distribution" in subsection 55(1) as follows:

(a) cash or near-cash property, comprising all of the current assets of the DC2 Group, including any cash, deposits, marketable securities, accounts receivable, inventory and rights arising from prepaid expenses;

(b) investment property, comprising all of the assets of the DC2 Group, other than cash or near-cash property, any income from which would, for purposes of the Act, be income from property or from a specified investment business; and

(c) business property, comprising all of the assets of the DC2 Group, other than cash or near-cash property, any income from which would, for purposes of the Act, be income from a business (other than a specified investment business) carried on by the DC2 Group, including goodwill and other intangible assets relating to such businesses.

For the purposes of this letter, DC2 will be considered to have significant influence over a corporation or a partnership if it has the ability to exercise significant influence over that entity (that is, that corporation or partnership, as the case may be) or over any other entity that has the ability to exercise significant influence over that entity, and for greater certainty:

(d) the FMV of any shares of a particular corporation or any partnership interest of a particular partnership over which DC2 has the ability to exercise significant influence and of any indebtedness receivable by DC2 from such a corporation or partnership will be allocated among the three types of property described above by multiplying the FMV of the shares of the particular corporation, or the FMV of the partnership interest of the particular partnership, or the amount of indebtedness receivable from the particular corporation or partnership, as the case may be, by the proportion that the net FMV of each type of property owned by the particular corporation or partnership (as determined in this Paragraph and Paragraph 98 below) is of the total net FMV of all the property owned by the particular corporation or partnership;

(e) the property of each of XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX , and XXXXXXXXXX Subco will be determined on a consolidated look-through basis, since DC2 has the ability to exercise significant influence over each of XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX , and XXXXXXXXXX Subco, as described in Paragraph 54;

(f) the property of each of Partnership 1 and Partnership 2 will be determined on a consolidated look-through basis since DC2 has the ability to exercise significant influence over each of Partnership 1 and Partnership 2, as described in Paragraphs 61 and 67, respectively.

(g) the shares of Investco owned by DC2 described in Paragraph 55 above will be classified as investment property and will not be subject to the consolidated look-through basis, since DC2 does not have the ability to exercise significant influence over Investco, nor over any other corporation that has the ability to exercise significant influence over Investco;

(h) Partnership 1 will determine the property of M Co, and in turn, M Co will determine the property of XXXXXXXXXX and XXXXXXXXXX Subco, on a consolidated look-through basis, since Partnership 1 has the ability to exercise significant influence over each of M Co, XXXXXXXXXX and XXXXXXXXXX Subco, as described in Paragraph 63;

(i) Partnership 2 will determine the property of W Co, and in turn, W Co will determine the property of XXXXXXXXXX and XXXXXXXXXX Subco, on a consolidated look-through basis, since Partnership 2 has the ability to exercise significant influence over each of W Co, XXXXXXXXXX and XXXXXXXXXX Subco, as described in Paragraph 69;

(j) each of Partnership 1 and Partnership 2 owns XXXXXXXXXX% of the outstanding common shares of US Co, which carries out XXXXXXXXXX in the state of XXXXXXXXXX, through two limited partnership interests. The shares of US Co will be classified as investment property. A look-through approach will not be adopted in respect of its shares of US Co, because Partnership 1 and Partnership 2 have less than a XXXXXXXXXX% interest in the company, and do not otherwise have the ability to exercise significant influence over the company;

(k) DC2 has more than five full-time employees in its rental business, and does not carry on a specified investment business; therefore, DC2's revenue-producing real properties and its land under development, or held for future development, as revenue-producing real properties (including DC2's interest in any such properties held directly or indirectly through various unincorporated joint ventures or tenancy in common arrangements) will be classified as business properties;

(l) each of Partnership 1's and Partnership 2's revenue-producing real properties and land under development, or held for future development, as revenue-producing real properties (including their respective interests in any such properties held directly or indirectly through various unincorporated joint ventures or tenancy in common arrangements) will be classified as investment properties since (i) the rental business of Partnership 1 and Partnership 2 is carried out by the employees of DC2, (ii) Partnership 1 and Partnership 2 do not directly employ more than five full-time employees, and (iii) Partnership 1 and Partnership 2 could not reasonably be expected to require more than five full-time employees in carrying on its respective rental business; and accordingly each of Partnership 1 and Partnership 2 carry on a specified investment business;

(m) each of XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX Co, and XXXXXXXXXX do not employ more than five full-time employees, and could not reasonably be expected to require more than five full-time employees, in carrying on its respective XXXXXXXXXX business, and accordingly carry on a specified investment business; therefore, each of XXXXXXXXXX Co, XXXXXXXXXX Co, XXXXXXXXXX Co, and XXXXXXXXXX will classify its respective XXXXXXXXXX as an investment property;

(n) to the extent that any revenue-producing real property owned by DC2 , which has been held as capital property, is listed for sale to an arm's length party (where such property is to be disposed of regardless of the Proposed Transactions) such property will be classified as business property;

(o) advances to related persons will be considered cash or near-cash property, except any amounts receivable from any corporation or partnership over which DC2 has the ability to exercise significant influence;

(p) advances to employees, if any, will be considered cash or near-cash property;

(q) in connection with a mortgage payable that will mature within 12 months of the date of the transfers of property described in Paragraph 100, only that part of the mortgage payable which is certain to be paid off within the succeeding twelve month period will be treated as the current portion of a long term debt;

(r) demand lines of credit, other demand bank loans and short-term banker's acceptances payable, which are secured by a general assignment of book debts and by a floating debenture over certain assets of DC2, will be treated as current liabilities; and

(s) rental and other deposits are considered to be liabilities for the purposes of the Proposed Transactions to the extent that the amount of such deposits gives rise to a legal obligation to repay such amount, should the amounts not be offset against future rental or other liabilities of the particular tenant.

