CRA rules on the elimination of a REIT sub trust through s. 107.4 transfer to a new “in house” MFT and a s. 132.2 merger of MFT into REIT

CRA has ruled respecting the elimination of an open-end listed mutual fund trust (which likely is a REIT) of its subtrust on a rollover basis.  First, the subtrust will transfer its assets (being units of subsidiary real estate partnerships and the shares of the GPs) under s. 107.4 to a newly-formed subsidiary unit trust ("MFT") of the REIT, with a small percentage of MFT's units then being distributed to the REIT unitholders in order to qualify MFT as a mutual fund trust.  MFT then will be merged into the REIT under s. 132.2.  These same general mechanics have been ruled on previously (see s. 132.2 – qualifying exchange).

It was contemplated that the transaction would be implemented without a plan of arrangement (e.g., the second stage of the s. 132.2 merger is to be implemented through a unilateral redemption of units).  The proposed transactions specify that the MFT’s Canadian-resident trustee will not be a director of any of the GPs.

Neal Armstrong.  Summary of 2013 Ruling 2013-0492731R3, amended by 2014 Supplement 2014-0518511R3 under s. 107.4(1).