2017 Ruling 2017-0693751R3 - Transfer of Shares of a Foreign Affiliate

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: (1) Will a rollover of shares of a foreign affiliate from a Canadian corporation to another foreign affiliate followed by a transfer to a related Canadian resident corporation (that is not a “Canadian corporation”) for less than FMV trigger the benefit provisions in subsections 15(1), 56(2), 69(4) or 246(1)? (2) Will subsection 245(2) apply to the transfers? (3) Will paragraph 69(11)(b) apply?

Position: (1) In the particular circumstances, no. (2) No. (3) No.

Reasons: (1) Ruling granted previously in similar circumstances - transaction not to confer benefit – in particular, transaction at less than FMV permitted tax deferred transaction with restriction of ACB of the foreign affiliate shares to amount of the transfer. (2) The transactions are not a misuse or abuse of the Act or its provisions. (3) The “one of the main purposes” condition has not been met.

XXXXXXXXXX					2017-069375

XXXXXXXXXX, 2017

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX (BN# XXXXXXXXXX)
XXXXXXXXXX (BN# XXXXXXXXXX)

This is in reply to your letter of XXXXXXXXXX, requesting an advance income tax ruling on behalf of the above-named taxpayers. We also acknowledge the information provided during our various telephone conversations (XXXXXXXXXX).

You have represented to us that, to the best of your knowledge and that of the above-named taxpayers, none of the issues involved in the ruling request is:

(i) in a previously filed tax return of the above-named taxpayers or a related person;

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

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

(iv) the subject of a current or completed court process involving the above-named taxpayers or a related person; or

(v) except as noted below, the subject of a Ruling request previously considered by this Directorate.

The Proposed Transactions described in this letter, and the rulings requested herein, are similar to the transactions considered in advance income tax ruling 2016-063076, dated XXXXXXXXXX, issued by the Canada Revenue Agency to ACo and BCo in respect of the transfer of the shares of XXXXXXXXXX.

This document is based solely on the Facts, Proposed Transactions, and Additional Information described below. Any documentation submitted in respect of your request does not form part of the Facts, Proposed Transactions or Additional Information and any references thereto are provided solely for the convenience of the reader.

Unless otherwise stated:

(i) all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the “Act”), and all terms and conditions used herein that are defined in the Act have the meaning given in such definitions, and

(ii) all references to monetary amounts are in Canadian dollars.

The following terms referred to throughout this document will have the following meaning:

(a) “ACB” means “adjusted cost base” as that term is defined in section 54;

(b) “ACo” means XXXXXXXXXX;

(c) “ACo Group” means, collectively, ACo and its direct and indirectly-owned subsidiaries;

(d) XXXXXXXXXX;

(e) XXXXXXXXXX;

(f) “BCA” means the Business Corporations Act XXXXXXXXXX;

(g) “BCo” means, XXXXXXXXXX;

(h) “BCo Common Shares” has the meaning assigned by Paragraph 4;

(i) “BCo Note” has the meaning assigned by Paragraph 19;

(j) “BCo Note Cash Payment” has the meaning assigned by Paragraph 21;

(k) “BCo Purchase Price” has the meaning assigned by Paragraph 19;

(l) “BCo Transfer Agreement” has the meaning assigned by Paragraph 19;

(m) “capital property” has the meaning assigned by section 54;

(n) “Closing Date” means XXXXXXXXXX, or such earlier date as may be agreed between the parties to the Proposed Transactions;

(o) “consolidated net surplus” of a foreign affiliate of a corporation means, at a particular time, the amount that would be determined under subparagraph 5902(1)(a)(i) of the Regulations to be the net surplus of the affiliate in respect of the corporation at that time if that subparagraph were applicable at that time;

(p) XXXXXXXXXX;

(q) “controlled foreign affiliate” has the meaning assigned by subsection 95(1);

(r) “Country A” means XXXXXXXXXX;

(s) “Country B” means XXXXXXXXXX;

(t) “CRA” means the Canada Revenue Agency;

(u) “excluded property” has the meaning assigned by subsection 95(1);

(v) “exempt surplus” has the meaning assigned by subsection 5907(1) of the Regulations;

(w) “FA1” means XXXXXXXXXX;