98. In determining, on a consolidated look-through basis, the net FMV of DC2's cash or near-cash property, investment property and business property immediately before the transfers of property described in Paragraph 100 below, the liabilities of DC2 and any entity (that is, any corporation or partnership, as the case may be) over which DC2 has the ability to exercise significant influence will be allocated to, and be deducted in the calculation of the net FMV of, each such type of property of DC2 or such entity, as the case may be, in the following manner:

(a) in determining, immediately before the transfer described in Paragraph 100 below, the net FMV of each type of property of a corporation or a partnership over which DC2 has the ability to exercise significant influence, the liabilities of that entity (other than any amount owing by such entity to DC2) will be allocated to, and be deducted in the calculation of, the net FMV of a type of property of that particular entity in the following manner:

(i) current liabilities of such entity (including accounts payable, income and other taxes payable, related party advances payable without any specific terms of repayment, and the current portion of long-term debt) will be allocated to the cash or near-cash property of such entity in the proportion that the FMV of each such property is of the FMV of all cash or near-cash property owned by that entity. To the extent that the total current liabilities so allocated exceed the total FMV of all cash or near-cash property of that particular entity, such entity will be considered to have a negative amount of cash or near-cash property;

(ii) provided that the amount of such entity's cash or near-cash property exceeds its current liabilities, the net FMV of all accounts receivable, inventory and prepaid expenses of such entity that are initially classified in accordance with Paragraph (a)(i) above as cash or near-cash property that will relate to a business that will be carried on by such entity or any Transferee2-Corp or any entity over which a Transferee2-Corp has the ability to exercise significant influence and that will be collected or consumed in the ordinary course of such business, may then be reclassified as business property and the net FMV thereof, determined after the allocation described in Paragraph (a)(i) herein, may be included in the net FMV of such entity's business property and, if so included, will not be included in the net FMV of such entity's cash or near-cash property;

(iii) liabilities, other than current liabilities, of such entity that relate to a particular property, will then be allocated to the particular property (and effectively to the type of property to which the particular property belongs) to the extent of its FMV. The liabilities pertaining to a type of property but not to a particular property will then be allocated to that type of property. To the extent that the allocation of liabilities to a type of property as described herein exceeds the aggregate FMV of all the particular type of property of such entity, such entity will be considered to have a negative amount of that type of property; and

(iv) any liabilities, other than current liabilities, of such entity which do not relate to a particular type of property will then be allocated to the cash or near-cash property, investment property and business property of such entity based on the relative net FMV of each type of property prior to the allocation of such liabilities, but after the allocation of the liabilities described in Paragraphs (a)(i) and (a)(iii) above and the reallocation of amounts described in Paragraph (a)(ii) above. However, where an entity is considered to have a negative amount of a type of property because of Paragraphs (a)(i) or (a)(iii) above, for the purposes of allocating those remaining liabilities, the net FMV of that type of property will be deemed to be nil, resulting in none of those remaining liabilities being allocated to that type of property.

(b) in determining, on a consolidated basis, the net FMV of each type of property of DC2 immediately before the transfer of property described in Paragraph 100, DC2 will include the appropriate pro-rata share of the net FMV of each type of property of any entity over which DC2 has the ability to exercise significant influence and, for greater certainty the appropriate negative amount of such types of property of any such entity, as determined in accordance with Paragraph (a) herein, and any liabilities of DC2, will then be allocated to, and be deducted in the calculation of, the net FMV of each type of property of DC2 in the following manner:

(i) current liabilities of DC2 (including accounts payable, income and other taxes payable, related party advances payable without any specific terms of repayment, and the current portion of long-term debt) will be allocated to the cash or near-cash property of DC2 in the proportion that the FMV of each such property is of the FMV of all cash or near-cash property of DC2 and the amount of liabilities allocated herein will not exceed the aggregate FMV of cash or near-cash property of DC2;

(ii) provided that the amount of DC2's cash or near-cash property exceeds its current liabilities, the net FMV of all accounts receivable, inventory and prepaid expenses of DC2 that are initially classified in accordance with Paragraph 97 above as cash or near-cash property that will relate to a business that will be carried on by any Transferee2-Corp or any entity over which a Transferee2-Corp has the ability to exercise significant influence and that will be collected or consumed in the ordinary course of such business, may then be reclassified as business property and the net FMV thereof, determined after the allocation described in Paragraph (b)(i) herein, may be included in the net FMV of DC2's business property and, if so included, will not be included in the net FMV of DC2's cash or near-cash property;

(iii) liabilities, other than current liabilities, of DC2 that relate to a particular property will then be allocated to the particular property (and effectively to the type of property to which the property belongs) to the extent of its FMV. The liabilities pertaining to a type of property but not to a particular property will then be allocated to that type of property, but not in excess of the net FMV of such type of property after the allocation of liabilities to a particular property as described herein; and

(iv) if any liabilities remain after the allocations described in Paragraphs (b)(i) and (b)(iii) above are made ("excess DC2 unallocated liabilities"), such excess DC2 unallocated liabilities will then be allocated to the cash or near-cash property, investment property and business property, if any, of DC2 based on the relative net FMV of each type of property prior to the allocation of such remaining liabilities, but after the allocation of the liabilities described in Paragraphs (b)(i) and (b)(iii) above.

Based on the types of property classifications described in Paragraph 97 and this Paragraph, and after the allocation of DC2's liabilities described in this Paragraph, it is anticipated that DC2 will only have investment property and business property at the time of the transfers of property described in Paragraph 100.

99. For purposes of determining each of the three types of property described in Paragraphs 97 and 98:

(a) any tax accounts, such as the balance of any non-capital losses, capital losses, RDTOH, deferred taxes, or CDA of DC2, or of any entity over which DC2 has the ability to exercise significant influence, will not be considered property; and

(b) no amount will be considered to be a liability unless it represents a true legal liability which is capable of quantification. For greater certainty, on the transfers of property, certain of the Transferee2-Subs will assume responsibility for DC2's letters of credit, as described in Paragraph 56. A letter of credit will not be considered a liability of DC2 provided that there are no legally enforceable claims outstanding at the time of the transfer described in Paragraph 100 with respect to such letter of credit.

