1998 Ruling 9825863 - 107(2),107(4.1) AND 55(2)

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

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

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

Principal Issues: 55(2), 107(2) and 107(4.1) issues

Position: (See Statement of Principal Issues attached with Ruling)

Reasons: (See Statement of Principal Issues attached with Ruling)

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xxxxxxxxxx 3-982586
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Attention: XXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
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xxxxxxxxxx
Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-noted taxpayers. In your letters of XXXXXXXXXX, you provided additional information concerning the facts and proposed transactions described in your original letter. We also acknowledge the information provided during our various telephone conversations (XXXXXXXXXX).

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

(i) is in an earlier return of any of the taxpayers or a related person;

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

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

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

Definitions

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

(a) Unless otherwise indicated, all references to statute are to the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.), c.1, as amended ( the "Act")

(b) "ACB" means "adjusted cost base" as that expression is defined in section 54 and subsection 248(1);

(c) "agreed amount" has the meaning assigned by subsection 85(1);

(d) "arm's length" has the meaning assigned by section 251;

(e) "BCA" means the Business Corporations Act XXXXXXXXXX, as amended;

(f) "capital property" has the meaning assigned by section 54;

(g) "CDA" means capital dividend account as that expression is defined in subsection 89(1);

(h) "cost amount" has the meaning assigned by subsection 248(1);

(i) "DC" means XXXXXXXXXX, a taxable Canadian corporation, which was formed as a result of the amalgamation of former XXXXXXXXX;

(j) "PUC', means paid-up capital as that expression is defined in subsection 89(1);

(k) "proceeds of disposition" has the meaning assigned by section 54;

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

(m) "related persons" has the meaning assigned by section 251;

(n) "safe-income determination time" has the meaning assigned by subsection 55(1) of the Act,

(o) "stated capital" has the meaning assigned by section XXXXXXXXXX of the BCA;

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

(q) "taxable Canadian corporation" has the meaning assigned by subsection 89(1); and

(r) "taxable dividend" has the meaning assigned by subsection 89(1).

Our understanding of the relevant facts, proposed transactions and purpose of the proposed transactions is as follows:

FACTS

1. XXXXXXXXXX (the "Trust ") is an inter vivos family trust. It was established by an agreement (the "Trust Agreement") made between XXXXXXXXXX ("Father ") and his two sons, XXXXXXXXXX("Settlor A") and XXXXXXXXXX ("Settlor B"), as of XXXXXXXXXX. Both Settlor A and Settlor B are residents of Canada for purpose of the Act.

The Trust was settled by Settlor A and Settlor B who each contributed the following property to it:

(a) XXXXXXXXXX non-voting shares of XXXXXXXXXX ("Aco".),

(b) XXXXXXXXXX non-voting shares of XXXXXXXXXX ("Bco"); and

(c) XXXXXXXXXX non-voting shares of XXXXXXXXXX ("Cco").

The shares contributed to the Trust by each of Settlor A and Settlor B were identical in number and class. No other person related to any individual beneficially interested in the Trust has transferred or loaned property either directly or indirectly to the Trust,

The trustees of the Trust are Settlor A and Settlor B, each of whom has been a trustee of the Trust since inception. Father was one of the co-trustees of the Trust when it was established in XXXXXXXXXX but he resigned his trusteeship in XXXXXXXXX.

Settlor A and Settlor B and their respective children are the primary beneficiaries of the Trust. According to the Trust Agreement, prior to the termination of the Trust, any income or capital of the Trust can be distributed, at the discretion of the trustees, to or for the benefit of Settlor A, Settlor B or any of their children. On termination of the Trust, the property of the Trust will be distributed equally to each of Settlor A and Settlor B, provided each of them is still alive.

Except for Settlor A and Settlor B who each acquired his respective beneficial interest in the Trust by contributing the property described above to the Trust, none of the beneficiaries of the Trust paid any consideration for his or her beneficial interest in the Trust. The Trust is a "personal trust" as defined under subsection 248(1) of the Act. The Trust is also a trust described in subsection 75(2) of the Act and each of Settlor A and Settlor B is "the person" as that term is used in subparagraph 75(2)(a)(i) of the Act.

