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: Whether the Canadian Butterfly Transactions, in the context of a cross-border butterfly, as described below, meet legislative and administrative requirements?
Position: Transactions meet requirements.
Reasons: Consistent with law and administrative requirements.
XXXXXXXXXX 2017-069920
XXXXXXXXXX, 2017
Dear XXXXXXXXXX:
Re: XXXXXXXXXX (B/N XXXXXXXXXX)
Advance Income Tax Ruling Request
This is in reply to your letter of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-noted taxpayer. We also acknowledge the additional information provided to us in subsequent letters and emails, and during our various telephone conversations.
To the best of your knowledge, and that of the taxpayer involved, none of the issues involved in this ruling request is:
(i) in a previously filed tax return of the taxpayer or a person related to the taxpayer;
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a person related to the taxpayer;
(iii) under objection by the taxpayer or a person related to the taxpayer;
(iv) the subject of a current or completed court process involving the taxpayer or a person related to the taxpayer; or
(v) the subject of an advance income ruling previously issued by the Income Tax Rulings Directorate.
I. ENTITIES INVOLVED
1. Throughout this letter, the entities below will be referred to as follows:
“DC” means XXXXXXXXXX, as more particularly described in Paragraph 14;
“DC Group” means DC and Newco;
“Foreign Parentco” means XXXXXXXXXX, as more particularly described in Paragraph 3;
“Foreign Parentco Group” means Foreign Parentco and its direct and indirect subsidiaries over which Foreign Parentco exercises control;
“Foreign Shareholder” means XXXXXXXXXX, a corporation resident in Country 1, as more particularly described in Paragraph 3;
“Foreign Spinco” means XXXXXXXXXX, as more particularly described in Paragraph 8;
“Foreign Spinco Sub” means XXXXXXXXXX, as more particularly described in Paragraph 11;
“Foreign Spinco Sub Treasury” means XXXXXXXXXX, a Non-Resident corporation, which was established under the law of Country 1, that is a wholly-owned subsidiary of Foreign Spinco Sub;
“Foreign Subco 1” means XXXXXXXXXX, as more particularly described in Paragraph 13;
“Foreign Subco 2” means XXXXXXXXXX, as more particularly described in Paragraph 6;
“Foreign Subco 3” means XXXXXXXXXX, a Non-Resident corporation, which was established under the law of Country 3, and is an indirect wholly-owned subsidiary of Foreign Parentco;
“Foreign Subco 4” means XXXXXXXXXX, as more particularly described in Paragraph 22;
“Newco” means XXXXXXXXXX, as more particularly described in Paragraph 19;
“Predecessor Parent” means the pre-amalgamation DC, as more particularly described in Paragraph 15;
“Predecessor Subsidiary” means XXXXXXXXXX, as more particularly described in Paragraph 15; and
“TCo” means XXXXXXXXXX, as more particularly described in Paragraph 25.
II. DEFINITIONS
Unless otherwise expressly stated, every reference herein to the “Act” or to a part, section or subsection, paragraph or subparagraph and clause or subclause is a reference to the relevant provision of the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.) c.1, as amended from time to time and consolidated to the date of this letter and the Income Tax Regulations thereunder are referred to as the “Regulations.”
Unless otherwise noted, all references herein to a currency are a reference to Canadian dollars.
2. In this letter, the following terms have the meanings specified and, where the circumstances so require, the singular should be read as plural and vice versa:
“ACB” means adjusted cost base, as defined in section 54;
“Act 1” means the XXXXXXXXXX Business Corporations Act, XXXXXXXXXX;
“Agreed Amount” in respect of a property means the amount that a transferor and transferee have agreed upon in a joint election under subsection 85(1) in respect of a transfer of an Eligible Property;
“Amalgamation” means the vertical amalgamation of the Predecessor Parent and its wholly-owned subsidiary Predecessor Subsidiary on XXXXXXXXXX, as described more particularly in Paragraph 15;
“Arm’s Length” has the meaning assigned by subsection 251(1);
“Butterfly Percentage” means the proportion, expressed as a percentage, that the aggregate net FMV of the business property, in respect of the Canadian Transferred Businesses, owned by Newco, is of the aggregate net FMV of all of the business property of DC, in each case determined (a) immediately before the DC Transfer 2, and (b) using the principles set out in Paragraphs 35 to 37;
“Canadian Butterfly Transactions” means the transactions described in Paragraphs 31 to 45;
“Canadian Retained Businesses” has the meaning set out in Paragraph 16;
“Canadian Transferred Businesses” has the meaning described in Paragraph 16;
“Capital Property” has the meaning assigned by section 54;
“Capital Reorganization” has the meaning set out in Paragraph 31;
“Cost Amount” has the meaning assigned by subsection 248(1);
“Country 1” means XXXXXXXXXX;
“Country 2” means XXXXXXXXXX;
“Country 3” means XXXXXXXXXX;
“CRA” means the Canada Revenue Agency;
“DC Cash Transfer” has the meaning described in Paragraph 40;
“DC Common Shares” means common shares in the capital of DC;
“DC Current Liabilities” has the meaning described in Paragraph 17(ii);
“DC Debt 1” has the meaning described in Paragraph 17(i);
“DC Dividend” means the dividend, deemed by subsection 84(3), to have been paid by DC and received by TCo, arising on the DC Redemption, as described in Ruling D;
“DC New Common Shares” has the meaning set out in Paragraph 31;
“DC Receivable” has the meaning described in Paragraph 17;
“DC Redemption” has the meaning described in Paragraph 44(a);
“DC Redemption Amount” has the meaning set out in Paragraph 31(ii)(I);
“DC Redemption Note” has the meaning set out in Paragraph 44(a);
“DC Share Exchange” has the meaning described in Paragraph 31;
“DC Shares” has the meaning set out in Paragraph 31;
“DC Special Shares” has the meaning set out in Paragraph 31;
“DC Transfer 1” has the meaning set out in Paragraph 23;
“DC Transfer 2” has the meaning set out in Paragraph 38;
“Depreciable Property” has the meaning assigned by subsection 13(21);
“Disposition” has the meaning assigned by subsection 248(1);
“Distribution Property” has the meaning assigned in Paragraph 38;
“Eligible Dividend” has the meaning assigned by subsection 89(1);
“Eligible Property” has the meaning assigned by subsection 85(1.1);
“FMV” means fair market value, being the highest price available in an open and unrestricted market between informed prudent parties acting at Arm’s Length and without compulsion to act, expressed in terms of cash;
“Financial Intermediary Corporation” has the meaning assigned by subsection 191(1);
“Foreign Spinco Shares” means the Class A and Class B common shares in the capital of Foreign Spinco, as described in Paragraph 48;
“Forgiven Amount” has the meaning assigned by subsections 80(1) and 80.01(1);
“Four-Party Share Exchange” means the four-party share exchange among Foreign Parentco, Foreign Spinco, Foreign Spinco Sub and TCo, as more particularly described in Paragraph 32;
“Industrial Property” has the meaning assigned in Paragraphs 17 and 18;
“Ministry” means the XXXXXXXXXX;
“Newco Common Shares” means common shares in the capital of Newco, as described in Paragraph 19;
“Newco Debt” has the meaning set out in Paragraph 23(b);
“Non-Resident” has the meaning assigned by subsection 248(1);
“Paragraph” refers to a numbered paragraph in this letter;
“Post-Butterfly Transactions” means the transactions described in Paragraphs 46 to 52;
“Principal Amount” has the meaning assigned by subsection 248(1);
“Private Corporation” has the meaning assigned by subsection 89(1);
“Proceeds of Disposition” has the meaning assigned by section 54;
“Proposed Transactions” means the transactions described in Paragraphs 31 to 52;
“PUC” means paid-up capital, as defined in subsection 89(1);
“Related Person” means, in relation to a particular person, another person who is related to the particular person by virtue of subsection 251(2), as modified for the purposes of section 55 by paragraph 55(5)(e);
“Retained Businesses” has the meaning set out in Paragraph 4;
“RDTOH” means refundable dividend tax on hand which has the meaning assigned by subsection 129(3);
“Rulings” means the advance income tax rulings labelled “A” to “J” in this letter;
“Securities Exchange 1” means the XXXXXXXXXX;
“Securities Exchange 2” means the XXXXXXXXXX;
XXXXXXXXXX;
“Series of Transactions or Events” has the meaning assigned by subsection 248(10);
“Short-Term Preferred Share” has the meaning assigned by subsection 248(1);
“Significant Influence” has the meaning assigned by Section 3051.04 of the Accounting Standards for Private Enterprises or by IAS 28 of the International Financial Reporting Standards;
“Specified Financial Institution” has the meaning assigned by subsection 248(1);
“Specified Investment Business” has the meaning assigned by subsection 125(7);
“Spin-Out” means the distribution of the issued and outstanding Foreign Spinco Shares to the shareholders of Foreign Parentco, as more particularly described in Paragraph 51;
“Stated Capital” in respect of the share capital of a corporation has the meaning assigned by the statute by which the corporation is governed at the relevant time;
“Subject Transactions” means the transactions described in Paragraphs 21 to 26.2;
“Taxable Canadian Corporation” has the meaning assigned by subsection 89(1);
“Taxable Canadian Property” has the meaning assigned by subsection 248(1);
“Taxable Dividend” has the meaning assigned by subsection 89(1);
“Taxable Preferred Share” has the meaning assigned by subsection 248(1);
“Taxable RFI Share” has the meaning assigned by subsection 248(1);
“Taxation Year” has the meaning assigned by subsection 249(1);
“TCo Assumed Liability 1” has the meaning described in Paragraph 41(a);
“TCo Assumed Liability 2” has the meaning described in Paragraph 41(b);
“TCo Common Shares” means the common shares in the share capital of TCo, as more particularly described in Paragraph 25(a);
“TCo Dividend” means the dividend, deemed by subsection 84(3), to have been paid by TCo and received by DC, arising on the TCo Redemption, as described in Ruling D;
“TCo Preferred Shares” means the preferred shares in the share capital of TCo, as more particularly described in Paragraph 25(b);
“TCo Redemption” has the meaning described in Paragraph 44(b);
“TCo Redemption Amount” has the meaning set out in Paragraph 25(b)(i);
“TCo Redemption Note” has the meaning set out in Paragraph 44(b);
“Term Preferred Share” has the meaning assigned by subsection 248(1);
“Transferred Businesses” has the meaning set out in Paragraph 4; and
“Undepreciated Capital Cost” has the meaning assigned by subsection 13(21).
III. FACTS
FOREIGN PARENTCO
3. Foreign Parentco is a Non-Resident corporation governed by the laws of Country 1. Foreign Parentco was formed on a merger of corporations in XXXXXXXXXX.
Foreign Parentco has two classes of issued and outstanding shares: Class A common shares and Class B common shares. The entitlement of the Class A and Class B common shares is identical, except that at meetings of Foreign Parentco shareholders, one Class B share possesses XXXXXXXXXX and one Class A share possesses XXXXXXXXXX.
The Class A and Class B common shares of Foreign Parentco are listed on the Securities Exchange 1, as well as other stock markets.
A program for American Depositary Receipts exists with respect to the Class A shares and Class B common shares of Foreign Parentco in XXXXXXXXXX in XXXXXXXXXX, which Receipts are traded on the Securities Exchange 2.
American Depositary Receipts are certificates issued in XXXXXXXXXX by a bank or brokerage that holds the number and class of shares of the foreign corporation specified in the American Depositary Receipt for the account of the holder of such Receipt and entitling such holder to take delivery of such shares upon presentation of the American Depositary Receipt.
The shares of Foreign Parentco are widely held and, to the best of Foreign Parentco’s knowledge, no one shareholder or group of related shareholders of Foreign Parentco owns XXXXXXXXXX% or more of the shares of either class of the shares of Foreign Parentco.
The only entity known by Foreign Parentco to own more than XXXXXXXXXX% of its shares is Foreign Shareholder, a XXXXXXXXXX formed in XXXXXXXXXX under the laws of Country 1, which holds Foreign Parentco shares representing approximately XXXXXXXXXX% of the votes and XXXXXXXXXX% of the capital attributable to all issued and outstanding shares of Foreign Parentco. Representatives of Foreign Shareholder constitute a minority of Foreign Parentco’s board of directors, and under the relevant governing law, Foreign Parentco is obligated to treat all shareholders equally.
Foreign Shareholder is controlled by the XXXXXXXXXX through their XXXXXXXXXX company XXXXXXXXXX, which owns XXXXXXXXXX% of the votes and XXXXXXXXXX% of the capital in Foreign Shareholder.
No person or group of persons controls Foreign Parentco.
The market capitalization of Foreign Parentco as of XXXXXXXXXX, was approximately $XXXXXXXXXX.
4. Foreign Parentco carries on XXXXXXXXXX primary businesses indirectly, through its subsidiaries, over XXXXXXXXXX countries:
XXXXXXXXXX;
Amongst the countries with the largest annual revenues are XXXXXXXXXX.
Foreign Parentco does not manufacture or sell goods directly. The Foreign Parentco Group has about approximately XXXXXXXXXX employees.
The XXXXXXXXXX business XXXXXXXXXX, together with the portion of the XXXXXXXXXX that relates to the XXXXXXXXXX industry, constitute the Transferred Businesses.
The XXXXXXXXXX businesses XXXXXXXXXX, together with the portion of the XXXXXXXXXX business XXXXXXXXXX that does not relate to the XXXXXXXXXX industry, constitute the Retained Businesses.
The aggregate FMV of the Transferred Businesses is estimated at XXXXXXXXXX $XXXXXXXXXX.
5. Foreign Parentco’s assets include:
(a) all of the issued and outstanding ordinary (i.e., common) shares (being XXXXXXXXXX shares) of Foreign Subco 2;
(b) all of the issued and outstanding common shares of Foreign Spinco;
(c) all of the issued and outstanding DC Common Shares (being XXXXXXXXXX shares);
(d) all of the issued and outstanding ordinary (i.e., common) shares (being XXXXXXXXXX) of Foreign Subco 1; and
(e) shares of other subsidiaries.
Foreign Parentco acquired all of the issued and outstanding DC Common Shares from Foreign Subco 2 on XXXXXXXXXX, as described in Paragraph 26.1.
(Foreign Parentco and its direct and indirect subsidiaries over which Foreign Parentco exercises control are collectively referred to as the Foreign Parent Group)
FOREIGN SUBCO 2
6. Foreign Subco 2 is a Non-Resident corporation, which was established under the laws of Country 2 in XXXXXXXXXX.
Foreign Subco 2 has issued and outstanding XXXXXXXXXX ordinary (i.e., common) shares, all of which are owned by Foreign Parentco.
Foreign Subco 2’s share capital is equal to XXXXXXXXXX.
7. Foreign Subco 2’s assets include shares of a number of other corporations fiscally resident in countries other than Canada.
Prior to XXXXXXXXXX, Foreign Subco 2 owned all of the issued and outstanding DC Common Shares. On XXXXXXXXXX, Foreign Subco 2 distributed all of its DC Common Shares to Foreign Parentco as a dividend, as described in Paragraph 26.1.
FOREIGN SPINCO
8. Foreign Spinco is a Non-Resident corporation, which was incorporated under the laws of Country 1 in XXXXXXXXXX. Foreign Spinco’s corporate name was changed from XXXXXXXXXX to XXXXXXXXXX on XXXXXXXXXX.
Foreign Spinco has only one class of issued and outstanding common shares, all of which are owned by Foreign Parentco.
9. Foreign Spinco’s assets include:
(a) all of the issued and outstanding common shares of Foreign Spinco Sub; and
(b) inter-company receivables owing from other non-Canadian members of the Foreign Parentco Group.
Foreign Spinco’s liabilities include:
(i) one or more promissory notes owing to Foreign Parentco, as described in Paragraph 26.2; and
(ii) inter-company liabilities owing to other non-Canadian members of the Foreign Parentco Group.
Foreign Spinco acquired all of the issued and outstanding common shares of Foreign Spinco Sub from Foreign Parentco on XXXXXXXXXX, as described in Paragraph 26.2.
10. Foreign Spinco had previously been engaged in XXXXXXXXXX and XXXXXXXXXX business until XXXXXXXXXX, when its business was transferred to Foreign Spinco Sub XXXXXXXXXX.
At the time of the transfer of Foreign Spinco’s business to Foreign Spinco Sub, as described in Paragraph 10, Foreign Parentco owned all of the issued and outstanding common shares of Foreign Spinco Sub.
FOREIGN SPINCO SUB
11. Foreign Spinco Sub is a Non-Resident corporation, which was incorporated under the laws of Country 1 in XXXXXXXXXX.
Foreign Spinco Sub has only one class of issued and outstanding common shares, all of which are owned by Foreign Spinco.
12. Foreign Spinco Sub’s business activities consist of XXXXXXXXXX in the Foreign Parentco Group.
Foreign Spinco Sub’s assets include all of the issued and outstanding shares of Foreign Spinco Sub Treasury.
Foreign Spinco Sub’s revenues were XXXXXXXXXX (XXXXXXXXXX) in XXXXXXXXXX. Its assets as of XXXXXXXXXX, were approximately $XXXXXXXXXX.
FOREIGN SUBCO 1
13. Foreign Subco 1 is a Non-Resident corporation, which was established under the laws of Country 2.
Foreign Subco 1 has issued and outstanding XXXXXXXXXX ordinary (i.e., common) shares, all of which are owned by Foreign Parentco.
Foreign Subco 1’s share capital is equal to XXXXXXXXXX.
Foreign Subco 1 is a holding company that does not itself directly carry on business activities.
DC
14. DC is a Taxable Canadian Corporation and a Private Corporation, which was incorporated under the provisions of Act 1.
DC deals with the XXXXXXXXXX Tax Services Office and files its T2 Corporation Income Tax Returns at the XXXXXXXXXX Taxation Centre. DC’s Taxation Year ends XXXXXXXXXX.
The authorized share capital of DC consists of:
(a) an unlimited number of DC Common Shares, which carry one vote per share, are entitled to dividends as and when declared by the directors, and share equally in the residual assets of the company upon dissolution, and
(b) an unlimited number of redeemable non-voting preferred shares.
All of the issued and outstanding DC Common Shares (being XXXXXXXXXX) are owned by Foreign Parentco.
None of the redeemable preferred shares of DC has ever been issued.
15. DC was formed by way of a vertical short-form amalgamation (Amalgamation) of pre-amalgamation DC (Predecessor Parent) and its wholly-owned subsidiary (Predecessor Subsidiary) on XXXXXXXXXX.
Prior to the Amalgamation, Foreign Subco 2 owned all of the issued and outstanding shares of Predecessor Parent. On the Amalgamation, no new shares of DC were issued: all of the issued and outstanding shares of Predecessor Parent simply became the DC Common Shares.
Predecessor Parent acquired all of the issued and outstanding shares of Predecessor Subsidiary from an Arm’s-Length person for FMV cash consideration (approximately $XXXXXXXXXX) in XXXXXXXXXX.
Predecessor Subsidiary was incorporated under the XXXXXXXXXX corporate statute and it acted as a XXXXXXXXXX. Predecessor Subsidiary was continued under Act 1 on XXXXXXXXXX, before the Amalgamation.
16. DC carries on a portion of the Retained Businesses in Canada (Canadian Retained Businesses) directly, and a portion of the Transferred Businesses in Canada (Canadian Transferred Businesses) indirectly through Newco.
DC transferred the Canadian Transferred Businesses to Newco on XXXXXXXXXX, as described in Paragraph 23.
17. The assets of DC include:
(a) all of the issued and outstanding Newco Common Shares;
(b) a loan receivable (DC Receivable) from Newco in the amount of approximately $XXXXXXXXXX;
(c) all of the assets used to carry on the Canadian Retained Businesses (including cash, accounts receivable (including amounts owing from related foreign corporations from the sale of goods), XXXXXXXXXX receivables, sundry account receivables, prepaid expenses, inventory, XXXXXXXXXX, machinery and equipment, furniture and fixtures, and leasehold improvements); and
(d) an industrial building in XXXXXXXXXX (Industrial Property).
DC owns no shares of any entity other than Newco.
The liabilities of DC include:
(i) short-term and long-term debt financing owing to Foreign Subco 3 of approximately $XXXXXXXXXX (DC Debt 1). The split in short-term and long-term debt financing is XXXXXXXXXX%/XXXXXXXXXX%; and
(ii) accounts payable (DC Current Liabilities) of approximately $XXXXXXXXXX (including amounts owing to related foreign corporations from the purchase of goods) and other accrued expenses incurred in connection with the Canadian Retained Businesses.
Foreign Subco 3 is a Non-Resident corporation that is an indirect wholly-owned corporation of Foreign Parentco.
The DC Debt 1 is not Taxable Canadian Property of Foreign Subco 3.
18. DC rents the Industrial Property to an Arm’s-Length tenant. This property requires XXXXXXXXXX and has no value. Specifically, it is currently subject to an approximately $XXXXXXXXXX that significantly exceeds what would otherwise be the property’s FMV were it to be sold in an Arm’s-Length transaction.
XXXXXXXXXX.
NEWCO
19. Newco is a Taxable Canadian Corporation and a Private Corporation, which is governed by Act 1.
The authorized share capital of Newco consists of an unlimited number of Newco Common Shares, which carry the right to vote at meetings of shareholders, are entitled to dividends as and when declared by Newco’s directors, and on dissolution share rateably in Newco’s residual property.
All of the issued and outstanding Newco Common Shares are owned by DC.
20. Newco carries on the Canadian Transferred Businesses. Its assets consist of all of the assets used to carry on the Canadian Transferred Businesses, including cash, accounts receivable (including amounts owing from related foreign corporations from the sale of goods), XXXXXXXXXX receivables, sundry account receivables, prepaid expenses, inventory, XXXXXXXXXX, machinery and equipment, furniture and fixtures, and leasehold improvements.
Newco acquired the Canadian Transferred businesses from DC on AXXXXXXXXXX, as described in Paragraph 23.
Newco owns no shares in any corporation.
The liabilities of Newco include:
(a) accounts payable of approximately $XXXXXXXXXX (including amounts owing to related foreign corporations from the purchase of goods) and other accrued expenses incurred in connection with the Canadian Transferred Businesses, and
(b) the Newco Debt of approximately $XXXXXXXXXX owing to DC, as described in Paragraph 23(b).
IV. SUBJECT TRANSACTIONS
Incorporation of Newco
21. On XXXXXXXXXX, DC incorporated Newco under the provisions of Act 1.
On the incorporation of Newco, DC subscribed for one Newco Common Share for $XXXXXXXXXX.
Transfer of Foreign Subco 2 to Foreign Parentco
22. Prior to XXXXXXXXXX, Foreign Subco 1 owned all of the issued and outstanding shares of Foreign Subco 2, and Foreign Parentco owned all of the issued and outstanding shares of Foreign Subco 4.
On XXXXXXXXXX, Foreign Subco 1 transferred all of its shares of Foreign Subco 2 to Foreign Parentco in exchange for all of Foreign Parentco’s Foreign Subco 4 shares having an aggregate FMV, at the time of exchange, equal to the aggregate FMV of Foreign Subco 1’s Foreign Subco 2 shares at that time.
Foreign Subco 4 is a Non-Resident corporation, which was formed under the laws of Country 1 on XXXXXXXXXX. It functions purely as a holding company for the Foreign Parentco Group and has no other activities. It owns shares in subsidiaries in XXXXXXXXXX different countries of a value of XXXXXXXXXX.
Transfer of Canadian Transferred Businesses to Newco
23. On XXXXXXXXXX, DC transferred (DC Transfer 1) the Canadian Transferred Business to Newco, which included the accounts receivable, trade receivables, inventories, prepaid expenses and business assets relating to the Canadian Transferred Businesses.
As consideration for the DC Transfer 1, Newco:
(a) assumed DC’s liabilities that related to the Canadian Transferred Businesses;
(b) issued a promissory note (Newco Debt) to DC, the amount of which (approximately $XXXXXXXXXX) corresponded to a portion of the DC Debt 1 that was approximately equivalent to the proportion that the aggregate FMV at that time of the Canadian Transferred Businesses was of the aggregate FMV at that time of the Canadian Transferred Businesses and the Canadian Retained Businesses, and the interest rate on which is one basis point higher than the interest rate on the corresponding DC Debt 1; and
(c) issued additional Newco Common Shares to DC, having an aggregate FMV at that time equal to the amount by which the aggregate FMV at that time of the Canadian Transferred Businesses so transferred to Newco, exceeded the total amount of DC’s liabilities assumed by Newco and the Newco Debt issued by Newco to DC, as described in Paragraph 23(a) and (b), respectively.
The amount added to the Stated Capital account maintained for the Newco Common Shares issued to DC, as described in Paragraph 23(c), did not exceed the amount by which the aggregate cost to Newco (determined pursuant to subsection 85(1), if relevant) of the Canadian Transferred Businesses transferred to Newco on the DC Transfer 1, exceeded the total amount of DC’s liabilities assumed by Newco and the Newco Debt issued by Newco to DC, as described in Paragraphs 23(a) and (b), respectively.
24. With respect to the DC Transfer 1, Newco will jointly elect with DC, in prescribed form and within the time limits referred to in subsection 85(6), to have the rules in subsection 85(1) apply to each transfer of Eligible Property to Newco on the DC Transfer 1, as described in Paragraph 23.
The Agreed Amount in each election will be as follows:
(a) in the case of Capital Property (other than Depreciable Property of a prescribed class) and inventory, an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii); and
(b) in the case of Depreciable Property of a prescribed class, an amount equal to the least of the amounts described in subparagraphs 85(1)(e)(i), (ii) and (iii).
In addition, in each case, the Agreed Amount will not exceed the FMV, at the time of the DC Transfer 1, of the property so transferred to Newco, nor will it be less than the amount permitted under paragraph 85(1)(b).
The amount of any liabilities (assumed and incurred by Newco as described in Paragraph 23(a) and (b)) allocated to a particular property:
(I) that is the subject of an election under subsection 85(1), will not exceed the Agreed Amount for that particular property; and
(II) that is not the subject of an election under subsection 85(1), will not exceed the FMV of such particular property.
Newco and DC will file a joint election in prescribed form and within the prescribed time period in section 22 in respect of any accounts receivables owing by DC that were transferred to Newco.
25. TCo is a Taxable Canadian Corporation and a Private Corporation. TCo was incorporated by Foreign Spinco Sub under the provisions of Act 1 on XXXXXXXXXX.
The authorized share capital of TCo consists of the following:
(a) an unlimited number of voting, fully participating common shares (TCo Common Shares); and
(b) an unlimited number of preferred shares (TCo Preferred Shares) having the following attributes:
(i) each TCo Preferred Share is redeemable, subject to applicable law, at any time at the option of TCo at a redemption amount (TCo Redemption Amount) equal to the amount by which the aggregate FMV, at the time of the DC Transfer 2, of the Newco Common Shares and the DC Cash Transfer, if any, exceeds the TCo Assumed Liability 2, if any, as described in Paragraph 41(b), and then dividing such amount by the number of the TCo Preferred Shares issued as consideration therefor, plus any declared but unpaid dividends thereon;
(ii) each TCo Preferred Share is retractable, subject to applicable law, at any time at the option of the holder for an amount equal to the TCo Redemption Amount, plus any declared but unpaid dividends thereon;
(iii) the holder of each TCo Preferred Share is entitled to a non-cumulative cash dividend as and when declared by the board of directors of TCo from time to time, which dividend need not also be declared on any other class of shares in the capital of TCo;
(iv) there will be a provision restricting the payment of dividends on other classes of shares in the capital of TCo such that no such dividends may be paid on such other shares if the resulting realizable value of the net assets of TCo after payment of such dividends would be less than the aggregate TCo Redemption Amount of all of the TCo Preferred Shares then outstanding, plus any declared but unpaid dividends thereon;
(v) the holder of each TCo Preferred Share is entitled, upon the liquidation, dissolution or winding-up of TCo, to a payment in priority to all other classes of shares in the capital of TCo of an amount equal to the TCo Redemption Amount therefor (plus any declared but unpaid dividends thereon) to the extent of the amount or value of property available under applicable law for payment to shareholders upon dissolution, but is entitled to no more than the amount of that payment; and
(vi) the holder of each TCo Preferred Share is not be entitled to vote at meetings of shareholders of TCo, other than as provided under Act 1.
26. On the incorporation of TCo, Foreign Spinco Sub subscribed for one TCo Common Share for $XXXXXXXXXX.
Reorganization of the ownership of DC
26.1 On XXXXXXXXXX, Foreign Subco 2 distributed all of its DC Common Shares to Foreign Parentco as a dividend, such that after the distribution DC became a wholly-owned subsidiary of Foreign Parentco. The DC Common Shares are not, and were not at that time, Taxable Canadian Property.
Accordingly, Foreign Subco 2 will not apply for a clearance certificate under section 116 in respect of the Disposition of the DC Common Shares.
Foreign Subco 2’s distribution of its DC Common Shares to Foreign Parentco did not give rise to taxation in Country 2.
Transfer of Foreign Spinco Sub common shares
26.2 On XXXXXXXXXX, Foreign Parentco transferred all of its Foreign Spinco Sub common shares to Foreign Spinco in exchange for one or more promissory notes issued by Foreign Spinco, which promissory notes will thereafter (and before the Canadian Butterfly Transactions) be capitalized into the equity of Foreign Spinco.
V. OVERVIEW OF PROPOSED TRANSACTIONS
27. Prior to the implementation of the Canadian Butterfly Transactions, Foreign Spinco and Foreign Spinco Sub will acquire, through a series of stock sales, asset sales and other transfers, XXXXXXXXXX% to XXXXXXXXXX% of the worldwide assets of the Transferred Businesses (other than the Canadian Transferred Businesses) from Foreign Parentco and/or its wholly-owned subsidiaries.
28. There are a variety of different methods by which these acquisitions (prior to the Canadian Butterfly Transactions) will occur, principally involving:
(a) spin-offs and demergers in certain countries (other than Canada), followed by contributions of resulting entities to Foreign Spinco or Foreign Spinco Sub; or
(b) sales of Transferred Businesses assets to a new local subsidiary of Foreign Spinco or Foreign Spinco Sub or, alternatively, sales of Retained Business assets to a new local subsidiary of Foreign Parent (followed by a sale of the existing subsidiary to Foreign Spinco or Foreign Spinco Sub).
In each case, the method adopted was driven largely by the nature of the assets (e.g., relative size of the various businesses, transferability of existing contracts, work involved in transferring assets, etc.) and local constraints in each country (e.g., need for regulatory or other approvals, local tax laws, etc.).
The steps by which the desired results will be achieved are as follows:
(i) Throughout XXXXXXXXXX, Foreign Spinco and Foreign Spinco Sub will acquire the Transferred Businesses (other than the Canadian Transferred Businesses) in various countries, with the transfer of most such businesses expected to be completed by XXXXXXXXXX.
(ii) The Canadian Butterfly Transactions will occur on XXXXXXXXXX.
(iii) During XXXXXXXXXX, the final steps towards realigning the businesses and preparing for the Spin-Out will occur, such as:
(I) Foreign Spinco Sub acquiring any remaining part of the Transferred Businesses not already owned, directly or indirectly, as described in Paragraph 47;
(II) Foreign Spinco reorganizing its share structure to mirror the Class A/Class B common share structure that Foreign Parentco has, as described in Paragraphs 48 and 49; and
(III) Foreign Parentco contributing all of the DC New Common Shares to Foreign Subco 2, as described in Paragraph 50.
(iv) Upon approval by the shareholders of Foreign Parentco with respect to the Spin-Out XXXXXXXXXX, the Spin-Out is expected to occur XXXXXXXXXX.
No court order is required with respect to the Spin-Out.
VI. PROPOSED TRANSACTIONS
29. [Reserved]
30. [Reserved]
Canadian Butterfly Transactions
Reorganization of the capital of DC
31. DC will: (a) reorganize its capital pursuant to Act 1 (Capital Reorganization) by amending its articles of association by passing a special resolution and filing a certified copy of such resolution to create a new class of common shares (DC New Common Shares) and a new class of preferred shares (DC Special Shares) (collectively referred to as the DC Shares), and (b) exchange (DC Share Exchange) each issued and outstanding DC Common Share for one DC New Common Share and one DC Special Share.
The DC Shares will have the rights and conditions as described below:
(i) each DC New Common Share will be a fully participating voting common share with the holder thereof entitled to XXXXXXXXXX votes per share at each meeting of the shareholders of DC; and
(ii) the DC Special Shares will have the following attributes:
(I) each DC Special Share will be redeemable, subject to applicable law, at any time at the option of DC for an amount (DC Redemption Amount) equal to the amount obtained by multiplying the aggregate FMV, immediately prior to the DC Share Exchange, of the issued and outstanding DC Common Shares by the Butterfly Percentage, and then dividing such product by the number of DC Special Shares issued on the DC Share Exchange, plus the amount of all declared but unpaid dividends thereon;
(II) each DC Special Share will be retractable, subject to applicable law, at any time at the option of the holder thereof for an amount equal to the DC Redemption Amount plus the amount of all declared but unpaid dividends thereon;
(III) the holder of each DC Special Share will be entitled to non-cumulative cash dividends as and when declared by the directors of DC from time to time, which dividends need not also be declared on any other class of shares of DC;
(IV) there will be a provision restricting the payment of dividends on other classes of shares of DC such that no such dividends may be paid on any other class of shares of DC if the resulting realizable value of the net assets of DC after payment of the dividends would be less than the aggregate DC Redemption Amount of all of the DC Special Shares then outstanding, plus any declared but unpaid dividends thereon;
(V) the holder of each DC Special Share will be entitled, upon the liquidation, dissolution or winding-up of DC, to a payment in priority to all other classes of shares of DC of an amount equal to the DC Redemption Amount thereon (plus any declared but unpaid dividends thereon) to the extent of the amount of the value of property available under applicable law for payments to the shareholders of DC upon liquidation, dissolution or winding-up, but is entitled to no more than the amount of that payment; and
(VI) the holder of each DC Special Share will not be entitled to vote at any meeting of the shareholders of DC, other than as provided under applicable law.
At the time the DC Special Shares are issued, there will be no declared but unpaid dividends thereon, nor any such dividends declared prior to the redemption of such shares.
The aggregate FMV of the DC New Common Shares and the DC Special Shares immediately following the DC Share Exchange, will be equal to the aggregate FMV of the DC Common Shares immediately before the DC Share Exchange.
Foreign Parentco will hold the DC Common Shares as Capital Property immediately before the DC Share Exchange.
No election under subsection 85(1) will be filed in respect of the DC Share Exchange.
The aggregate addition to the Stated Capital under Act 1, in respect of the DC Shares issued by DC on the DC Share Exchange, will not exceed the aggregate PUC of the DC Common Shares immediately before the DC Share Exchange. Such aggregate Stated Capital will be apportioned between the DC New Common Shares and the DC Special Shares in proportion to the relative aggregate FMV of such shares.
The DC Common Shares are not, and will not be, Taxable Canadian Property on or before the time of the DC Share Exchange. Accordingly, Foreign Parentco will not apply for a clearance certificate under section 116 in respect of the Disposition of the DC Common Shares on the DC Share Exchange.
All of the DC Common Shares will be cancelled following the DC Share Exchange.
Four-Party Share Exchange
32. Following the DC Share Exchange, in the context of a four-party share exchange (Four-Party Share Exchange), pursuant to an agreement among Foreign Parentco, Foreign Spinco Sub, Foreign Spinco and TCo:
(a) TCo will agree to pay the purchase price for the DC Special Shares transferred to it by Foreign Parentco on the Four-Party Share Exchange, by issuing TCo Common Shares to Foreign Spinco Sub, having an aggregate FMV at that time equal to the aggregate FMV, at the time of the transfer, of the DC Special Shares so transferred by Foreign Parentco to TCo, as described in Paragraph 32(b).
TCo, Foreign Parentco, Foreign Spinco Sub and Foreign Spinco will agree that the TCo Common Shares will be issued to Foreign Spinco Sub in respect of, and by virtue of, the Disposition by Foreign Parentco of the DC Special Shares to TCo;
(b) Foreign Parentco will agree to pay the purchase price for the common shares of Foreign Spinco issued to it by Foreign Spinco, as described in Paragraph 32(c), by transferring all of its DC Special Shares to TCo;
(c) Foreign Spinco will agree to pay the purchase price for the common shares of Foreign Spinco Sub issued to it by Foreign Spinco Sub, as described in Paragraph 32(d), by issuing Foreign Spinco common shares to Foreign Parentco, having an aggregate FMV at that time equal to the aggregate FMV of the DC Special Shares, at the time of the transfer, of the DC Special Shares so transferred by Foreign Parentco to TCo, as described in Paragraph 32(b);
TCo, Foreign Parentco, Foreign Spinco and Foreign Spinco Sub will agree that the Foreign Spinco Sub common shares will be issued to Foreign Spinco in respect of, and by virtue of, the Disposition by Foreign Parentco of the DC Special Shares to TCo; and
(d) Foreign Spinco Sub will agree to pay the purchase price for the TCo Common Shares issued to it by TCo, by issuing Foreign Spinco Sub common shares to Foreign Spinco, having an aggregate FMV at that time equal to the aggregate FMV, at the time of the transfer, of the DC Special Shares so transferred by Foreign Parentco to TCo, as described in Paragraph 32(b).
For greater certainty, the purchase price paid by TCo for the DC Special Shares, as described in Paragraph 32(a), will be an amount equal to the aggregate FMV of those shares at the time of their transfer by Foreign Parentco to TCo, which will be the amount that an Arm’s-Length purchaser would pay for those shares.
By virtue of the Disposition, by Foreign Parentco, of the DC Special Shares to TCo, as described in Paragraph 32(b), and subject to the application of paragraph 212.1(1.1)(b), the amount added to the Stated Capital of the TCo Common Shares issued by TCo to Foreign Spinco Sub, as described in Paragraph 32(a) will be an amount equal to the aggregate FMV, at the time of the transfer, of the DC Special Shares so transferred by Foreign Parentco to TCo, as described in Paragraph 32(b).
TCo will hold the DC Special Shares as Capital Property.
33. Immediately following the Four-Party Share Exchange:
(a) Foreign Parentco will own all of the issued and outstanding common shares of Foreign Spinco;
(b) Foreign Spinco will own all of the issued and outstanding common shares of Foreign Spinco Sub;
(c) Foreign Spinco Sub will own all of the issued and outstanding TCo Common Shares; and
(d) TCo will own all of the issued and outstanding DC Special Shares.
No person other than Foreign Spinco Sub will acquire shares in the capital of TCo, as part of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D (except for the TCo Preferred shares that will be issued by TCo to DC, as described in Paragraph 41(b), and redeemed by TCo, as described in Paragraph 44(b)).
34. The aggregate FMV, immediately before the DC Transfer 2, of the Foreign Spinco common shares owned by Foreign Parentco will be equal to or approximate the amount determined by the following formula, on the assumption that Foreign Parentco is the participant, DC is the distributing corporation and Foreign Spinco is the acquiror,
(A × B/C) + D
as found in subparagraph (b)(iii) of the definition of “permitted exchange” in subsection 55(1).
For greater certainty, immediately before the DC Transfer 2:
(a) Foreign Parentco will own all of the issued and outstanding common shares of Foreign Spinco;
(b) Foreign Spinco will own all of the issued and outstanding common shares of Foreign Spinco Sub;
(c) Foreign Spinco Sub will own all of the issued and outstanding TCo Common Shares; and
(d) TCo will own all of the issued and outstanding DC Special Shares.
Classification of DC Property
35. Immediately before the DC Transfer 2, the property of DC will be determined on a consolidated look-through basis by including the appropriate pro rata share of the assets of Newco (being the only corporation over which DC has the ability to exercise significant influence) (DC and Newco are collectively referred to as the DC Group).
The assets of DC, determined on a consolidated look-through basis as described in Paragraph 35, will be classified into the following three types of property 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 the DC Group, including cash, marketable securities (except for portfolio investments), accounts receivable (including amounts owing from related foreign corporations from the sale of goods), trade receivables, inventory and prepaid expenses;
(b) business property, comprising all of the assets of the DC Group, other than cash or near-cash property, any income from which would, for purposes of the Act, be income from an active business (other than a Specified Investment Business) including goodwill; and
(c) investment property, comprising all of the assets of the DC Group, other than cash or near-cash property, any income from which would be, for purposes of the Act, income from property or from a Specified Investment Business.
For greater certainty, for purposes of the determination described in Paragraphs 35 and 36:
(d) any tax accounts, such as the balance of any non-capital losses of the DC Group, if any, will not be considered property;
(e) advances that have a term of less than 12 months or are due on demand (other than the DC Receivable described in Paragraph 35(g)) will be considered cash or near-cash property;
(f) DC will be considered to have significant influence over a corporation if DC has significant influence over that corporation or over any other corporation that had significant influence over that corporation, or if DC, in combination with corporations over which it had significant influence, has significant influence over that corporation. For greater certainty, Newco will be the only corporation that DC has significant influence over; and
(g) for the purposes of determining the FMV of each type of property of DC, the aggregate FMV of the Newco Common Shares and the DC Receivable from Newco, will be allocated among the three types of property described above, by multiplying the aggregate FMV of the Newco Common Shares or the DC Receivable, as the case may be, by the proportion that the net FMV of each type of property owned by Newco (determined in accordance with the principles described in Paragraphs 35 and 36) is of the aggregate net FMV of all the property owned by Newco (determined in accordance with the principles described in Paragraphs 35 and 36).
36. In determining, on a consolidated look-through basis, the net FMV of each of the three types of property of the DC Group immediately before the DC Transfer 2, the liabilities of DC and Newco will be allocated to, and will be deducted in the calculation of the net FMV of, each type of property of DC or Newco, as the case may be, in the manner described in Paragraphs 36(a) and (b):
(a) Liabilities of Newco: in determining the net FMV of each type of property of Newco immediately before the DC Transfer 2, the liabilities of Newco (other than any amount owing by Newco to DC) will be allocated to, and deducted in the calculation of, the net FMV of each type of property of Newco in the following manner:
(i) current liabilities of Newco will be allocated to each cash or near-cash property of Newco in the proportion that the FMV of each such property is of the aggregate FMV of all cash or near-cash property owned by Newco. To the extent that the total amount of current liabilities to be allocated to the cash or near-cash property exceed the total FMV of all of the cash or near-cash property, Newco will be considered to have a negative amount of cash or near-cash property;
(ii) following the allocation of current liabilities to cash or near-cash property, as described in Paragraph 36(i), provided that the net FMV of the cash or near-cash property of Newco is positive, any remaining net FMV of any accounts receivable, trade receivables, inventories and prepaid expenses of Newco will be reclassified as business property of Newco and excluded from the net FMV of the cash or near-cash property, to the extent that such property will be collected, sold, used or consumed in the ordinary course of business to which such property relates;
(iii) liabilities, other than current liabilities, of Newco that relate to a particular property will be allocated to that particular property (and effectively to the type of property to which the particular property belonged) to the extent of its FMV. Any excess of such liabilities over the FMV of a particular property and liabilities that pertain to a particular type of property, but not to a particular property, will then be allocated to that particular type of property. To the extent that the total amount of liabilities that are to be allocated to a particular type of property, as described in Paragraph 36(a)(iii), exceeds the total FMV of that type of property, Newco will be considered to have a negative amount of that type of property; and
(iv) any liabilities that remain after the allocations described in Paragraphs 36(a)(i) and (iii) are made, will then be allocated to the cash or near-cash property, investment property and business property of Newco, based on the relative net FMV of each type of property immediately prior to the allocation of such excess unallocated liabilities. However, where Newco is considered to have a negative amount of a type of property because of Paragraphs 36(a)(i) or (iii), 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) Liabilities of DC: in determining, on a consolidated look-through basis, the net FMV of each type of property of DC immediately before the DC Transfer 2, DC will include the appropriate pro rata share of the net FMV of each type of property of Newco and, for greater certainty, the appropriate negative amount of such type of property of Newco (as determined in accordance with Paragraph 36(a)), and any liabilities of DC will be allocated to, and be deducted in the calculation of, the net FMV of each such type of property of DC in the following manner:
(i) current liabilities of DC will be allocated to the cash or near-cash property of DC in the proportion that the FMV of each such property is of the aggregate FMV of all cash or near-cash property of DC. The allocation of current liabilities, as described in Paragraph 36(b)(i), will not exceed the aggregate FMV of all of the cash or near-cash property of DC;
(ii) following the allocation of current liabilities to each cash or near-cash property in Paragraph 36(b)(i), any remaining net FMV of any accounts receivable, trade receivables, inventories and prepaid expenses of DC will be reclassified as business property and excluded from the cash or near-cash property, to the extent that such property will be collected, sold, used or consumed in the ordinary course of the business to which such property relates;
(iii) liabilities of DC, other than current liabilities, that relate to a particular property will be allocated to the particular property (and effectively to the type of property to which the particular property belonged) to the extent of its FMV. Any excess of such liabilities over the FMV of a particular property and the liabilities that pertain to a particular type of property but not to a particular property, will be allocated to that particular 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 in Paragraph 36(b)(iii); and
(iv) any liabilities that remain after the allocations described in Paragraphs 36(b)(i) and (iii) are made, will then be allocated to the cash or near-cash property, investment property and business property of DC, on the basis of the relative net FMV of each type of property immediately prior to the allocation of such excess unallocated liabilities, but after the allocation of the liabilities as described in Paragraphs 36(b)(i) and (iii).
(c) For greater certainty, for purposes of the determination described in Paragraphs 35 and 36:
(i) the amount of any deferred income tax will not be considered to be a liability because such amount does not represent a legal obligation;
(ii) amounts owing that have a term of less than 12 months or are due on demand will be considered current liabilities;
(iii) current liabilities include amounts normally classified as current liabilities, including accounts payable, bonuses payable, and the current portion of any long term debt;
(iv) no amount will be considered to be a liability unless it represents a true legal liability that is capable of quantification; and
(v) a contingent obligation will not be considered to be a liability.
37. Based on the principles described in Paragraphs 35 and 36, it is anticipated that DC will have cash or near-cash property and business property, but no investment property, as the Industrial Property does not, and will not, at the time of the DC Transfer 2, have a positive net FMV.
Distribution of Distribution Property to TCo
38. Immediately after the determination of the types of property and the aggregate net FMV of each type of property described in Paragraphs 35, 36 and 37, DC will transfer (DC Transfer 2), and will become legally obligated to transfer the DC Cash Transfer, if any, as described in Paragraph 40, a proportionate share of each type of its property (Distribution Property) to TCo, such that immediately following the DC Transfer 2, the DC Cash Transfer and the liability assumption by TCo (being the total of the TCo Assumed Liability 1 and the TCo Assumed Liability 2, if any), as described in Paragraphs 38, 40 and 41, respectively, the net FMV of each type of property so transferred to TCo (determined in each case on the basis of the principles described in Paragraphs 35, 36 and 37) will be equal to or approximate that proportion of the net FMV of all property of DC of that type, determined immediately before the DC Transfer 2 that:
(a) the aggregate FMV, immediately before the DC Transfer 2, of all the DC Special Shares owned by TCo at that time,
is of
(b) the aggregate FMV, immediately before the DC Transfer 2, of all the issued and outstanding DC Shares at that time.
The Distribution Property will consist of: (i) all of DC’s Newco Common Shares, (ii) the DC Receivable, and (iii) the DC Cash Transfer, if any.
The aggregate FMV of the Distribution Property is approximately $XXXXXXXXXX.
39. The expression “approximate that proportion” described in Paragraphs 38 and 43 means that the discrepancy from that proportion, if any, would not exceed XXXXXXXXXX%, determined as a percentage of the aggregate net FMV of each type of property of DC which TCo has received (or DC has retained) as compared to what TCo would have received (or DC would have retained) had it received (or retained) its appropriate pro rata share of the aggregate net FMV of that type of property of DC.
40. No later than XXXXXXXXXX days after the date of the DC Transfer 2, and in the event that immediately prior to the time of the DC Transfer 2 DC has cash or near cash property with a positive aggregate net FMV, DC will transfer to TCo any required additional cash (DC Cash Transfer) necessary to ensure that the aggregate net FMV of:
(a) the cash or near-cash property of DC transferred to TCo, as described in Paragraph 38,
(b) the DC Cash Transfer (if any is required to be made), as described in Paragraph 40; and
(c) the TCo Assumed Liability 2 (if any is required to be assumed), as described in Paragraph 41(b),
will be equal to or approximate that proportion, as described in Paragraphs 38(a) and (b), of the aggregate net FMV of all cash or near-cash property of DC, determined immediately before the DC Transfer 2 and applying the principles described in Paragraphs 35, 36 and 37.
41. As consideration for the Distribution Property, TCo will:
(a) with respect to the DC Receivable, assume (TCo Assumed Liability 1) a portion of the DC Debt 1, which portion will be equal to the outstanding Principal Amount of the DC Receivable; and
(b) with respect to the Newco Common Shares and the DC Cash Transfer (if that transfer is required to be made): (i) assume (TCo Assumed Liability 2) a portion of the DC Current Liabilities (if required), and (ii) issue TCo Preferred Shares to DC having an aggregate FMV at that time equal to the amount by which the aggregate FMV of the Newco Common Shares transferred by DC to TCo at that time and the DC Cash Transfer (if that transfer is required to be made), exceeds the TCo Assumed Liability 2 (if any is required to be assumed), as described in Paragraph 41(b)(i).
At the time the TCo Preferred Shares are issued, there will be no declared but unpaid dividends thereon, nor any such dividends declared prior to the redemption of such shares.
The Principal Amount and the FMV of the DC Receivable will be equal to the Principal Amount and the FMV of the TCo Assumed Liability 1 that TCo Assumes, at the time of the DC Transfer 2.
The only change in the terms of the DC Debt 1 will be to the identity of the debtor (TCo instead of DC) to the extent of the Principal Amount being assumed by TCo as the TCo Assumed Liability 1. No other changes to the terms of the DC Debt 1 will occur.
DC will hold the TCo Preferred Shares as Capital Property.
42. TCo will jointly elect with DC, in prescribed form and within the time limit referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfer by DC of the Newco Common Shares to TCo on the DC Transfer 2. The Agreed Amount in respect of the election will be an amount equal to the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii), which amount will not be less than the amount permitted under paragraph 85(1)(b).
The amount added to the Stated Capital of the TCo Preferred Shares issued by TCo to DC, as described in Paragraph 41(b)(ii), will not exceed the aggregate cost (determined pursuant to subsection 85(1), where applicable) to TCo of the Newco Common Shares and the DC Cash Transfer, less the amount of the TCo Assumed Liability 2, if any, as described in Paragraph 41(b)(i).
For greater certainty:
(a) the increase to the aggregate PUC of the TCo Preferred Shares issued by TCo to DC, as described in Paragraph 41(b)(ii) will not exceed the maximum amount that could be added to the aggregate PUC of such shares, having regard to subsection 85(2.1); and
(b) any of the TCo Liability 2 that is allocated to the Newco Common Shares that are the subject of an election under subsection 85(1), as described in Paragraph 42, will not exceed the Agreed Amount for the Newco Common Shares.
The Newco Common Shares will be Eligible Property at the time of the DC Transfer 2.
43. Immediately following the DC Transfer 2, taking into account the DC Cash Transfer, if any, the TCo Assumed Liability 1 and the TCo Assumed Liability 2, if any, the aggregate net FMV of each type of property retained by DC (determined in each case on the basis of the principles described in Paragraphs 35, 36 and 37) will be equal to or approximate that proportion of the aggregate net FMV of all property of DC of that type, determined applying those principles, immediately before the DC Transfer 2 that:
(a) the aggregate FMV, immediately before the DC Transfer 2, of all the DC New Common Shares owned by Foreign Parentco at that time,
is of
(b) the aggregate FMV, immediately before the DC Transfer 2, of all the issued and outstanding DC Shares at that time.
Share Redemptions
44. Immediately following the DC Transfer 2, the following transactions will occur simultaneously:
(a) DC will redeem all of the DC Special Shares owned by TCo (DC Redemption) for an amount equal to the aggregate DC Redemption Amount.
In satisfaction of the aggregate DC Redemption Amount for such shares, DC will issue a promissory note (DC Redemption Note), payable to TC on demand without interest or fixed terms of repayment, having a Principal Amount and FMV equal to the aggregate DC Redemption Amount of the DC Special Shares so redeemed.
TCo will accept the DC Redemption Note in full payment of the redemption price of the DC Special Shares owned by TCo, and will assume the full risk of the note being dishonoured.
DC will not designate the DC Dividend to be an Eligible Dividend under subsection 89(14).
(b) TCo will redeem all of the TCo Preferred Shares owned by DC (TCo Redemption) for an amount equal to the aggregate TCo Redemption Amount.
In satisfaction of the aggregate TCo Redemption Amount for such shares, TCo will issue a promissory note (TCo Redemption Note), payable to DC on demand without interest or fixed terms of repayment, having a Principal Amount and FMV equal to the aggregate TCo Redemption Amount of the TCo Preferred Shares so redeemed.
DC will accept the TCo Redemption Note in full payment of the redemption price of the TCo Preferred Shares owned by DC, and will assume the full risk of the note being dishonoured.
TCo will not designate the TCo Dividend to be an Eligible Dividend under subsection 89(14).
Promissory Note Set-Off
45. Immediately following the DC Redemption and the TCo Redemption, the Principal Amount owing by DC under the DC Redemption Note and the Principal Amount owing by TCo under the TCo Redemption Note will be set-off in full against each other and each such note will be marked paid in full and extinguished.
VII. POST-BUTTERFLY TRANSACTIONS
Repayment of the TCo Assumed Liability 1 to Foreign Subco 3
46. Foreign Spinco Sub Treasury will make a loan to TCo equal to the outstanding Principal Amount of the TCo Assumed Liability 1, which loan proceeds will be used by TCo to repay fully the TCo Assumed Liability 1 to Foreign Subco 3.
Transfer the remaining part of the Transferred Businesses
47. Any part of the Transferred Businesses not already owned, directly or indirectly, by Foreign Spinco will be transferred to Foreign Spinco Sub or one or more of its wholly-owned subsidiaries other than TCo.
Reorganization of Foreign Spinco
48. The constating documents of Foreign Spinco will be amended to:
(a) rename the existing class of common shares as Foreign Spinco Class A common shares and otherwise ensure that the attributes of that class of shares correspond to those of the Foreign Parentco Class A common shares;
(b) create a new class of shares (named Foreign Spinco Class B common shares) the attributes of which correspond to the Foreign Parentco Class B common shares; and
(c) otherwise ensure that Foreign Spinco’s constating documents correspond with those of Foreign Parentco.
(Foreign Spinco Class A and Class B common shares are collectively referred to as the Foreign Spinco Shares)
49. Foreign Spinco will effect a stock split to cause the number of issued and outstanding renamed Foreign Spinco Class A common shares to correspond to the number of issued and outstanding Foreign Parentco Class A common shares.
Foreign Parentco will subscribe for a number of Foreign Spinco Class B shares for cash (XXXXXXXXXX) that corresponds to the number of the issued and outstanding Foreign Parentco Class B common shares.
All of the transactions described in Paragraph 49 will occur on a tax-deferred basis under the taxation laws of Country 1.
50. Foreign Parentco will contribute all of the DC New Common Shares to Foreign Subco 2 as a capital contribution. No shares will be issued by Foreign Subco 2 to Foreign Parentco with respect to that capital contribution.
The DC New Common Shares will not be Taxable Canadian Property on or before the time Foreign Parentco transferring those shares to Foreign Subco 2, as described in Paragraph 50. Accordingly, Foreign Parentco will not apply for a clearance certificate under section 116 in respect of the Disposition of the DC New Common Shares to Foreign Subco 2.
Spin-Out Foreign Spinco to Foreign Parentco Shareholders
51. Foreign Parentco will distribute (Spin-Out) all of the issued and outstanding Foreign Spinco Shares pro rata to the shareholders of Foreign Parentco as a special dividend.
On the Spin-Out, XXXXXXXXXX Foreign Spinco Class A common share will be distributed for each Foreign Parentco Class A common share held, and XXXXXXXXXX Foreign Spinco Class B common share will be distributed for each Foreign Parentco Class B common share held.
The Spin-Out will occur on a tax-deferred basis under the taxation laws of Country 1 for both Foreign Parentco and its shareholders.
52. The Foreign Spinco Shares distributed in the Spin-Out will be listed and traded on the Securities Exchange 1, as well as other stock markets.
53. DC’s earnings have routinely been distributed to Foreign Subco 2 as dividends. DC paid a dividend of $XXXXXXXXXX in XXXXXXXXXX, and a dividend of $XXXXXXXXXX in XXXXXXXXXX, to Foreign Subco 2. Canadian dividend withholding tax at a rate of XXXXXXXXXX% was paid on such dividends. No other DC dividends were paid during XXXXXXXXXX, or during XXXXXXXXXX to the date of this letter, nor are any further dividends anticipated for the remainder of XXXXXXXXXX.
54. The source of funding for the Foreign Spinco Sub Treasury’s loan to TCo, as described in Paragraph 46, will be as follows:
(a) Foreign Parentco will make a capital contribution to Foreign Spinco;
(b) Foreign Spinco will make a capital contribution to Foreign Spinco Sub;
(c) Foreign Spinco Sub will make a capital contribution to Foreign Spinco Sub Treasury;
(d) Foreign Spinco Sub Treasury will make the loan to TCo described in Paragraph 46;
(e) TCo will make the debt repayment to Foreign Subco 3 described in Paragraph 46; and
(f) Foreign Subco 3 will make a loan back to Foreign Parentco.
55. Foreign Parentco has one other Canadian subsidiary involved in one of the Canadian Retained Businesses, which corporation is not relevant to the Proposed Transactions.
56. No property of any kind has or will become property of DC or Newco, and no liabilities have or will be incurred by DC or Newco, in contemplation of and before the DC Transfer, otherwise than in a transaction described in subparagraphs 55(3.1)(a)(i) to (iv).
57. As part of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, there was not and will not be:
(a) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
(b) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii); and
(c) an acquisition of shares in the capital stock of DC in the circumstances described in subparagraph 55(3.1)(b)(iii).
58. None of the shares of the capital stock of DC or TCo has been or will be, at any time prior to the completion of the Proposed Transactions:
(a) the subject of any undertaking that is referred to in subsection 112(2.2) as a “guarantee agreement”;
(b) a share that is 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” referred to in subsection 112(2.3), as that term is defined in subsection 248(1).
59. Each of DC and TCo is or will be a Specified Financial Institution. Neither DC nor TCo is or will be a Financial Intermediary Corporation.
60. The TCo Preferred Shares and the DC Special Shares will be Term Preferred Shares. However, the acquisition by DC of the TCo Preferred Shares, as described in Paragraph 41(b), will occur outside the ordinary course of DC’s businesses, and the acquisition by TCo of the DC Special Shares, as described in Paragraph 32(a), will occur outside the ordinary course of TCo’s businesses.
61. The DC Special Shares and the TCo Preferred Shares will not be Taxable RFI Shares. However, those shares will be Short-Term Preferred Shares and Taxable Preferred Shares.
DC and TCo will have a “substantial interest” (as defined in paragraph 191(2)(a)) in each other at all relevant times.
62. Each of DC and TCo will have the financial capacity to honour, upon presentation for payment, the amount payable under the promissory note issued by it as part of the Proposed Transactions.
63. At no time, during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, will:
(a) XXXXXXXXXX% or more of the FMV of any one of the Foreign Spinco Sub common shares,
(b) XXXXXXXXXX% or more of the FMV of any one of the Foreign Spinco common shares, or
(c) XXXXXXXXXX% or more of the FMV of any one of the Foreign Spinco Shares,
in each case, be derived, directly or indirectly, from one or more shares of DC or of TCo.
More specifically:
(i) immediately following the DC Transfer 2, the aggregate FMV of the TCo Common Shares owned by Foreign Spinco Sub will not exceed $XXXXXXXXXX; and
(ii) during the portion of the Series of Transactions or Events, which includes the Taxable Dividends described in Ruling D, commencing immediately prior to the Four-Party Share Exchange and ending at the completion of that Series of Transactions or Events, the aggregate FMV of the issued and outstanding shares of Foreign Spinco Sub will not be less than $XXXXXXXXXX.
For greater certainty, the Proposed Transactions constitute a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D.
64. TCo will not have a RDTOH balance at the end of the Taxation Year in which the TCo Dividend is deemed to have been paid.
65. DC will not have a RDTOH balance at the end of the Taxation Year in which the DC Dividend is deemed to have been paid.
66. To the best of Foreign Parentco’s knowledge, it is not aware of an anticipated or expected acquisition of control or takeover of Foreign Parentco, Foreign Spinco, Foreign Spinco Sub, DC, TCo or Newco.
67. Foreign Parentco, Foreign Subco 1, Foreign Subco 2 and DC are, and will remain, Related to each other throughout the course of any Series of Transactions or Events that includes the Taxable Dividends as described in Ruling D.
68. The DC Common Shares are not Short-Term Preferred Shares or Taxable Preferred Shares.
69. The Proposed Transactions will not result in DC or a person Related to DC described herein being unable to pay its existing tax liabilities.
IX. PURPOSES OF THE SUBJECT TRANSACTIONS AND THE PURPOSED TRANSACTIONS
70. XXXXXXXXXX.
71. The transfer by Foreign Subco 1 of all of its Foreign Subco 2 shares to Foreign Parentco, as described in Paragraph 22, was part of a corporate simplification initiative that is wholly unrelated to the Spin-Out.
XXXXXXXXXX.
72. The reason for DC transferring the Canadian Transferred Businesses to Newco, as described in Paragraph 23, XXXXXXXXXX prior to the Canadian Butterfly Transactions was to establish the Canadian Transferred Businesses in a separate operating entity that is fully functional and in place by the time of the Spin-Out.
73. The reason for Foreign Subco 2’s transfer of all of its DC Common Shares to Foreign Parentco, as described in Paragraph 26.1, is to have Foreign Parentco own all of the issued and outstanding shares of DC, so that Foreign Parentco’s transfer of its DC Special Shares to TCo in exchange for the Foreign Spinco common shares on the Four-Party Share Exchange will qualify as a “permitted exchange” (as defined in subsection 55(1)). This is because Foreign Parentco will own all of the issued and outstanding shares of Foreign Spinco immediately after the Four-Party Share Exchange and immediately before the DC Transfer 2.
74. The purpose of giving the DC New Common Shares XXXXXXXXXX votes per share, as described in Paragraph 31(i), is to make the DC New Common Shares different from the DC Common Shares (one vote per share) so as to ensure that, for the purposes of subsection 86(1), all of the DC Common Shares owned by Foreign Parentco are being disposed of for “other shares” of the capital stock of DC on the DC Share Exchange.
75. The purpose of the Four-Party Share Exchange is to allow the DC Special Shares to be transferred by Foreign Parentco to TCo and the Foreign Spinco common shares to be received by Foreign Parentco on a “permitted exchange,” as defined in subsection 55(1).
76. The reason for adding the amount equal to the aggregate FMV of the DC Special Shares to the Stated Capital of the TCo Common Shares, as described in Paragraph 32, as opposed to the lesser amount that is permitted to be added to the PUC of the TCo Common Shares under paragraph 212.1(1.1)(b), is simply a matter of convenience, in terms of executing the necessary corporate resolutions to effect these steps and not needing to put in those resolutions the particular amount that would need to be specified if an amount less than the FMV of the property received by TCo in exchange for issuing the TCo Common Shares were to be added to that Stated Capital.
77. The reason for the stock-split of the Foreign Spinco Class A common shares and the share subscription by Foreign Parentco of the Foreign Spinco Class B common shares, as described in Paragraph 49, is to ensure that on the Spin-Out, shareholders of Foreign Parentco will receive XXXXXXXXXX of Foreign Spinco Shares as XXXXXXXXXX of Foreign Parentco shares.
78. The purpose of Foreign Parentco transferring all of its DC New Common Shares to Foreign Subco 2, as described in Paragraph 50, is to keep direct shareholdings by Foreign Parentco to as few entities as possible for administrative convenience reasons.
79. XXXXXXXXXX
80. The purpose of Foreign Parentco’s transfer of all of its Foreign Spinco Sub common shares to Foreign Spinco, as described in Paragraph 26.2, is to achieve the greatest possible administrative convenience, in terms of having Foreign Spinco Sub (instead of Foreign Spinco) be the direct shareholder of as many as possible of the various entities carrying on the Transferred Businesses around the world.
81. While the general concept is that Foreign Spinco Sub will be the acquiror of the Transferred Businesses, in the case of particular countries where, for local law commercial or tax reasons it is impractical for Foreign Spinco Sub to be the acquiror, Foreign Spinco will act as the acquiror.
To the extent that it is thereafter possible to do so without material adverse consequences, Foreign Spinco would transfer such Transferred Business down to Foreign Spinco Sub, consistent with Foreign Spinco Sub’s role as the group holding company below the public corporation (Foreign Spinco).
82. Foreign Parentco’s board of directors has made the strategic decision to separate the Transferred Businesses from the Retained Businesses. The separation is driven primarily by the fact that the Transferred Businesses have different end-markets, differing levels of volatility, and different demand drivers and characteristics from the Retained Businesses.
The separation will enhance shareholder value by, among other things, increasing the ability of the respective businesses to add value to customers, grow their businesses and attract talent, as well as achieving a fairer valuation on the stock market. Management of Foreign Parentco was the initiator and driving force behind the decision to separate the Retained Businesses and the Transferred Businesses.
X. RULINGS
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, transactions, Additional Information and the purposes of the Subject Transactions and the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, our Rulings are set forth below:
A. The provisions of subsection 86(1) will apply, and the provisions of subsection 86(2) will not apply, to the DC Share Exchange.
B. As a result of the Four-Party Share Exchange:
(a) the provisions of subparagraph 212.1(1.1)(a)(ii) will not apply to deem a dividend to have been paid by TCo, or to have been received by Foreign Parentco, on the Four-Party Share Exchange;
(b) the provisions of paragraph 212.1(1.1)(b) will apply to reduce the aggregate PUC of the TCo Common Shares that TCo issued to Foreign Spinco Sub on the Four-Party Share Exchange, to an amount equal to the aggregate PUC, immediately before the transfer, of the DC Special Shares so transferred by Foreign Parentco to TCo, as described in Paragraph 32(b); and
(c) the aggregate cost to TCo of the DC Special Shares that TCo acquired from Foreign Parentco on the Four-Party Share Exchange will be equal to the aggregate FMV at that time of those DC Special Shares. For greater certainty, subsection 143.3(3) will not apply to reduce that aggregate cost.
C. Subject to the application of subsection 69(11), the provisions of subsection 85(1) will apply to:
(a) the transfer, by DC, of the Canadian Transferred Businesses to Newco on the DC Transfer 1, and
(b) the transfer, by DC, of the Newco Common Shares to TCo on the DC Transfer 2,
such that the Agreed Amount in respect of each transfer of Eligible Property will be deemed to be the transferor’s Proceeds of Disposition and the transferee’s cost of such property pursuant to paragraph 85(1)(a).
For greater certainty,
(c) paragraph 85(1)(e.2) will not apply to the transfers described in Rulings C (a) and (b); and
(d) in applying subsection 85(1) to the DC Transfer 1, the reference in subparagraph 85(1)(e)(i) to the “undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition” shall be interpreted to mean the portion of the Undepreciated Capital Cost to DC of all property of that class immediately before the Disposition that the aggregate FMV at that time of the properties of that class transferred to Newco is of the aggregate FMV at that time of all property of that class.
D. Subsection 84(3) will apply to:
(a) the TCo Redemption, to deem TCo to have paid, and DC to have received; and
(b) the DC Redemption, to deem DC to have paid, and TCo to have received,
a dividend that is a Taxable Dividend, on the TCo Preferred Shares and the DC Special Shares, respectively, 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 and such dividend:
(c) will be included, pursuant to subsection 82(1) and paragraph 12(1)(j), in computing the income of the recipient corporation;
(d) will be deductible, pursuant to subsection 112(1), by the recipient corporation;
(e) will not be a dividend to which any of subsections 112(2.1), (2.2), (2.3) and (2.4) apply;
(f) will be excluded, pursuant to paragraph (j) of the definition of Proceeds of Disposition, in determining the Proceeds of Disposition to the recipient corporation of the shares which are redeemed;
(g) will not be subject to tax under Part IV, except as provided in paragraph 186(1)(b);
(h) will not be subject to tax under Part IV.1 or Part VI.1; and
(i) will, by virtue of subsection 112(3), reduce any loss that would otherwise be determined for the particular recipient corporation as a result of the TCo Redemption or the DC Redemption, as the case may be.
E. By virtue of the provisions of paragraph 55(3)(b), subsection 55(2) will not apply to the Taxable Dividends referred to in Ruling D, provided that:
(a) XXXXXXXXXX% or more of the FMV of any one of: (i) the Foreign Spinco Sub common shares, (ii) the Foreign Spinco common shares, or (iii) the Foreign Spinco Shares, in each case, is not, at any time during the course of a Series of Transactions or Events that includes the Taxable Dividends described in Ruling D, derived, directly or indirectly, from one or more shares of DC or of TCo; and
(b) as part of a Series of Transactions or Events that includes the Taxable Dividends referred to in Ruling D, there is not:
(i) an acquisition of property in the circumstances described in paragraph 55(3.1)(a);
(ii) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
(iii) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii); or
(iv) an acquisition of shares in the capital stock of DC in the circumstances described in subparagraph 55(3.1)(b)(iii),
that has not been described herein and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).
F. The set-off and cancellation of the DC Redemption Note held by TCo and the TCo Redemption Note held by DC, as described in Paragraph 45, will not give rise to a Forgiven Amount, and neither DC nor TCo will realize any gain or incur any loss therefrom.
G. Subject to subsections 1102(14.11) and (14.12) of the Regulations, by virtue of subsection 1102(14) of the Regulations, each property that, immediately before the DC Transfer 1, was Depreciable Property of a prescribed class or separate prescribed class of DC and that was acquired by Newco on the DC Transfer 1, will be Depreciable Property of the same prescribed class or separate prescribed class, as the case may be, of Newco.
H. Provided that the conditions specified in paragraph 1100(2.2)(f) or (g) of the Regulations are satisfied, paragraph 1100(2.2)(h) of the Regulations will apply such that no amount will be included by Newco under paragraph 1100(2)(a) of the Regulations in respect of Depreciable Property of a prescribed class that was property acquired by Newco from DC, on the DC Transfer 1.
I. The provisions of subsections 15(1), 56(2), 69(4) and 246(1) will not, in and of themselves, be applied, as a result of any of the Proposed Transactions.
J. The provisions of subsection 245(2) will not be applied, as a result of the Proposed Transactions, in and of themselves, to redetermine the tax consequences confirmed in the Rulings.
The Rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R7 issued by the CRA on April 22, 2016, and are binding on the CRA provided that the Proposed Transactions are completed on or before XXXXXXXXXX.
The Rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the Rulings provided herein.
1. We make no comment:
(a) in respect of any tax consequences relating to TCo’s assumption of the TCo Assumed Liability 1, as described in Paragraph 41(a); or
(b) as to whether any of the properties described in this letter including the DC Common Shares, the DC Special Shares, the DC New Common Shares or the DC Debt 1 would or would not constitute Taxable Canadian Property.
2. Unless otherwise confirmed, nothing in the Rulings should be construed as implying that the CRA has confirmed, reviewed, made any determination, or accepted any method for the determination in respect of:
(a) the Stated Capital or PUC of any share, or the ACB or FMV of any property, referred to herein;
(b) any other tax account of any corporation referred to herein;
(c) the characterization of any property described herein to the holder thereof; or
(d) any other tax consequence relating to the facts, transactions, 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, including whether any of the Proposed Transactions would also be included in a Series of Transactions or Events that includes other transactions or events that are not described in this letter.
Yours truly,
XXXXXXXXXX
Section Manager
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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