100. Following the determination of the net FMV of DC2's cash or near-cash property, business property and investment property, as described in Paragraphs 97 and 98, DC2 will transfer a pro-rata portion of each of its three types of property (to the extent it has property of that type, as determined in accordance with Paragraphs 97 and 98) ("Transferred Assets 2") to each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub. As consideration for the transfer of the Transferred Assets 2 transferred to such Transferee2-Sub, each of the Transferee2-Subs will:

(a) assume an appropriate portion of the liabilities of DC2 outstanding at that time; and

(b) issue a number of its TC-Sub Class A Preference Shares to DC2, which will have an aggregate FMV and redemption amount equal to the amount by which the aggregate FMV of the Transferred Assets 2 that are transferred to that particular Transferee2-Sub exceeds the aggregate amount of liabilities of DC2 assumed by that particular Transferee2-Sub;

such that immediately following such property transfers and liability assumptions, the net FMV of each of the three types of property of DC2 so transferred to each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, as the case may be, (including the payments to be made by DC2 to each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub in consideration for each Transferee2-Sub assuming certain obligations of DC2 as described below),will for greater certainty, approximate that proportion of the net FMV of all property of that type owned by DC2 determined immediately before such transfers that:

(c) the aggregate FMV of the DC2 shares owned by the Transferee2-Corp which is the parent corporation of the particular Transferee2-Sub immediately before the transfer,

is of

(d) the aggregate FMV of all of the outstanding shares of DC2 immediately before the transfer.

For the purposes of this Paragraph, the expression "approximate that proportion" means that the discrepancy of that proportion, if any, will not exceed one percent (1%), determined as a percentage of the net FMV of each type of property which TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, as the case may be, received as compared to what TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub would have received had such corporation received its appropriate pro-rata share of the FMV of each type of property.

DC2 will make a payment to each Transferee2-Sub (by transferring property to the particular Transferee2-Sub) in consideration for the Transferee2-Sub assuming undertakings of DC2, which relate primarily to prepaid monthly rent and tenant contributions to prepaid common area operating costs, to which paragraph 12(1)(a) applies. The payment made by DC2 to each Transferee2-Sub will be considered to be part of the distribution, as described in this Paragraph, made by DC2 to the Transferee2-Sub. For the purposes of paragraph 20(24)(b), each Transferee2-Sub will receive the amount in the course of business and will include such amount in its income under paragraph 12(1)(a). DC2 and each Transferee2-Sub that has assumed any such undertakings in the transactions described in this Paragraph will elect, jointly and in prescribed form and within the time referred to in subsection 20(25), to have the rules in subsection 20(24) apply to DC2 as the payer, and to such Transferee2-Sub as the recipient, in respect of any payment made by DC2 to such Transferee2-Sub in consideration for the assumption by such Transferee2-Sub of those undertakings.

101. An agreement will be entered into by the Transferee2-Subs, whereby each will agree that all assets or liabilities, if any, not known at the date of the transfers of the Transferred Assets 2 and the assumptions of the liabilities of DC2, as described in Paragraph 100, will be subsequently shared among the Transferee2-Subs (or their respective parent corporations, following the wind-up of the Transferee2-Subs, as described in Paragraph 104), based on each Transferee2-Sub's respective pro-rata share as determined under paragraphs (c) and (d) of Paragraph 100.

102. In respect of the transfers of the Transferred Assets 2 described in Paragraph 100, DC2 and each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, as the case may be, will jointly elect, in prescribed form and within the time determined under subsection 85(6), for the provisions of subsection 85(1) to apply to each transfer of property included in the Transferred Assets 2 and so transferred to such Transferee2-Sub provided that such property is an eligible property. In each case, the agreed amount will not exceed the FMV of each such property and it will not be less than the amount permitted under paragraph 85(1)(b).

Specifically, the agreed amount in each joint election will not be less than:

(a) the least of the amounts specified in subparagraphs 85(1)(d)(i), (ii) and (iii) in the case of any eligible capital property;

(b) the least of the amounts specified in subparagraphs 85(1)(e)(i), (ii) and (iii) in the case of depreciable property of a prescribed class; and

(c) the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii) in the case of property described in paragraph 85(1)(c.1).

The liabilities assumed as consideration for a property transferred pursuant to subsection 85(1) will not exceed the agreed amount in respect of that property. To the extent that any mortgage liability secured by a transferred property exceeds the agreed amount in respect of that property, the excess mortgage liability will be assumed as consideration for the transfer of other assets. The liabilities allocated to a property that is not transferred pursuant to subsection 85(1) will not exceed the FMV of that property.

For the purposes of the joint elections under subsection 85(1) described in this Paragraph, the reference to "the undepreciated capital cost to the taxpayer of all the property of that class immediately before the disposition" in subparagraph 85(1)(e)(i) will be read to mean the proportion of the undepreciated capital cost to DC2 of all the property of that class that the capital cost of the property immediately before the disposition is of the aggregate capital cost of all property of that class immediately before the disposition.

The subsection 85(1) election referred to herein will exclude any cash, accounts receivable and prepaid expenses. DC2 and each Transferee2-Sub to which accounts receivable are transferred in the transactions described in Paragraph 100 will elect, jointly and in prescribed form and within the time referred to in section 22, to have the rules in section 22 apply to the transfer of such accounts receivable.

For the purposes of the Act, the increase to the PUC of the TC-Sub Class A Preference Shares issued to DC2 by a particular Transferee2-Sub as consideration for the property transferred to it, as described in Paragraph 100, will not exceed the aggregate cost of such property to the particular Transferee2-Sub, as determined pursuant to subsection 85(1) where applicable, less the aggregate amount of liabilities of DC2 assumed by that particular Transferee2-Sub for such property.