XXXXXXXXX

XXXXXXXXX

XXXXXXXXX

(i) XXXXXXXXX

(ii) XXXXXXXXXX

On XXXXXXXXXX, the Trust filed an election pursuant to subsection 104(5.3) of the Act.

2. The Trust currently owns the following trust properties:

(a) XXXXXXXXXX non-voting shares of DC, which have a fair market value far exceeding both their ACB to the Trust and their PUC;

(b) XXXXXXXXXX common shares of XXXXXXXXXX ("X Co."), being all of the issued and outstanding shares thereof which have an aggregate PUC and ACB to the Trust of $XXXXXXXXXX and a fair market value not exceeding the ACB thereof. The X Co. shares were acquired by the Trust from treasury in XXXXXXXXXX;

(c) XXXXXXXXXX common shares of XXXXXXXXXX ("Y Co."), being all of the issued and outstanding shares thereof which have an aggregate PUC and ACB to the Trust of $XXXXXXXXXX and a fair market value not exceeding the ACB thereof.. The Y Co. shares were acquired by the Trust from treasury in XXXXXXXXXX;

(d) XXXXXXXXXX;

(e) some cash.

Each of X Co. and Y Co. is a private corporation and a taxable Canadian corporation. The Trust holds the xxxxxxxxxx non-voting shares of DC as capital property.

3. DC is a private corporation and a taxable Canadian corporation which is governed by the provisions of the BCA. The issued and outstanding capital of DC consists of XXXXXXXXXX voting shares and XXXXXXXXXX non-voting shares. The XXXXXXXXXX and XXXXXXXXXX shares of DC have the same rights and privileges except that the Class B shares of DC are non-voting. Each of Settlor A and Settlor B holds 50% of the XXXXXXXXXX shares of DC, while the XXXXXXXXXX nonvoting shares of DC are held by the Trust.

DC's assets currently consist of XXXXXXXXXX.

4. The manner in which the property contributed by Settlor A and Settlor B to the Trust as described in paragraph 1 above has come to be held by the Trust as XXXXXXXXXX non-voting shares of DC is described below.

The XXXXXXXXXX non-voting shares of Aco. Originally contributed to the Trust were transferred to XXXXXXXXXX ("Eco")(XXXXXXXXXX) on XXXXXXXXXX, pursuant to subsection 85(1) of the Act for consideration including shares of Eco.

The Trust's XXXXXXXXXX non-voting shares of Bco (XXXXXXXXXX) were transferred to XXXXXXXXXX ("Fco") (XXXXXXXXXX) on XXXXXXXXXX, pursuant to subsection 85(1) of the Act for consideration including shares of Fco.

The Trust's XXXXXXXXXX non-voting shares of Cco (XXXXXXXXXX) were transferred to XXXXXXXXXX ("Gco") on XXXXXXXXXX, pursuant to subsection 85(1) of the Act for consideration including shares of Gco.

Between XXXXXXXXXX the Trust received cash and stock dividends on the various shares that it owned at that time. XXXXXXXXXX was subsequently used to acquire shares of corporations which later became XXXXXXXXXX ("lico"), XXXXXXXXXX ("Ico") and XXXXXXXXXX ("Jco").

On XXXXXXXXXX Bco, Eco, Fco, Gco, Hco. Ico and Jco were all amalgamated to form Predecessor DC. On the amalgamation, the Trust received:

(a) XXXXXXXXXX non-voting shares of Predecessor DC in exchange for shares held by the Trust in Eco, Fco (Bco was a subsidiary of Fco) and Gco which were substituted property for the shares which were originally contributed to the Trust by Settlor A and Settlor B as described in paragraph 1 above, and

(b) XXXXXXXXXX non-voting shares of Predecessor DC in exchange for shares held by the Trust in Hco, Ico and Jco.

Some or all of the XXXXXXXXXX non-voting shares of Predecessor DC represent the number of shares that were properties which were substituted for the shares which can be traced to the cash and stock dividends received by the Trust on the various stocks that it owned between xxxxxxxxxx.