(x) “FA1 Shares” has the meaning assigned by Paragraph 10;

(y) “FA2” XXXXXXXXXX;

(z) “FA2 Shares” has the meaning assigned by Paragraph 13;

(aa) “FA3” means XXXXXXXXXX;

(bb) “FA4” means XXXXXXXXXX;

(cc) “FA5” means XXXXXXXXXX;

(dd) “fair market value” or “FMV” means the highest price available in an open and unrestricted market, between informed, prudent parties, acting at arm’s length and under no compulsion to act and contracting for a taxable purchase and sale expressed in terms of cash;

(ee) “FAPI” means “foreign accrual property income” as defined in subsection 95(1);

(ff) XXXXXXXXXX;

(gg) “Foreign Act 1” means XXXXXXXXXX;

(hh) “Foreign Act 2” means XXXXXXXXXX;

(ii) “Foreign Act 3” means XXXXXXXXXX;

(jj) “foreign affiliate” has the meaning assigned by subsection 95(1);

(kk) XXXXXXXXXX;

(ll) “net surplus” has the meaning assigned by subsection 5907(1) of the Regulations;

(mm) “New FA” means the XXXXXXXXXX described in Paragraph 17;

(nn) “New FA Common Shares” has the meaning assigned by Paragraph 17;

(oo) “New FA Distribution” has the meaning assigned by Paragraph 22;

(pp) “New FA XXXXXXXXXX Agreement” has the meaning assigned by Paragraph 17;

(qq) “New FA Purchase Price” has the meaning assigned by Paragraph 18;

(rr) “New FA Transfer Agreement” has the meaning assigned by Paragraph 18;

(ss) “Paragraph” means a numbered paragraph in this letter;

(tt) “Proposed Transactions” means the transactions set out in Paragraphs 18 to 23;

(uu) “public corporation” has the meaning assigned by subsection 89(1);

(vv) “RCB” means “relevant cost base” as that term is defined in subsection 95(4) if that definition were read without regard to paragraph (b) thereof;

(ww) “Regulations” means the Income Tax Regulations, C.R.C., c. 945, as amended;

(xx) XXXXXXXXXX;

(yy) “Stock Exchange” means the XXXXXXXXXX Stock Exchange;

(zz) “Stated Capital” in respect of a class of shares of New FA has the meaning assigned by Paragraph 17;

(aaa) “taxable Canadian corporation” has the meaning assigned by subsection 89(1); and

(bbb) “Transfer Amount” means an amount equal to the sum of (i) the aggregate RCB to New FA of its FA1 Shares at the time of their transfer by New FA to BCo, as described in Paragraph 19, and (ii) the consolidated net surplus of FA1 at such time, such sum not to exceed the aggregate FMV of such FA1 Shares at such time.

FACTS

ACo

1. ACo is a XXXXXXXXXX. It is a taxable Canadian corporation, XXXXXXXXXX. ACo carries on a XXXXXXXXXX business and is the parent corporation for directly and indirectly-owned subsidiaries that collectively comprise the ACo Group.

2. ACo’s executive offices are situated at XXXXXXXXXX. ACo’s Taxation Centre is the XXXXXXXXXX Taxation Centre and its Tax Services Office is the XXXXXXXXXX Tax Services Office. ACo’s business number is XXXXXXXXXX.

BCo

3. XXXXXXXXXX.

4. On XXXXXXXXXX, BCo XXXXXXXXXX under the Foreign Act 2 XXXXXXXXXX.

5. As at XXXXXXXXXX, the issued and outstanding share capital of BCo consists of XXXXXXXXXX BCo Common Shares, all of which are owned by ACo. Prior to the completion of the Proposed Transactions, additional BCo Common Shares may be issued to ACo as consideration for the transfer of cash or other property by ACo to BCo.

6. XXXXXXXXXX, the central management and control of BCo has been exercised in Canada and, accordingly, XXXXXXXXXX, BCo XXXXXXXXXX resident in Canada for purposes of the Act.

7. BCo holds shares of corporations that, directly or indirectly through subsidiaries, carry on XXXXXXXXXX businesses in Country A XXXXXXXXXX. The assets of BCo consist principally of the shares of FA3, FA4 and FA5.