Share Redemptions and Winding-Up of the Transferee2-Subs

103. Each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, as the case may be, will, on a contemporaneous basis, redeem from DC2 all of its TC-Sub Class A Preference Shares held by DC2 for an amount equal to the aggregate of the redemption amounts of such shares. As consideration therefor, each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, as the case may be, will issue to DC2 in consideration therefor a non-interest-bearing demand promissory note having a principal amount and FMV equal to the aggregate redemption amounts of such TC-Sub Class A Preference Shares so redeemed. In particular, TC1-Sub's demand promissory note will be referred to as the "TC1-Sub Note"; TC2-Sub's demand promissory note will be referred to as the "TC2-Sub Note"; TC3-Sub's demand promissory note will be referred to as the "TC3-Sub Note"; and TC4-Sub's demand promissory note will be referred to as the "TC4-Sub Note" (collectively referred to as the "TC-Sub Notes", or sometimes singularly as a "TC-Sub Note"). DC2 will accept each such TC-Sub Note as full and absolute payment of the redemption amounts in respect of such Transferee2-Sub's redeemed shares, with the risk of the notes being dishonored.

104. Immediately following the share redemptions described in Paragraph 103, the shareholder of each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, will, by special resolution, resolve to wind-up and dissolve its TC-Sub into its respective parent corporation in accordance with the provisions of the BCA. As a consequence of the wind-up, all of the property of each Transferee2-Sub will be distributed to the respective Transferee2-Corp and each such Transferee-2-Corp will assume any liabilities owing by its particular Transferee2-Sub, including such Transferee2-Sub's promissory note owing to DC2 as described in Paragraph 103.(a)

Winding-up of DC2

105. The Transferee2-Corps, as the shareholders of DC2, will by special resolution, resolve to liquidate and dissolve DC2 pursuant to the provisions of the BCA. Under the terms of the winding-up, DC2 will assign and distribute the TC1-Sub Note to TC1, the TC2-Sub Note to TC2, the TC3-Sub Note to TC3, and the TC4-Sub Note to TC4. As a result of the assignment and distribution of the TC-Sub Notes by DC2, the obligation of each Transferee2-Corp under its respective TC-Sub Note will be cancelled. No agreement or resolution relating to the winding-up of DC2 or the distribution of its property will provide for the cancellation of any shares of DC2. At such time, DC2 will not have any balance of pre-1972 capital surplus on hand.

106. Prior to the distribution of the TC-Sub Notes, DC2 will elect, pursuant to subsection 83(2), in prescribed manner and prescribed form, that the full amount of any resulting dividend referred to in subparagraph 88(2)(b)(i) will be a capital dividend.

107. Following the receipt of the dividend refund to which DC2 will become entitled as a result of the Proposed Transactions described herein, DC2 will distribute the appropriate proportion of such amount to each of the Transferee2-Corps. The refund will not arise until after the end of the fiscal period in which the Proposed Transactions described above are completed.

108. Following the completion of all Proposed Transactions described herein, all the properties of DC2 will have been distributed and all liabilities discharged and Articles of Dissolution will be filed and DC2 will be dissolved.

109. An agreement will be entered by TC1 and TC2 whereby each will agree that all assets and liabilities, if any, not known at the date of the wind-up of DC2, will be subsequently shared among TC1 and TC2, in proportion to their common shareholdings in DC2 before the wind-up.

Estate Freezes

110. Upon completion of the Proposed Transactions described in Paragraphs 79 through 109 above:

(a) the share capital of A Co will be reorganized by converting all of the Common Shares of A Co held by Sib1 into XXXXXXXXXX A Co Class B Preference Shares having an aggregate FMV and redemption amount equal to the FMV of the Common Shares of A Co owned by Sib1 prior to the conversion. A Co will cancel the Common Shares. The directors of A Co will resolve, pursuant to the provisions of the BCA, to add to the stated capital of the A Co Class B Preference Shares so issued an amount equal to the PUC of the Common Shares of A Co so converted, and for greater certainty, such amount will not exceed "B" of the formula in paragraph 84.1(1)(a) in respect of the shares;

(b) the spouse of Sib1 will subscribe for XXXXXXXXXX new Common Shares of A Co in exchange for cash of $XXXXXXXXXX ; and

(c) the spouse of Sib1 will gift the XXXXXXXXXX Common Shares of A Co to Trust1.

111. Contemporaneously with the Proposed Transaction described in Paragraph 110 above:

(a) the share capital of B Co will be reorganized by converting all of the Common Shares of B Co held by Sib2 into XXXXXXXXXX B Co Class B Preference Shares having an aggregate FMV and redemption amount equal to the FMV of the Common Shares of B Co owned by Sib2 prior to the conversion. B Co will cancel the Common Shares. The directors of B Co will resolve, pursuant to the provisions of the BCA, to add to the stated capital of the B Co Class B Preference Shares so issued an amount equal to the PUC of the Common Shares of B Co so converted, and for greater certainty, such amount will not exceed "B" of the formula in paragraph 84.1(1)(a) in respect of the shares;

(b) the spouse of Sib2 will subscribe for XXXXXXXXXX new Common Shares of B Co in exchange for cash of $XXXXXXXXXX ; and

(c) the spouse of Sib2 will gift the XXXXXXXXXX Common Shares of B Co to Trust2.

112. Contemporaneously with the Proposed Transactions described in Paragraphs 110 and 111 above:

(a) the share capital of C Co will be reorganized by converting all of the Common Shares of C Co held by Sib3 into XXXXXXXXXX C Co Class B Preference Shares having an aggregate FMV and redemption amount equal to the FMV of the Common Shares of C Co owned by Sib3 prior to the conversion. C Co will cancel the Common Shares. The directors of C Co will resolve, pursuant to the provisions of the BCA, to add to the stated capital of the C Co Class B Preference Shares so issued an amount equal to the PUC of the Common Shares of C Co so converted, and for greater certainty, such amount will not exceed "B" of the formula in paragraph 84.1(1)(a) in respect of the shares;

(b) the spouse of Sib3 will subscribe for XXXXXXXXXX new Common Shares of C Co in exchange for cash of $XXXXXXXXXX ; and

(c) the spouse of Sib3 will gift the XXXXXXXXXX Common Shares of C Co to Trust3.

ADDITIONAL INFORMATION

113. None of DC1, DC2 or any of the related taxpayers has any outstanding tax liabilities that could be affected by the Proposed Transactions.

114. There are no agreements in respect of the Class B Preference Shares of DC1 under which any of the Class B Preference Shares are convertible or exchangeable nor are there any agreements whereby any holder of such shares is entitled to receive on the redemption, cancellation or acquisition of Class B Preference Shares by DC1, or by any person with whom DC1 does not deal at arm's length, an amount greater than the total FMV of the consideration for which the shares were issued and the amount of any unpaid dividends thereon.

115. No property has or will become property of DC1 or any corporation or partnership controlled by DC1 in contemplation of and before the distribution described in Paragraph 84, except as described herein, and no liabilities have been, or will be, incurred or discharged by DC1, or any corporation or partnership controlled by DC1, in contemplation of and before the distribution described in Paragraph 84, except as described herein. Moreover, except as specifically outlined herein, there is no expectation or intention of any of DC1, A Co, B Co or C Co, or any corporation or partnership controlled by DC1, A Co, B Co or C Co, to dispose of any property owned by it as part of the series of transactions or events that includes the Proposed Transactions, other than in the ordinary course of such corporation's business.

116. There are no agreements in respect of the DC2 Class A Preference Shares, DC2 Class B Preference Shares or DC2 Class C Preference Shares under which any of the DC2 Class A Preference Shares, DC2 Class B Preference Shares or DC2 Class C Preference Shares are convertible or exchangeable nor are there any agreements whereby any holder of such shares is entitled to receive on the redemption, cancellation or acquisition of DC2 Class A Preference Shares, DC2 Class B Preference Shares or DC2 Class C Preference Shares by DC2, or by any person with whom DC2 does not deal at arm's length, an amount greater than the total FMV of the consideration for which the shares were issued and the amount of any unpaid dividends thereon.

117. No property has or will become property of DC2, or any corporation or partnership controlled by DC2, in contemplation of and before the distribution described in Paragraph 100, except as described herein, and no liabilities have been, or will be, incurred or discharged by DC2, or any corporation or partnership controlled by DC2, in contemplation of and before the distribution described in Paragraph 100, except as described herein. Moreover, except as specifically outlined herein, there is no expectation or intention of any of DC2 or the Transferee2-Corps, or any corporation or partnership controlled by DC2 or the Transferee2-Corps, to dispose of any property owned by it as part of the series of transactions or events that includes the Proposed Transactions, other than in the ordinary course of business of such corporation or partnership.

118. None of DC1, DC2, any of the Holdcos, any of the Transferee2-Corps or any of the Transferee2-Subs is or will be a corporation described in any of paragraphs (a) to (f) of the definition of "financial intermediary corporation" in subsection 191(1). None of DC1, DC2, any of the Holdcos, any of the Transferee2-Corps or any of the Transferee2-Subs is or will be a "specified financial institution" as defined in subsection 248(1), prior to the completion of the Proposed Transactions.

119. None of the shares in the capital of DC1, DC2, any of the Holdcos, any of the Transferee2-Corps or any of the Transferee2-Subs will be at any time during a series of transactions or events that includes the Proposed Transactions:

(a) the subject of any undertaking or agreement that is referred to in subsection 112(2.2) as a "guarantee agreement";

(b) issued or acquired as part of a transaction, event or series of transactions or events of the type described in subsection 112(2.5); or

(c) the subject of a "dividend rental arrangement".

120. DC1, DC2, and each of the Holdcos, Transferee2-Corps and Transferee2-Subs will have the financial capacity to honour, upon presentation for payment, the amount payable under any promissory note issued by, or assumed by, the particular corporation as part of the Proposed Transactions.

121. The only significant transactions that were completed prior to the time of submission of the ruling request were the normal course refinancing of certain revenue-producing real properties as discussed below, the normal course development of several revenue-producing real properties and the listing of certain revenue-producing real properties for sale. In the normal course of business, DC2 refinanced certain bank indebtedness and certain mortgages payable where such indebtedness or mortgages became due. The transactions described in this Paragraph took place as part of the ongoing business operations of DC2, and were not made in contemplation of the proposed distributions, nor will they form part of the series of transactions or events that includes the Proposed Transactions described herein.

122. Prior to the commencement of the Proposed Transactions, DC2 will separate its existing demand line of credit (currently secured by a floating charge over certain revenue-producing real properties) into two distinct credit facilities. DC2 will allocate a portion of the current balance of the line of credit to a new credit facility with the same financial institution and will grant a floating charge over certain revenue-producing real properties to be transferred to TC1-Sub, as described in Paragraph 100. DC2 will grant a floating charge over certain revenue-producing real properties to be transferred to TC2-Sub, as described in Paragraph 100. Consequently, one of the credit facilities will be secured with certain revenue-producing real properties to be transferred to TC1-Sub and the balance will be secured with certain revenue-producing real properties to be transferred to TC2-Sub. The aggregate principal balance of the demand line of credit will be equal to the principal amount of the line of credit before the allocation of the credit facility. The balance owed on the operating line of credit fluctuates as DC2 expends funds as part of its ongoing business operations or makes advances. The operating line of credit is repaid as DC2 earns income or receives repayments of advances. As these transactions are carried out in the ordinary course of business by DC2 and the sole purpose of such draws and repayments of the line of credit is to fulfill a business requirement, they would be made independently of the Proposed Transactions and do not constitute an acquisition of property by DC2 in contemplation of the proposed butterfly transaction.