Then on XXXXXXXXXX, Predecessor DC amalgamated with XXXXXXXXXX (“Kco") to form DC. Settlor A and Settlor B each held 50% of the issued shares of Kco. The XXXXXXXXXX nonvoting shares of DC currently owned by the Trust were received on the amalgamation in exchange for its shares in Predecessor DC and had, immediately after the amalgamation, a fair market value equal to that of the shares for which they were exchanged. On the amalgamation, Settlor A and Settlor B each received XXXXXXXXXX preferred shares of DC in exchange for his respective shares in Kco. The XXXXXXXXXX shares were the only outstanding XXXXXXXXXX preferred shares of DC. The aggregate PUC of the XXXXXXXXXX shares of DC was $XXXXXXXXX.

5.

XXXXXXXXX

XXXXXXXXX

XXXXXXXXX

In XXXXXXXXXX, DC disposed of:

(a) all of its shares in Amalgamated Aco (a corporation continuing from the amalgamation of XXXXXXXXXX) to XXXXXXXXXX;

(b) all of its shares in XXXXXXXXXX to xxxxxxxxxx; and

(c) all of its shares in XXXXXXXXXX (a corporation continuing from the amalgamation of XXXXXXXXXX) to XXXXXXXXX at fair market value and received cash and near-cash property (XXXXXXXXXX) as consideration.

DC deals at arm's length with each of the purchasers referred to in (a), (b) and (c) above.

XXXXXXXXXX, the company referred to in (b) above, was a subsidiary wholly-owned corporation of Lco and was acquired by DC from Lco, a subsidiary wholly-owned corporation of DC, at fair market value.

XXXXXXXXX

XXXXXXXXX

XXXXXXXXX

XXXXXXXXX

XXXXXXXXX

6.

XXXXXXXXX

You have advised us that if the '4safe-income determination time" for the winding-up of DC (as described in paragraph 12 below) were immediately before such wind-up, all of the gain inherent in the shares of DC at the time of its winding-up would be attributable to income earned or realized by DC before that safe-income determination time. However, since certain of the transactions referred to in paragraph 5 above may be considered as occurring as part of the series of transactions or events which includes the winding-up of DC, the portion of the gain inherent in the shares of DC at the time of its winding-up will not be wholly attributable to the income earned or realized by DC before the safe-income determination time.

PROPOSED TRANSACTIONS

7. Prior to XXXXXXXXXX, the Trust will incorporate two new corporations under the BCA (hereinafter referred to as NewcoA and NewcoB). Each of NewcoA and NewcoB will be a taxable Canadian corporation and a private corporation. The authorized share capital of each of NewcoA and NewcoB will consist of an unlimited number of common shares. No shares of NewcoA and NewcoB will be issued prior to the transactions described in paragraphs 9 and 10 below, as the case may be.

8. The Trust currently holds a single share certificate representing the XXXXXXXXXX non-voting common shares of DC which it currently holds. The Trust will deliver the single share certificate to DC and request that DC issue four certificates in exchange therefor: one representing XXXXXXXXX non-voting common shares of DC ("Certificate A"); a second representing XXXXXXXXX non-voting common shares of DC ("Certificate B"); a third representing XXXXXXXXXX nonvoting common shares of DC ("Certificate C") ; and a fourth representing XXXXXXXXX non-voting common shares of DC ("Certificate D")

9. Immediately thereafter, the Trust will transfer XXXXXXXXXX non-voting shares of DC (i.e. those represented by Certificates A and B) to NewcoA pursuant to subsection 85(1) of the Act. Of the XXXXXXXXXX non-voting shares of DC so transferred, the trustees will designate XXXXXXXXXX nonvoting shares of DC represented by Certificate A to be property substituted for the shares originally contributed to the Trust by Settlor A. In the event that the trustees can establish that some portion of the XXXXXXXXXX non-voting shares of DC represented by Certificate B:

(a) are not substituted property for shares which can be traced to the cash or stock dividends received by the Trust on the various shares which it owned before XXXXXXXXXX, and

(b) are substituted property for the shares which were originally contributed to the Trust by Settlor A and Settlor B as described in paragraph 1 above,

the trustees will designate such portion of the XXXXXXXXXX non-voting shares of DC represented by Certificate B to be property substituted for the shares originally contributed to the Trust by Settlor A.

In consideration for such transfer, the Trust will receive XXXXXXXXXX common shares of NewcoA in two Certificates:

(a) the NewcoA First Certificate representing xxxxxxxxxx common shares of NewcoA which represent the shares exchanged for the XXXXXXXXXX non-voting shares of DC represented by Certificate A; and

(b) the NewcoA Second Certificate representing xxxxxxxxxx common shares of NewcoA which represent the shares exchanged for the XXXXXXXXXX non-voting shares of DC represented by Certificate B;

having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX non-voting shares of DC so transferred.

NewcoA and the Trust will jointly elect pursuant to subsection 85(1) of the Act, in prescribed form and within the time referred to in subsection 85(6) of the Act, with respect to the transfer of the XXXXXXXXXX non-voting shares of DC to NewcoA. Specifically, the agreed amount in the joint election will not be less than the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) or (ii), and will not exceed the fair market value of the XXXXXXXXXX non-voting shares of DC immediately before the transfer.

Pursuant to subsection XXXXXXXXXX of the BCA, the amount to be added to the stated capital of the NewcoA common shares to be issued as described herein will equal the PUC of the XXXXXXXXX non-voting shares of DC so transferred to NewcoA.

10. Contemporaneously with the transfer described in paragraph 9 above, the Trust will transfer XXXXXXXXXX non-voting shares of DC (i.e. those represented by Certificates C and D) to NewcoB pursuant to subsection 85(1) of the Act. Of the XXXXXXXXX non-voting shares of DC so transferred, the trustees will designate XXXXXXXXXX non-voting shares of DC represented by Certificate C to be property substituted for the shares originally contributed to the Trust by Settlor B. In the event that the trustees can establish that some portion of the XXXXXXXXXX non-voting shares of DC represented by Certificate D:

(a) are not substituted property for shares which can be traced to the cash or stock dividends received by the Trust on the various shares which it owned before XXXXXXXXXX, and

(b) are substituted property for the shares which were originally contributed to the Trust by Settlor A and Settlor B as described in paragraph 1 above,

the trustees will designate such portion of the XXXXXXXXXX non-voting shares of DC represented by Certificate D to be property substituted for the shares originally contributed to the Trust by Settlor B.

In consideration for such transfer, the Trust will receive XXXXXXXXXX common shares of NewcoB in two Certificates:

(a) the NewcoB First Certificate representing the XXXXXXXXXX common shares of NewcoB which represent the shares exchanged for the XXXXXXXXXX non-voting shares of DC represented by Certificate C; and

(b) the NewcoB Second Certificate representing xxxxxxxxxx common shares of NewcoB which represent the shares exchanged for the XXXXXXXXXX non-voting shares of DC represented by Certificate D;

having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX non-voting shares of DC so transferred.

NewcoB and the Trust will jointly elect pursuant to subsection 85(1) of the Act, in prescribed form and within the time referred to in subsection 85(6) of the Act, with respect to the transfer of the XXXXXXXXXX non-voting shares of DC to NewcoB. Specifically, the agreed amount in the joint election will not be less than the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) or (ii), and will not exceed the fair market value of the XXXXXXXXXX non-voting shares of DC immediately before the transfer.

Pursuant to subsection XXXXXXXXXX of the BCA, the amount to be added to the stated capital of the NewcoB common shares to be issued as described herein will equal the PUC of the xxxxxxxxxx non-voting shares of DC so transferred to NewcoB.

11. Immediately following the transfers of property described in paragraphs 9 and 10 above and before XXXXXXXXXX, the Trust will distribute all of its property equally to Settlor A and Settlor B as follows:

(a) the NewcoA First Certificate and the NewcoA Second Certificate representing XXXXXXXXXX common shares of NewcoA, the XXXXXXXXXX shares of X Co., 50% of any of the Trust's cash and near cash assets and XXXXXXXXXX to Settlor A; and

(b) the NewcoB First Certificate and the NewcoB Second Certificate representing XXXXXXXXXX common shares of NewcoB, the XXXXXXXXXX shares of Y Co., 50% of any of the Trust's cash and near cash assets and XXXXXXXXXX to Settlor B;

all in complete satisfaction of their respective capital interests in the Trust. The Trustees will designate that the NewcoA shares which are described in the NewcoA First Certificate will be property which is substituted for the property which was originally contributed to the Trust by Settlor A and that the NewcoB shares which are described in the NewcoB First Certificate will be property which is substituted for the property which was originally contributed to the Trust by Settlor B. In the event that the trustees can Qstablish that some portion of the XXXXXXXXXX common shares of NewcoA and NewcoB represented by the NewcoA Second Certificate and the NewcoB Second Certificate:

(a) are not substituted property for shares which can be traced to the cash or stock dividends received by the Trust on the various shares which it owned before XXXXXXXXXX, and

(b) are substituted property for the shares which were originally contributed to the Trust by Settlor A and Settlor B as described in paragraph 1 above,

the trustees will also designate such portion of the XXXXXXXXXX common shares of NewcoA and NewcoB represented by the NewcoA Second Certificate and the NewcoB Second Certificate to be property substituted for the shares originally contributed to the Trust by Settlor A and Settlor B, as the case may be.

Immediately after the distribution of all of its assets, the Trust will dissolve by operation of law.

12. Subsequent to the distribution of the property of the Trust as described in paragraph 11 above, Settlor A, Settlor B, NewcoA and NewcoB, being all of the shareholders of DC, will pass a shareholders' resolution to wind-up DC pursuant to the provisions of the BCA. DC will, pursuant to subsection 88(2) of the Act, then distribute all of its assets to Settlor A, Settlor B, NewcoA and NewcoB according to their respective share interest in DC.

Prior to the distribution of its property as described above, DC will elect, pursuant to subsection 83(2) of the Act, in prescribed manner and prescribed form that the full amount of any resulting dividend referred to in subparagraph 88(2)(b)(i) of the Act be deemed to be a capital dividend.

Upon receipt of any tax refunds to which DC may subsequently become entitled, DC will distribute such amounts to Settlor A, Settlor B, NewcoA and NewcoB according to their respective share interest in DC. Upon receipt of a clearance certificate pursuant to subsection 159(2) of the Act, Articles of Dissolution of DC will be filed with the XXXXXXXXXX Corporate Registry and DC will be dissolved pursuant to the provisions of the BCA.

PURPOSES OF THE PROPOSED TRANSACTIONS

13. The purpose of the distribution of Trust properties to Settlor A and Settlor B is to facilitate the termination of the Trust prior to XXXXXXXXXX, the date when the Trust would be deemed, by virtue of subsections 104(4) to (5.3), to have disposed of its assets for proceeds of disposition equal to their fair market value.

14. The purpose of winding-up DC is to permit Settlor A and Settlor B to pursue their separate business interests through their respective corporations.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and the purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:

A. Subsection 107(2) of the Act will apply with respect to the distributions of:

(a) the XXXXXXXXXX common shares of NewcoA represented by the NewcoA First Certificate by the Trust to Settlor A; and

(b) the XXXXXXXXXX common shares of NewcoB represented by the NewcoB First Certificate by the Trust to Settlor B;

so that the Trust will be deemed to have disposed of such common shares of NewcoA and NewcoB for proceeds of disposition equal to their cost amount to the Trust immediately before that time. Each of Settlor A and Settlor B will be deemed to have acquired the NewcoA common shares or the NewcoB common shares, as the case may be, so distributed to him at a cost equal to the amount determined under paragraph 107(2)(b) and to have disposed of his capital interest in the Trust for proceeds determined in accordance with paragraph 107(2)(c). For greater certainty, subsection 107(4.1) will not apply to the distributions of property referred to in (a) and (b) hereof.

B. That as a result of the distributions of DC's property to NewcoA, NewcoB, Settlor A and Settlor B, on the winding-up of DC:

(i) pursuant to paragraph 88(2)(b) and subsection 84(2), but subject to (ii) to (iv) herein, NewcoA, NewcoB, Settlor A and Settlor B will be deemed to have received a dividend (the ~ dividend") on their shares of DC equal to the proportion of the amount by which the aggregate fair market value of the property of DC distributed by DC to NewcoA, NewcoB, Settlor A and Settlor B on the winding-up exceeds the amount by which the PUC of the XXXXXXXXXX and XXXXXXXXXX shares of DC, as the case may be, is reduced as a result of the distribution that the number of shares of such class held by NewcoA, NewcoB, Settlor A and Settlor B, as the case may be, is of the number of issued shares of such class outstanding immediately before the distribution;

(ii) pursuant to subparagraph 88(2)(b)(i), such portion of the winding-up dividend referred to in (i) herein as does not exceed DC's CDA determined immediately before the payment of the winding-up dividend shall be deemed, for the purposes of the subsection 83(2) election referred to in paragraph 12 above, to be the full amount of a separate dividend;

(iii)pursuant to subparagraph 88(2)(b)(ii), the portion of the winding-up dividend that is equal to the lesser of:

(A) DC's pre-1972 capital surplus on hand as determined immediately before the payment of the winding-up dividend, and

(B) the amount by which the winding-up dividend exceeds the portion, if any, in respect of which DC will elect under subsection 83(2)

shall be deemed not to be a dividend; and

(iv) pursuant to subparagraph 88(2)(b)(iii), the winding-up dividend, to the extent that it exceeds the portion thereof referred to in (ii) herein that is deemed to be a separate dividend and the portion referred to in (iii) herein that is deemed not to be a dividend, shall be deemed to be a separate dividend that is a taxable dividend.

C. Subsection 55(2) of the Act will not apply to the taxable dividend to be received by each of NewcoA and NewcoB as described in B.(iv) above.

D. Subsection 69(11) will not apply with respect to:

(a) the transfer of the XXXXXXXXXX non-voting shares of DC by the Trust to each of NewcoA and NewcoB as described in paragraphs 9 and 10 above;

(b) the distribution of the common shares of NewcoA by the Trust to Settlor A and the common shares of NewcoB to Settlor B as described in paragraph 11 above; or

(c) the winding-up of DC as described in paragraph 12 above.

E. As a result of the proposed transactions described in paragraphs 7 to 12 above, in and of themselves, subsection 245(2) will not be applied to redetermine the tax consequences confirmed in the rulings given above.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996 and are binding provided that the proposed transactions, other than the dissolution of DC, are completed by XXXXXXXXXX. The above 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.

Comments

1. Based on our understanding of the facts as set out above, it is our opinion that subsection 107(4.1) of the Act will apply with respect to the distributions of:

(a) XXXXXXXXXX common shares of NewcoA. represented by the NewcoA Second Certificate, the XXXXXXXXXX shares of X Co., 50% of any of the Trust's cash assets and the xxxxxxxxxx; and

(b) XXXXXXXXXX common shares of NewcoB represented by the NewcoB Second Certificate, the XXXXXXXXXX shares of Y Co., 50% of any of the Trust's cash assets and XXXXXXXXXX, to the extent that:

(c) the XXXXXXXXXX common shares of NewcoA represented by the NewcoA Second Certificate so distributed by the Trust to Settlor A and the XXXXXXXXXX common shares of NewcoB represented by the NewcoB Second Certificate so distributed by the Trust to Settlor B are shares substituted for the cash and stock dividends received by the Trust prior to XXXXXXXXXX on the various shares that it owned; or

(d) such property so distributed to Settlor A or Settlor B was not directly or indirectly received by the Trust from Settlor A or Settlor B, as the case may be, or was not property substituted for any such property.

2. Nothing in this ruling should be construed as implying that Revenue Canada has agreed to or reviewed:

(a) the determination of the fair market value or ACB of any particular asset or the PUC of any shares referred to herein; or

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

Yours truly,

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