8. XXXXXXXXXX.

9. BCo’s Taxation Centre is the XXXXXXXXXX Taxation Centre and its Tax Services Office is the XXXXXXXXXX Tax Services Office. BCo’s business number is XXXXXXXXXX.

FA1

10. FA1 is a XXXXXXXXXX incorporated under the laws of Country B and a non-resident of Canada for purposes of the Act. The issued and outstanding share capital of FA1 consists of XXXXXXXXXX shares without nominal value (the “FA1 Shares”), all of which are owned by ACo. FA1 is a holding company. The principal asset of FA1 consists of certain FA2 Shares, as described below. FA1 is a controlled foreign affiliate of ACo. ACo holds the FA1 Shares as capital property.

11. FA1 maintains its surplus accounts in the currency of Country A in accordance with subsection 5907(6) of the Regulations. The consolidated net surplus of FA1 consists only of exempt surplus.

12. As at XXXXXXXXXX, the aggregate ACB to ACo of its FA1 Shares was estimated to be $XXXXXXXXXX. ACo expects that, at the time of undertaking the Proposed Transactions, the FMV of the FA1 Shares will exceed the total of (a) the ACB to ACo of its FA1 Shares, and (b) the consolidated net surplus of FA1.

FA2

13. FA2 is a corporation incorporated under the Foreign Act 1 and a non-resident of Canada for purposes of the Act. The issued and outstanding share capital of FA2 consists of common shares (“FA2 Shares”). XXXXXXXXXX. As of XXXXXXXXXX, approximately XXXXXXXXXX% of such FA2 Shares were owned by FA1 and the balance were owned by XXXXXXXXXX. FA2, directly or indirectly through subsidiaries, carries on a XXXXXXXXXX business in Country A. FA2 is a foreign affiliate of ACo.

FA3, FA4, FA5

14. FA3 is a corporation incorporated under the Foreign Act 1, a non-resident of Canada for purposes of the Act and a direct wholly-owned subsidiary of BCo. FA3 is a XXXXXXXXXX company under the Foreign Act 3 and holds shares of corporations that, directly or indirectly through subsidiaries, carry on XXXXXXXXXX businesses in Country A.

15. FA4 is a XXXXXXXXXX incorporated under the laws of Country B, a non-resident of Canada for purposes of the Act and a direct wholly-owned subsidiary of BCo. FA4 is XXXXXXXXXX company.

16. FA5 is a corporation incorporated under the Foreign Act 1, a non-resident of Canada for purposes of the Act and a direct wholly-owned subsidiary of BCo. FA5 holds shares of corporations that, directly or indirectly through subsidiaries, carry on XXXXXXXXXX businesses in Country A.

Formation of New FA

17. On XXXXXXXXXX, ACo formed XXXXXXXXXX (“New FA”) under the Foreign Act 2. On the formation of New FA, ACo subscribed for one New FA Common Share for XXXXXXXXXX$XXXXXXXXXX. For purposes of the Act, New FA is a corporation not resident in Canada and a controlled foreign affiliate of ACo.

The XXXXXXXXXX of New FA (the “New FA XXXXXXXXXX Agreement”) provides, among other things, that:

(a) “Share” shall XXXXXXXXXX in New FA. Subject to the Foreign Act 2 and the New FA XXXXXXXXXX Agreement, Shares may be issued in separate classes, each such class having its own distinctive rights and privileges;

(b) the only class of Shares provided for in the New FA XXXXXXXXXX Agreement is designated as “Common Shares” (“New FA Common Shares”);

(c) “Stated Capital” in respect of the Shares of a class shall be the amount recorded in the Stated Capital account of such class of Shares from time to time as provided in the terms of the New FA XXXXXXXXXX Agreement, and the Stated Capital in respect of a Share of a class shall mean the pro rata portion (based upon the number of Shares of the class that are then outstanding) of the Stated Capital in respect of the Shares of the class;

(d) “Capital Amount” in respect of a Share shall be the amount of the capital contribution made by a holder in respect of such Share to be maintained in the same currency as the Stated Capital in respect of the Shares of the class;

(e) New FA shall maintain a separate Stated Capital account for each class of Shares it issues. On the issuance of Shares of a particular class, there shall be added to the Stated Capital account of that class their Capital Amounts. There shall be deducted from the Stated Capital account of a class of Shares such amount of the Stated Capital of that class as was reduced and paid to the holders of Shares pursuant to the New FA XXXXXXXXXX Agreement; and

(f) notwithstanding subparagraph (e) above, on the issuance of Shares of a particular class, New FA may add to the Stated Capital of that class the whole or any part of their Capital Amounts where such Capital Amounts arise from the contribution of shares of, or another interest or right in, a corporation or other entity that immediately before the exchange, or that because of the exchange, did not deal with New FA at arm’s length within the meaning of that expression in the Act.

XXXXXXXXXX.

PROPOSED TRANSACTIONS

Transfer of FA1 Shares by ACo to New FA

18. ACo will transfer to New FA all of its FA1 Shares pursuant to a share transfer agreement (the “New FA Transfer Agreement”) at a purchase price equal to the aggregate FMV of such FA1 Shares at the time of the transfer (the “New FA Purchase Price”). As sole consideration for the transfer, New FA will issue to ACo New FA Common Shares having an aggregate FMV equal to the aggregate FMV of the FA1 Shares, at the time of the transfer, so transferred by ACo to New FA.

Pursuant to the resolution of the board of directors of New FA that will authorize the issuance of New FA Common Shares pursuant to the New FA Transfer Agreement, the Stated Capital in respect of the New FA Common Shares will be increased as a result of such issuance by an amount equal to the principal amount of the BCo Note, as such principal amount may be adjusted as described in Paragraph 19.

Transfer of FA1 Shares by New FA to BCo

19. New FA will transfer to BCo all of its FA1 Shares pursuant to a share transfer agreement (the “BCo Transfer Agreement”) at a purchase price (the “BCo Purchase Price”) equal to the Transfer Amount. As sole consideration for the transfer, BCo will issue to New FA a non-interest bearing demand promissory note (the “BCo Note”) having a principal amount and FMV equal to the BCo Purchase Price.

The BCo Transfer Agreement will specify that the BCo Purchase Price and the principal amount of the BCo Note issued to New FA in exchange for the FA1 Shares are subject to a price adjustment clause, which will adjust the BCo Purchase Price and the principal amount of the BCo Note issued to New FA upward or downward depending on any adjustment to the Transfer Amount.

The terms of the BCo Note will contain an acknowledgement that the principal amount of the BCo Note is subject to an adjustment clause which will adjust the principal amount of the BCo Note upward or downward depending on any adjustment provided for under the BCo Purchase Agreement, as described in this Paragraph.

Share subscription by ACo in BCo

20. ACo will subscribe for additional BCo Common Shares for cash in an amount equal to the principal amount of the BCo Note.

The total share subscription amount as described herein will be subject to an adjustment clause, which will adjust the total subscription amount and the number of BCo Common Shares issued by BCo upward or downward depending on any adjustment to the principal amount of the BCo Note, as described in Paragraph 19.

Payment of the BCo Note

21. BCo will pay to New FA an amount in cash equal to the principal amount and FMV of the BCo Note (the “BCo Note Cash Payment”) in full repayment and satisfaction of the BCo Note.

The amount of the BCo Note Cash Payment will be subject to an adjustment clause, which will adjust the amount of the BCo Note Cash Payment upward or downward depending on any adjustment to the principal amount of the BCo Note, as described in Paragraph 19.

New FA Distribution

22. The Stated Capital in respect of the New FA Common Shares will be reduced by an amount equal to the entire amount of the BCo Note Cash Payment received by New FA from BCo, as such amount may be adjusted as described in Paragraph 21, and, on the reduction, New FA will distribute such amount to ACo (the “New FA Distribution”) in a single cash distribution made in respect of all the issued and outstanding New FA Common Shares.

The resolution of the board of directors of New FA to authorize the New FA Distribution will specify that the amount of the New FA Distribution is subject to an adjustment clause, which will adjust the amount of the New FA Distribution upward or downward depending on any adjustment to the amount of the BCo Note Cash Payment, as described in Paragraph 21.

ACo will not elect pursuant to subsection 90(3) to treat the New FA Distribution as a qualifying return of capital. ACo will elect in writing pursuant to paragraph 5901(2)(b) of the Regulations, within the time prescribed therein, to treat the portion of the New FA Distribution that would otherwise have been deemed by subsection 5901(1) of the Regulations to have been paid out of the exempt surplus, hybrid surplus, or taxable surplus of New FA to instead be deemed to have been paid out of New FA’s pre-acquisition surplus.

Liquidation and Dissolution of New FA

23. New FA will be liquidated and dissolved. On the liquidation and dissolution, the property of New FA (consisting materially of the rights of New FA to receive an adjustment payment under the BCo Note and in respect of the New FA Distribution) will be transferred to ACo in consideration for ACo assuming the obligations of New FA (consisting materially of the obligations of New FA to make an adjustment payment under the BCo Note and in respect of the New FA Distribution).

ADDITIONAL INFORMATION

24. The Proposed Transactions in Paragraphs 18 and 19 will take place sequentially on the Closing Date. The Proposed Transactions in Paragraphs 20 to 22 will take place on the date that is two days after the Closing Date. The Proposed Transaction in Paragraph 23 may occur on the date that is two days after the Closing Date after the completion of the other Proposed Transactions or may be undertaken on a date after the Closing Date, but prior to XXXXXXXXXX.

25. ACo controls BCo, FA1, and New FA, through its direct or indirect shareholding interest in them. Consequently, BCo, FA1, and New FA are related to ACo and to each other under subparagraph 251(2)(b)(i) or 251(2)(c)(i).

26. Immediately before the time of the transfer by ACo of its FA1 Shares to New FA, as described in Paragraph 18, and immediately before the time of the transfer by New FA of its FA1 Shares to BCo, all or substantially all of the property of FA1 will constitute excluded property of FA1.

27. ACo’s transfer of its FA1 Shares to New FA, as described in Paragraph 18, is not part of a transaction or event or a series of transactions or events the purpose of which is to dispose of the FA1 Shares to a person or partnership that, immediately after the transaction, event or series, will be a person or partnership (other than a foreign affiliate of ACo in respect of which ACo has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom ACo is dealing at arm’s length.

28. At the time of the transfer by ACo of its FA1 Shares to New FA, as described in Paragraph 18, the ACB to ACo of its FA1 Shares will not be greater than the amount that would, absent subsection 85.1(3), be ACo’s proceeds of disposition of such FA1 Shares.

29. The Transfer Amount may be significantly less than the aggregate FMV of the FA1 Shares transferred by New FA to BCo, as described in Paragraph 19, at the time of the transfer.

30. ACo will not, as part of a series of transactions or events that includes the Proposed Transactions, acquire directly, in any manner whatever or by any means whatever, any of the FA1 Shares that are transferred by New FA to BCo, as described in Paragraph 19.

31. XXXXXXXXXX.

32. New FA will not issue shares of any class other than New FA Common Shares.

PURPOSE OF THE PROPOSED TRANSACTIONS

33. XXXXXXXXXX. The purpose of the Proposed Transactions is to transfer the indirect ownership of FA2 to BCo in order to permit ACo XXXXXXXXXX in a manner that is neutral from a tax perspective.

34. The purpose for the transfer by New FA of its FA1 Shares to BCo, as described in Paragraph 19, occurring at the Transfer Amount as opposed to occurring at their FMV, is not to confer a benefit on a person, but rather to address certain tax policy concerns of the CRA by restricting BCo’s aggregate ACB of its FA1 Shares to the Transfer Amount.

RULINGS PROVIDED

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant Facts, Proposed Transactions, Additional Information and the purpose of the Proposed Transactions, that the Proposed Transactions are completed in the manner described above and are legally effective, and that there are no other transactions that may be relevant to the rulings given, we rule as follows:

A. Provided that the FA1 Shares constitute capital property to ACo, the provisions of paragraphs 85.1(3)(b), (c) and (d) will apply to the transfer by ACo of its FA1 Shares to New FA, as described in Paragraph 18, such that:

(a) the cost to ACo of the New FA Common Shares issued as consideration for the FA1 Shares will, pursuant to paragraph 85.1(3)(b), be equal to the ACB of the FA1 Shares to ACo immediately before their disposition;

(b) ACo’s proceeds of disposition for the FA1 Shares will, pursuant to paragraph 85.1(3)(c), be equal to ACo’s cost of the New FA Common Shares; and

(c) New FA’s cost of the FA1 Shares will, pursuant to paragraph 85.1(3)(d), be equal to ACo’s proceeds of disposition of the FA1 Shares.