PURPOSES OF THE PROPOSED TRANSACTIONS

The purpose of the Proposed Transactions is to permit the shareholders of DC2 to separate their respective interests in DC2 to the extent possible, in order to enable Sib1 and Trust1, on the one hand, and Sib2, Sib3, Trust2 and Trust3, on the other hand, to own their various property interests independently from each other.

The purpose of the Recently Completed Transactions described in Paragraph 76 (that is, the use of the Transferee2-Subs) is to prevent the circularity of RDTOH between DC2 and the Transferee2-Corps. The purpose of the wind-up of the Transferee2-Subs, as described in Paragraph 104, is to enable the Transferee2-Corps to have received an indirect transfer of property, as stipulated in the definition of "distribution" in subsection 55(1).

The only purpose of the Proposed Transactions described in Paragraph 110 is to effect an estate "freeze" in respect of the pro rata share of the property of DC2 owned by Sib1 to the children and grandchildren of Sib1. The only purpose of the Proposed Transactions described in Paragraphs 111 and 112 is to effect an estate "freeze" in respect of the pro rata share of the property of DC2 owned by Sib2 and Sib3, to their respective children and grandchildren.

The spouse of each of Sib1, Sib2 and Sib 3 will subscribe for the new Common Shares, as described in Paragraphs 110 to 112 inclusive, and will gift such Common Shares to the respective family trust for the purpose of excluding such shares from the net family property of the beneficiaries, XXXXXXXXXX .

The only purpose of allocating the demand line of credit into two separate credit facilities, as described in Paragraph 122, is to enable the assumption of separate lines of credit by each of TC1-Sub and TC2-Sub, in partial consideration for the transfers of property described in Paragraph 100.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, Proposed Transactions and the purposes of the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described, our rulings are set forth below.

A. The filing of the articles of amendment of A Co, B Co and C Co referred to in Paragraph 80 will not, in and of itself, constitute a disposition of its shares for the purposes of the Act.

B. Subject to the application of subsection 69(11), provided that the appropriate joint elections are filed in the prescribed form and manner within the time specified in subsection 85(6), the provisions of subsection 85(1) will apply to the transfers:

(a) of the Common Shares of XXXXXXXXXX Co, Real Co and DC2 by DC1 to each of A Co, B Co and C Co, as described in Paragraph 84;

(b) of the Transferred Assets 1 to each of A Co, B Co and C Co, as described in Paragraph 84, to the extent that each property so transferred is an eligible property;

(c) of the DC2 Common Shares to TC1 by A Co, as described in Paragraph 93;

(d) of the DC2 Common Shares to TC2 by each of B Co and C Co, as described in Paragraph 93;

(e) of the DC2 Class B Preference Shares to TC3 by Real Co, as described in Paragraph 93; and

(f) of the Transferred Assets 2 to each of the Transferee2-Subs, as described in Paragraph 100, to the extent that each property so transferred is an eligible property;

such that the agreed amount in respect of each transfer will be deemed to be the proceeds of disposition for the particular transferred property to each transferor, and the cost to each transferee for the particular transferred property. For greater certainty, paragraph 85(1)(e.2) will not apply to any of the transfers described above.

C. Subsection 84(3) will apply:

(a) on the redemption by each of A Co, B Co and C Co of the Holdco Class A Preference Shares owned by DC1, as described in Paragraph 86, to deem DC1 to have received and for each such corporation to have paid, and

(b) on the redemption by each of TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub of its Class A Preference Shares owned by DC2, as described in Paragraph 103, to deem DC2 to have received and each such Transferee-2 Sub to have paid, a dividend on such shares equal to the amount, if any, by which the aggregate amount paid upon such redemption exceeds the aggregate PUC in respect of such shares immediately before such redemption.

C.1 As a result of the distribution by DC1 in the course of its winding-up as described in Paragraph 87 above, by virtue of paragraph 88(2)(b) and subsection 84(2), DC1 will be deemed to have paid, and:

(i) A Co, B Co and C Co will each be deemed to have received a dividend (the "winding-up dividend") on the DC1 Common Shares equal to the proportion of the amount by which the aggregate FMV of the property of DC1 distributed to each of A Co, B Co and C Co in respect of the DC 1 Common Shares on the winding-up exceeds the amount by which the PUC of the DC1 Common Shares is reduced that the number of DC1 Common Shares held by each of A Co, B Co and C Co is of the total number of issued DC1 Common Shares, and, pursuant to subparagraph 88(2)(b)(iii), such winding-up dividend will be deemed to be a taxable dividend; and

(ii) A Co, B Co and C Co will each be deemed to have received a winding-up dividend on the DC1 Class B Preference Shares equal to the proportion of the amount by which the aggregate FMV of the property of DC1 distributed to each of A Co, B Co and C Co in respect of the DC1 Class B Preference Shares on the winding-up exceeds the amount by which the PUC of the DC 1 Class B Preference Shares is reduced that the number of DC 1 Class B Preference Shares held by each of A Co, B Co and C Co is of the total number of issued DC1 Class B Preference Shares, and, pursuant to subparagraph 88(2)(b)(iii), such winding-up dividend will be deemed to be a taxable dividend.

C.2 As a result of the distribution by DC2 in the course of its winding-up as described in Paragraph 105 above:

(a) pursuant to paragraph 88(2)(b) and subsection 84(2), but subject to (b) and (c) herein:

(i) TC3 will be deemed to have received a winding-up dividend on the DC2 Class B Preference Shares, equal to the amount by which the aggregate FMV of the property of DC2 distributed to TC3 on the winding-up exceeds the amount by which the PUC of the DC2 Class B Preference Shares is reduced;

ii) TC4 will be deemed to have received a winding-up dividend on the DC2 Class C Preference Shares, equal to the amount by which the aggregate FMV of the property of DC2 distributed to TC4 on the winding-up exceeds that amount by which the PUC of the DC2 Class C Preference Shares is reduced; and

iii) TC1 and TC2 will each be deemed to have received a winding-up dividend on the DC2 Common Shares, equal to the proportion of the amount by which the aggregate FMV of the property of DC2 distributed to each of TC1 and TC2 on the winding-up exceeds the amount by which the PUC of the DC2 Common Shares is reduced that the number of DC2 Common Shares, held by each of TC1 and TC2, as the case may be, is of the total number of issued DC2 Common Shares,

(b) pursuant to subparagraph 88(2)(b)(i), such portion of the winding-up dividend referred to in paragraph (a) above as does not exceed DC2's CDA determined immediately before the payment of the winding-up dividend will be deemed, for the purposes of the subsection 83(2) election referred to in Paragraph 106 above, to be the full amount of a separate dividend, and

(c) pursuant to subparagraph 88(2)(b)(iii), the winding-up dividend described in paragraph (a)(iii) above, to the extent that it exceeds the portion thereof referred to in (b) herein that is deemed to be a separate dividend, will be deemed to be a separate dividend that is a taxable dividend.

D. To the extent that each deemed dividend referred to above is a taxable dividend, each such dividend:

(a) will be included, pursuant to subsection 82(1) and paragraph 12(1)(j), in computing the income of the person deemed to have received such dividend;

(b) will be deductible, pursuant to subsection 112(1), by the corporation deemed to have received the dividend;

(c) will not be a dividend to which any of subsections 112(2.1), (2.2), (2.3) or (2.4) will apply; and

(d) will not be subject to tax under Parts IV.1 or VI.1 by virtue of paragraph (c) of the definition of "excepted dividend" in section 187.1 and paragraph (a) of the definition of "excluded dividend" in subsection 191(1).

D.1 (a) By virtue of subsection 186(2) and paragraph 186(4)(a) of the Act, DC1 will be connected with each Holdco and each Holdco will be connected with DC1. Consequently,
(i) DC1 will, pursuant to paragraph 186(1)(b), be subject to Part IV tax in respect of each dividend referred to in Ruling C.(a) in an amount equal to the proportion of the dividend refund to which the particular Holdco will become entitled for its taxation year in which the dividends referred to in Ruling C.(a) are paid, that the amount of such dividends received by DC1 is of the aggregate of all taxable dividends paid by such Holdco in its taxation year in which such dividends are paid, and
(ii) each Holdco will, pursuant to paragraph 186(1)(b) of the Act, be subject to Part IV tax in an amount equal to that proportion of the dividend refund to which DC1 will become entitled for its taxation year in which the dividends referred to in Ruling C.1 are paid, that the amount of such dividends received by each Holdco is of the aggregate of all taxable dividends paid by DC1 in its taxation year in which such dividends are paid.

(b) By virtue of subsection 186(2) and paragraph 186(4)(a) of the Act, DC2 will be connected with each Transferee2 Corp and each Transferee2 Sub will be connected with DC2. Consequently,

(i) provided that none of the Transferee2 Subs is entitled to a dividend refund in respect of its taxation year in which it is deemed to pay the dividend referred to in Ruling C.(b) above, DC2 will not be subject to Part IV tax in respect of any such dividend, and

(ii) each Transferee2 Corp will, pursuant to paragraph 186(1)(b) of the Act, be subject to Part IV tax in an amount equal to that proportion of the dividend refund to which DC2 will become entitled for its taxation year in which the dividends referred to in Ruling C.2 are paid, that the amount of such dividends received by each Transferee2 Corp is of the aggregate of all taxable dividends paid by DC2 in its taxation year in which such dividends are paid.

E. The deemed dividends described in Rulings C, C.1 and C.2 above will be excluded, pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54, in determining the proceeds of disposition to the recipient corporation of the shares so redeemed or purchased.

F. Subsection 129(1.2) will not apply to deem the taxable dividends referred to in Rulings C, C.1 and C.2 above not to be taxable dividends.

G. The provisions of subsection 112(3) will apply to reduce any loss that may otherwise be determined for a particular holder as a result of the dispositions of shares described in Paragraphs 86, 90, 103 and 108.

H. Provided that, as part of the series of transactions or events that includes the Proposed Transactions described above, there is not:

(a) an acquisition of property in circumstances described in paragraph 55(3.1)(a);

(b) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(c) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);

(d) an acquisition of shares of a distributing corporation in the circumstances described in subparagraph 55(3.1)(b)(iii); or

(e) an acquisition of property in the circumstances described in subparagraph 55(3.1)(c) or 55(3.1)(d);

which has not been described herein, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends described in Rulings C C.1 and C.2 above, and for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

I. The cancellation of the promissory notes owing by DC1 and the Holdcos, as described in Paragraph 87, will not, in and of themselves, give rise to a forgiven amount, within the meaning thereof in subsection 80(1) or 80.01(1), nor will DC1 or any of the Holdcos otherwise realize any gain or sustain any loss as a result of such set-off and cancellation.

Similarly, the transfer by each Transferee2-Sub of its TC-Sub Note from DC2 to its respective Transferee2-Corp on the winding-up of the particular Transferee2-Sub, and the distribution of the TC-Sub Notes by DC2 as described in Paragraph 105, will not, in and of themselves, give rise to a forgiven amount, within the meaning thereof in subsection 80(1) or 80.01(1), nor will DC2, any of the Transferee2-Subs, or any of the Transferee2-Corps otherwise realize any gain or sustain any loss as a result of such assignment, set-off and cancellation.

J. Provided that an existing property that is owned by DC2 constitutes a capital property, depreciable property or inventory, as the case may be, to DC2 immediately prior to the commencement of the Proposed Transactions, and such property is acquired by TC1-Sub, TC2-Sub, TC3-Sub or TC4-Sub, as the case may be, as described in Paragraph 100, and subsequently by TC1, TC2, TC3 or TC4, as the case may be, as described in Paragraph 104, each such acquisition will not, in and by itself, cause such property to cease to be a capital property, depreciable property or inventory, as the case may be, to the particular acquirer immediately following such acquisition.

K. By virtue of subsection 1102(14) of the Regulations, each property which is depreciable property of a prescribed class or separate prescribed class of DC2, immediately before the transfer described in Paragraph 100, and which is acquired by TC1-Sub, TC2-Sub, TC3-Sub or TC4-Sub, as applicable, on the transfer described in Paragraph 100, and by TC1, TC2, TC3 and TC4, as applicable, on the winding-up of TC1-Sub, TC2-Sub, TC3-Sub or TC4-Sub, as the case may be, as described in Paragraph 104 above, will continue to be depreciable property of the same prescribed class or separate prescribed class, as the case may be, that was formerly held by DC2.

L. Provided that the condition specified in paragraph 1100(2.2)(f) of the Regulations is satisfied, paragraph 1100(2.2)(h) of the Regulations will apply so that no amount will be included by any of the Transferee2-Corps under paragraph 1100(2)(a) of the Regulations in respect of depreciable property of a prescribed class that is property acquired by a particular Transferee2-Sub from DC2, on the transfer described in Paragraph 100 above, and then by the particular Transferee2-Corp from its respective Transferee2-Sub, on the winding-up of the particular Transferee2-Sub, as described in Paragraph 104 above.

M. Provided that TC1, TC2, TC3, and TC4, as the case may be, continues to use the property acquired as a result of the transfer of property described in Paragraph 100 above, and the winding-up of the applicable Transferee2-Sub as described in Paragraph 104 above, for the purpose of gaining or producing income therefrom (other than income which is exempt from taxation), and provided that each of TC1, TC2, TC3, and TC4, as the case may be, has a legal obligation to pay interest in respect of any liabilities (other than any liabilities in respect of which DC2 was not entitled to deduct interest under paragraph 20(1)(c)) that are assumed by the Transferee2-Sub from DC2 as consideration for such property, as described in Paragraph 100, and by the Transferee2-Corp on the winding-up of the Transferee2-Sub, as described in Paragraph 104 above, any such interest paid in the year or payable in respect of the year (depending on the method regularly followed by such corporation in computing its income for the purposes of the Act) by TC1, TC2, TC3, and TC4, as the case may be, in respect of such liabilities, not in excess of a reasonable amount, will be deductible in computing such corporation's income under paragraph 20(1)(c).

N. By virtue of subsection 20(24), DC2 will be entitled to deduct in computing its income for the taxation year in which the Proposed Transactions occurs, an amount equal to the FMV of the undertakings of DC2 to which paragraph 12(1)(a) applies that are assumed by the Transferee2-Subs that was included in computing DC2's income in a previous taxation year, pursuant to paragraph 12(1)(a).

O. For the purposes of the provisions of the Act described in subsection 256(7):

(a) control of DC2, and of any corporation that DC2 controls, will not be considered to be acquired solely because of the acquisition by TC2 of a majority of the issued and outstanding DC2 Common Shares from B Co and C Co, as described in Paragraph 93(b), because TC2 will be related, otherwise than because of a right referred to in paragraph 251(5)(b), to each of B Co and C Co immediately before the transfer of the DC2 Common Shares to TC2, and

(b) control of TC2 will not be considered to be acquired solely because of the issuance to B Co of a majority of the Common Shares of TC2, as described in Paragraph 93(b), because TC2 will be related, otherwise than because of a right referred to in paragraph 251(5)(b), to B Co immediately before the issuance of the Common Shares of TC2 to B Co.

P. The provisions of subsection 88(1) will apply to the winding-up of each Transferee2-Sub into its respective parent corporation, as described in Paragraph 104, such that:

(a) Each Transferee2-Sub will be deemed, pursuant to paragraph 88(1)(a), to have disposed of its assets (other than any interest in a partnership) in each case for an amount equal to the cost amount to the particular Transferee2-Sub of the particular asset immediately before the winding-up;

(b) Each Transferee2-Corp will be deemed, pursuant to paragraph 88(1)(b), to have disposed of its Common Shares of its respective Transferee2-Sub such that its proceeds of disposition equal to the greater of the amounts described in subparagraphs 88(1)(b)(i) and (ii); and

(c) Each Transferee2-Corp will be deemed, pursuant to paragraph 88(1)(c), to have acquired the assets of its respective Transferee2-Sub that are distributed by such Transferee2-Sub on the winding-up, for an amount equal to the proceeds of disposition to Transferee2-Sub of each property distributed.

Q. The provisions of subsections 15(1), 56(2), 56(4), 69(1), 69(4) and 246(1) will not apply to any of the proposed transactions described in Paragraphs 79 to 109 above, in and of themselves.

R. The provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and of themselves, to re-determine the tax consequences confirmed in the rulings given above.

The above rulings are subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002 and are binding on the CRA provided that the Proposed Transactions (with the exception of the dissolutions of DC1 and DC2) are completed by XXXXXXXXXX. The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and the Regulations which, if enacted into law, could have an effect on the rulings provided herein.

Unless otherwise confirmed, nothing in this letter should be construed as implying that the CRA has confirmed, reviewed or has made any determination in respect of:

(a) the paid-up capital of any share or the adjusted cost base or FMV of any property referred to herein;

(b) the balance of CDA or RDTOH of any corporation; or

(c) any other tax consequence relating to the facts, Proposed Transactions or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the rulings given above, including whether any of the Proposed Transactions would also be included in a series of transactions or events that include other transactions or events that are not described in this letter.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch