Income Tax Severed Letters

Principal Issues: Whether the wholly-owned subsidiary ("Subsidiary") of a parent corporation ("Parent") owned without interruption the units of a continuing mutual fund trust ("Continuing MFT") that it received ("MFT Units") in exchange for the share that it held in the capital stock of a mutual fund corporation ("MFC Share") as a result of a qualifying exchange undertaken pursuant to subsection 132.2(1) ("Qualifying Exchange") between the time Parent last acquired control of Subsidiary ("Acquisition of Control Date"), and the time Parent acquired the MFT Units ("Distribution Date") on a vertical amalgamation ("Uninterrupted Ownership Requirement").

Position: No.

Reasons: The wording of paragraph 88(1)(c) and section 132.2 does not include a continuity rule and a substituted property rule intended to expand or otherwise alter the scope of the Uninterrupted Ownership Requirement. Moreover, the context and the purpose underlying paragraph 88(1)(c) and section 132.2 do not support the view that the MFT Units are intended to be the continuation of the MFC Share such that the Subsidiary could be viewed to have owned the MFT Units without interruption between the Acquisition of Control Date and the Distribution Date.