B. The transfer by ACo of its FA1 Shares to New FA, as described in Paragraph 18, and the transfer by New FA of its FA1 Shares to BCo, as described in Paragraph 19, will not, in and by themselves, cause such FA1 Shares that were capital property to ACo immediately before the first such transfer not to be capital property to New FA during the period that it holds such shares.

C. To the extent that the Transfer Amount is less than the aggregate FMV of the FA1 Shares at the time of the transfer by New FA of such FA1 Shares to BCo, as described in Paragraph 19, paragraph 69(1)(b) will apply to deem New FA to receive proceeds of disposition of its FA1 Shares equal to such FMV.

D. To the extent of any capital gain (determined without the application of subsection 93(1)) realized by New FA from the disposition by New FA of its FA1 Shares to BCo, as described in Paragraph 19:

(a) subsections 93(1), (1.1) and (1.11) and the relevant Regulations will apply to cause the amount, prescribed under subsection 5902(6) of the Regulations, to be treated as a dividend received by New FA from FA1 immediately before the disposition and not to be proceeds of disposition of such FA1 Shares; and

(b) provided that the FA1 Shares are excluded property of New FA at the time of the disposition, the amount of any capital gain (determined after the application of subsection 93(1)) from the disposition of such shares will not be included in the FAPI of New FA.

E. With respect to the New FA Distribution:

(a) the New FA Distribution will be deemed by subsection 90(2) to be a dividend paid by New FA to ACo, and, for certainty, will not be recharacterized as interest for any purpose of the Act pursuant to subsection 258(3) or (5);

(b) provided that ACo elects in writing pursuant to paragraph 5901(2)(b) within the time prescribed therein, the portion of the New FA Distribution that would otherwise have been deemed by subsection 5901(1) of the Regulations to have been paid out of the exempt surplus, hybrid surplus, or taxable surplus of New FA will instead be deemed to have been paid out of New FA’s pre-acquisition surplus in respect of ACo;

(c) the amount of such dividend will be deductible by ACo pursuant to paragraph 113(1)(d) in computing its taxable income for the taxation year in which the New FA Distribution is received by ACo;

(d) subparagraph 53(2)(b)(i) and subsection 92(2) will apply at the time of the New FA Distribution to reduce the ACB to ACo of its New FA Common Shares by the amount of the New FA Distribution; and

(e) to the extent the reduction in the ACB of the New FA Common Shares owned by ACo, as described in paragraph (d) above, causes there to be an excess, as described in subsection 40(3), subsections 40(3), 93(1), 93(1.1) and 93(1.11) and the relevant Regulations will cause the amount, as is prescribed under subsection 5902(6) of the Regulations, to be treated as a dividend received by ACo from New FA immediately before the time of the New FA Distribution.

F. The provisions of subsections 15(1), 56(2), 69(4) and 246(1) will not apply to the transfer by New FA of all of its FA1 Shares to BCo, as described in Paragraph 19.

G. Subsection 69(11) will not apply to the Proposed Transactions to deem ACo’s proceeds of disposition from the disposition of the FA1 Shares to New FA, as described in Paragraph 18, to be equal to the FMV of the FA1 Shares.

H. The provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and by themselves, to redetermine the tax consequences confirmed in any of the rulings given.

COMMENTS

The above rulings, which are based on the Act and the Regulations in their present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R7 dated April 22, 2016, and are binding on the CRA provided that the Proposed Transactions are completed by XXXXXXXXXX.

Nothing in this letter should be construed as implying that the CRA has agreed to, reviewed or made any determination in respect of any tax consequences relating to the Facts and Proposed Transactions described herein other than those specifically described in the rulings given above and, in particular, without limiting the generality of the foregoing, in respect of:

(a) the amount of the FMV, ACB, RCB, cost or capital cost of any property referred to herein, or whether any such property is capital property or excluded property; or

(b) any surplus balances of foreign affiliates referred to herein.

Yours truly,

XXXXXXXXXX
Section Manager
for Division Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch