2001 Ruling 1999-0012963 - Allocation of taxable income earned in a prov

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: (a) Whether subsection 402(7) of the Regulations would apply to deem certain fees paid by a partnership or corporation (which is a joint venturer of an oil and gas project - a Project Owner) as salary? (b) Would the agency relationship between Agentco (a wholly-owned subsidiary of the Project Operator) and the Project Owners be tainted by virtue of the fact that the Project Owners will be indemnified of any damages or losses resulting from Agentco's or the Project Operator's gross negligence or from wilful misconduct of the senior supervisory personnel of Agentco or the Project Operator? (c) XXXXXXXXXX (d) Whether the severance payments would be considered as "salaries and wages" for the purposes of subparagraph 402(3)(a)(ii) of the Regulations? (e) Whether the amounts paid to XXXXXXXXXX would be considered as "salaries and wages" of the Project Owners for the purposes of subparagraph 402(3)(a)(ii) of the Regulations?

Position: (a) No (b) No (c) Yes (d) No (e) No

Reasons:

(a) Based on the jurisprudence and based on the facts, it appears that the normalcy test in respect of performing services by the taxpayers' employees under subsection 402(7) of the Regulations would not be met. Furthermore, the better view is that this subsection would be inapplicable to the corporate partners of a partnership which is a Project Owner. XXXXXXXXXX . We had informed the representative of the taxpayers about this conclusion, and we were told that the initially proposed transactions of setting up a servicing company to provide services XXXXXXXXXX in respect of the Project would be scrapped.

(b) XXXXXXXXXX based on the fact that the instance of gross negligence and wilful misconduct would be very rare, it is arguable that the indemnity provided in the agency agreement would not taint the agency relationship.

(c) XXXXXXXXXX

(d) The term "salary or wages" is defined in subsection 248(1) of the Act to exclude any superannuation or pension benefits or retiring allowances. The term "retiring allowances" is defined in subsection 248(1) of the Act to include any amount received in respect of loss of an office or employment of a taxpayer, which could arguably include severance payments. Accordingly, it is our view that the severance payments would not be considered as "salaries and wages" for the purposes of subparagraph 402(3)(a)(ii) of the Regulations.

(e) XXXXXXXXXX The amounts paid in respect of Project Employees and Project Secondees would be considered as "salaries and wages" paid by Agentco on behalf of the Project Owners. However, the amounts paid to a Third Party Contractor or in respect of employees or the Project Operator who are not Project Secondees, would not be considered as "salaries and wages" of the Project Owners for the purposes of subparagraph 402(3)(a)(ii) of the Regulations because the employees of the Third Party Contractors and employees of the Project Operator who are not Project Secondees could not reasonably be considered as employees of the Project Owners.

XXXXXXXXXX 1999-001296

XXXXXXXXXX, 2001

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX, as amended by your letters of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted corporations and partnerships with respect to the XXXXXXXXXX. We acknowledge our subsequent telephone conversations (XXXXXXXXXX) and your additional information and documents provided to us.

We understand that to the best of your knowledge and that of the taxpayers involved, none of the issues involved in the ruling request is:

(i) dealt with in an earlier return of the taxpayers or a related person;

(ii) being considered by a Tax Services Office or Taxation Centre in connection with a previously filed tax return of the taxpayers or a related person;

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

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

(v) subject of a ruling previously issued by the Income Tax Rulings Directorate.

We also understand that the above-noted corporations and the corporate partners of the above-noted partnerships file their income tax returns at the XXXXXXXXXX Tax Centre and are served by the XXXXXXXXXX Tax Services Office, and their account numbers are as follows:

Account No.

XXXXXXXXXX

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

Definitions

Unless otherwise stated, the terms and expressions used herein are defined as follows:

XXXXXXXXXX

"A Co." means XXXXXXXXXX.

"Act" means the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended to the date hereof.

"Agency Agreement" means the XXXXXXXXXX Agreement to be entered into among Agentco and the Project Owners as described in 15 below.

"Agentco" means the new corporation to be incorporated as described in 14 below.

"Agentco's Account" means the Canadian dollar account maintained by Agentco for the purpose of paying the Employment Costs and Secondment Costs and the bank charges in respect of this bank account.

"B Co." means XXXXXXXXXX.

"Balance Amount" means any positive balance in Agentco's Account at the close of any banking day as described in 18 below.

"CBCA" means the Canada Business Corporations Act.

"C Co." means XXXXXXXXXX.

"Canadian partnership" has the meaning assigned to the expression by subsection 102(1) of the Act.

"D Co." means XXXXXXXXXX.

"E Co." means XXXXXXXXXX.

"Employment Costs" means the salaries, wages, benefits, bonuses, severance payments and payroll remittances incurred and paid by Agentco in respect of the Project Employees.

"Facility X" means the XXXXXXXXXX.

"F Co." means XXXXXXXXXX.

XXXXXXXXXX

"fiscal period" has the meaning assigned to the expression by subsection 249.1(1) of the Act.

"G Co." means XXXXXXXXXX.

"Gross Negligence" means XXXXXXXXXX.

"H Co." means XXXXXXXXXX.

"I Co." means XXXXXXXXXX.

"J Co." means XXXXXXXXXX .

"Joint Venture" means the joint venture formed by the Project Owners in developing Project A as described in 10 below.

"K Co." means XXXXXXXXXX.

"L Co." means XXXXXXXXXX.

"M Co." means XXXXXXXXXX.

"Management Committee" means the management committee which is composed of representatives of each Project Owner, XXXXXXXXXX.

XXXXXXXXXX

"non-resident-owned investment corporation" has the meaning assigned to the expression by subsection 133(8) of the Act.

XXXXXXXXXX

"Oil Field A" means XXXXXXXXXX.

"Oil Field B" means XXXXXXXXXX.

"Operator's Account" means the Canadian dollar account maintained by the Project Operator XXXXXXXXXX.

"Operator Liabilities" means XXXXXXXXXX.

"Owner's Account" means, in respect of a Project Owner, the Canadian dollar account maintained by the Project Owner XXXXXXXXXX.

"XXXXXXXXXX S" means the XXXXXXXXXX.

"XXXXXXXXXX T" means XXXXXXXXXX.

"XXXXXXXXXX U" means XXXXXXXXXX.

"XXXXXXXXXX V" means XXXXXXXXXX.

"permanent establishment" has the meaning assigned to the expression by subsection 400(2) of the Regulations.

"private corporation" has the meaning assigned to the expression by subsection 89(1) of the Act.

"Production Operation" means the day-to-day operation of the Production Facilities and the operation of Oil Field A.

"Production Facilities" means the facilities used in the production of the Project Substances as described in 9 below.

"Project A" means the XXXXXXXXXX Project consisting of the Oil Field A development project XXXXXXXXXX.

"Project Agreement" means the XXXXXXXXXX in respect of Project A.

"Project B" means the XXXXXXXXXX Project.

"Project Employees" means such personnel hired and employed by Agentco that are required for Project A in its Production Operation, as determined from time to time by the Project Operator.

"Project Interest" means the respective ownership and participating interest of each Project Owner in Project A.

XXXXXXXXXX

"Project Operator" means the designated operator of Project A pursuant to the Project Agreement, currently A Co.

"Project Owner" means XXXXXXXXXX a joint venture participant in Project A and which is the beneficial owner of the properties of Project A as described in 10 below.

"Project Secondees" means such personnel, other than Project Employees, that are required for Project A for its Production Operation, as determined from time to time by the Project Operator, and who have been seconded to Agentco by the Project Owners or their affiliates (XXXXXXXXXX) to work on Project A.

"Project Substances" means crude oil and natural gas in all geological formations and zones within Oil Field A.

XXXXXXXXXX

"public corporation" has the meaning assigned to the expression by subsection 89(1) of the Act.

"Regulations" means the Income Tax Regulations to the Act as amended to the date hereof.

"Secondment Costs" means the amounts of reimbursement made by Agentco to the Project Owners or their affiliates in respect of the salaries, wages, benefits, bonuses, severance payments and payroll remittances incurred and paid by the Project Owners or their affiliates in respect of the Project Secondees.

"Service Agreement" means the XXXXXXXXXX Agreement to be entered into between A Co. and Agentco as described in 17 below.

"taxable Canadian corporation" has the meaning assigned to the expression by subsection 89(1) of the Act.

"taxation year" has the meaning assigned to the expression by subsection 249(1) of the Act.

"Third Party Contractor" means a contractor (other than the Project Operator, Agentco or any Project Owner, or an affiliate thereof) that provides the other services in respect of the Production Operation as referred to in 21 below.

"Total Costs" means the aggregate amount of the Employment Costs, Secondment Costs and bank charges incurred and paid by Agentco in respect of the Production Operation as described in 18 below.

"Wilful Misconduct" means an XXXXXXXXXX.

Facts

1. XXXXXXXXXX S is a XXXXXXXXXX. The purpose of XXXXXXXXXX S is to participate in Project A with a view to producing crude oil from Project A. A Co. owns a XXXXXXXXXX A Co. is a taxable Canadian corporation and a public corporation subject to the CBCA. XXXXXXXXXX A Co. is engaged, directly and indirectly, in the exploration for, and the development, production and marketing of, petroleum, natural gas and related products within and outside of Canada, XXXXXXXXXX B Co. is a taxable Canadian corporation subject to the CBCA, and is a wholly-owned subsidiary of A Co.

2. XXXXXXXXXX T is a XXXXXXXXXX T is engaged in the exploration for, and the development, production, transportation and marketing of, petroleum, natural gas and related products XXXXXXXXXX . C Co. owns a XXXXXXXXXX interest in XXXXXXXXXX T and D Co. owns a XXXXXXXXXX interest in XXXXXXXXXX T. C Co. is a taxable Canadian corporation and a private corporation subject to the CBCA and is indirectly wholly-owned by XXXXXXXXXX corporation that is not resident in Canada for purposes of the Act. D Co. is also a taxable Canadian corporation and a private corporation subject to the CBCA and is wholly-owned by C Co. Both C Co. and D Co. are engaged, directly and indirectly, in the exploration for, and the development, production and marketing of, petroleum, natural gas and related products in Canada, XXXXXXXXXX.

3. E Co. is a taxable Canadian corporation and a private corporation subject to the CBCA. The controlling shareholder of E Co. is XXXXXXXXXX corporation that is not resident in Canada for purposes of the Act and that is engaged in the exploration for, and the development and production of, petroleum, natural gas and related products throughout the world. E Co. is engaged in the exploration, development and production of petroleum and natural gas in Canada, XXXXXXXXXX.

4. F Co. is a taxable Canadian corporation and a public corporation subject to the CBCA. F Co. is a wholly-owned subsidiary of XXXXXXXXXX corporation that is not resident in Canada for purposes of the Act. F Co. is engaged, directly and indirectly, in the exploration for, and the development, production, transportation and marketing of, petroleum, natural gas and related products in Canada, XXXXXXXXXX.

5. XXXXXXXXXX U is a XXXXXXXXXX. The purpose of XXXXXXXXXX U is to participate in Project A with a view to producing crude oil from Project A. G Co. owns approximately XXXXXXXXXX interests in XXXXXXXXXX U, and H Co. owns approximately XXXXXXXXXX interests in XXXXXXXXXX U. G Co. is a taxable Canadian corporation subject to the XXXXXXXXXX. H Co. is a taxable Canadian corporation subject to the XXXXXXXXXX. G Co. is a wholly-owned subsidiary of XXXXXXXXXX, a taxable Canadian corporation and a public corporation, and H Co. is a wholly-owned subsidiary of G Co. Both G Co. and H Co. are engaged in the exploration for, and the development, production and marketing of, petroleum, natural gas and related products in Canada, XXXXXXXXXX.

6. I Co. is a taxable Canadian corporation and a private corporation subject to the XXXXXXXXXX. I Co. is wholly-owned by XXXXXXXXXX, which is a corporation resident in Canada and is a XXXXXXXXXX corporation. All of the shares of XXXXXXXXXX are owned by XXXXXXXXXX, a corporation that is resident in XXXXXXXXXX, and by XXXXXXXXXX I Co. is engaged in the exploration for, and the development, production and marketing of, petroleum, natural gas and related products in Canada, XXXXXXXXXX.

7. XXXXXXXXXX V is a XXXXXXXXXX V is engaged in the exploration for, and the development, production and marketing of, petroleum, natural gas and related products in Canada, XXXXXXXXXX. J Co. owns a XXXXXXXXXX interest in XXXXXXXXXX V, and each of K Co., L Co. and M Co. owns a XXXXXXXXXX interest in XXXXXXXXXX V. Each of these corporations is wholly-owned, directly or indirectly, by XXXXXXXXXX corporation that is not resident in Canada for purposes of the Act.

Project A

8. Oil Field A is a XXXXXXXXXX oil field situated in XXXXXXXXXX . Oil Field A is XXXXXXXXXX of another XXXXXXXXXX oil field, Oil Field B. Oil Field A and Oil Field B are located in XXXXXXXXXX Oil Field B has been in production since XXXXXXXXXX. However, Oil Field A has not yet been in production.

9. Project A consists of the exploration for, and the development, gathering, production, processing, treating and storage of, petroleum, the ownership, construction, commissioning and operation of facilities that will enable the production of crude oil from Oil Field A, XXXXXXXXXX. The production facilities of Project A (the "Production Facilities") consist of XXXXXXXXXX. The construction of Project A is approximately XXXXXXXXXX% complete.

10. The Project Owners have entered into a joint venture in respect of Project A (the "Joint Venture") pursuant to the Project Agreement. Rights to explore for, develop and produce petroleum, natural gas and related hydrocarbons from Oil Field A XXXXXXXXXX are co-owned by the Project Owners. The Project Owners and their respective Project Interests are as follows:

Project Interests

XXXXXXXXXX S XXXXXXXXXX%
XXXXXXXXXX T XXXXXXXXXX%
XXXXXXXXXX U XXXXXXXXXX%

E Co. XXXXXXXXXX%

F Co. XXXXXXXXXX%

I Co. XXXXXXXXXX%

XXXXXXXXXX V XXXXXXXXXX
_____
100%

Pursuant to the Project Agreement, the rights, duties, obligations and liabilities of the Project Owners are separate and neither joint nor joint and several. The Project Owners disclaim any intention to create by the Project Agreement any partnership, association, trust, or fiduciary relationship, or to provide for the joint sale or marketing of substances produced from Oil Field A except the relationship between the Project Operator and the Project Owners pursuant to the Project Agreement. Neither the Project Agreement nor any of the other agreements in respect of Project A will be construed or considered as creating any such partnership, association, trust or fiduciary relationship. XXXXXXXXXX.

11. XXXXXXXXXX.

Proposed Transactions

12. The Production Facilities will be owned by each of the Project Owners in proportion to their Project Interests. Ownership of these facilities will constitute a permanent establishment in XXXXXXXXXX because of the reference to an "oil well" in the preamble to subsection 400(2) of the Regulations and because of the reference to "substantial machinery or equipment" in paragraph 400(2)(e) of the Regulations. Project Substances produced from Oil Field A will also be owned by each of the Project Owners in proportion to their Project Interests.

13. A Co. has been appointed as the initial Project Operator. In accordance with the instructions, guidelines, policies, directives and budgets received from the Management Committee, the Project Operator will have exclusive charge of and control over the conduct of all operations of Project A, including the Production Operation within the production strategy which has been agreed to by the Project Owners. The Project Operator will neither gain a profit nor suffer a loss as a result of being the Project Operator and conducting the operations of Project A on behalf of the Project Owners, except in the situation wherein Operator Liabilities are incurred, in which case, the Project Owners will be indemnified by the Project Operator of the Operator Liabilities.

14. A new corporation, referred to herein as "Agentco", will be incorporated under the CBCA. The authorized share capital of Agentco will consist of one class of shares all of which will be owned by A Co. Agentco will have its head office in XXXXXXXXXX and will file its income tax returns with the XXXXXXXXXX Tax Centre and will be served by the XXXXXXXXXX Tax Services Office.

15. Agentco will enter into the Agency Agreement with the Project Owners, whereby Agentco will be appointed as the agent of the Project Owners to hire and employ Project Employees and to enter into and administer secondment agreements with seconding employers and Project Secondees, and to provide the Project Operator with Project Employees and Project Secondees and the supervision and control thereof for the Production Operation in accordance with the Service Agreement. All actions of Agentco will be considered as actions of the Project Owners as principals. Agentco will not carry on any business of any kind or nature other than as described in this paragraph and matters necessarily incidental thereto. Agentco will neither make any profit nor suffer any loss in respect of performing the above-noted functions.

16. Subject to paragraph 21 below, the Production Operation will be carried out by a combination of Project Employees and Project Secondees. With respect to Project Employees, Agentco will directly pay the Employment Costs and then recover them from the Project Owners in proportion to their Project Interests through the Project Operator. A particular Project Owner or an affiliate thereof, as the case may be, will also directly pay the salaries, wages, benefits, bonuses, severance payments and payroll remittances in respect of Project Secondees who have been employed by that particular Project Owner before their secondment to Agentco. Agentco will then reimburse the respective Project Owner for such costs. The aggregate reimbursement amounts (the "Secondment Costs") will then be included in Agentco's regular billings to the Project Owners who will bear the costs in proportion to their Project Interests through the Project Operator.

17. A Co. and Agentco will enter into the Service Agreement, whereby Agentco, under the supervision of the Project Operator, will carry out the Production Operation using Agentco's Project Employees and Project Secondees. Pursuant to the Service Agreement, Agentco will have supervision and control over Project Employees and Project Secondees. However, the Project Operator will have supervision and control over all Production Operation including, for greater certainty, instructing Agentco in relation to activities carried out by Agentco's Project Employees and Project Secondees. In carrying out its duties and obligations under the Service Agreement, Agentco will at all times adhere to such policies, guidelines and directives established from time to time by the Project Operator. XXXXXXXXXX. The Project Operator will provide the equipment, materials and other facilities required by Project Employees and Project Secondees in connection with their work on the Production Operation. The Project Operator in conducting or arranging for the Production Operation is acting on behalf of the Project Owners and therefore the Project Owners will be entitled to certain benefits of the Service Agreement. Further to 12 above, offices where Project Employees and Project Secondees will normally report to work (XXXXXXXXXX ) will constitute a permanent establishment in XXXXXXXXXX, because of the reference to an "office" in the preamble to subsection 400(2) of the Regulations.

18. The Project Operator will pay to Agentco on a daily basis an amount equal to the aggregate of the Employment Costs and Secondment Costs and bank charges incurred and paid by Agentco (the "Total Costs"). The amount so paid by the Project Operator will be included in the daily Joint Venture billings from the Project Operator to the Project Owners. The Total Costs will be reimbursed to Agentco by way of a transfer of funds to Agentco's Account from the Operator's Account, and then the same aggregate amount will be reimbursed to the Project Operator by way of transfer of funds to the Operator's Account from all of the Owner's Accounts in proportion to their Project Interests. If at the close of any banking day, after taking into account any payments made by the Project Operator to Agentco, Agentco's Account has a positive balance (the "Balance Amount"), Agentco will pay the Balance Amount directly to the Project Owners by way of a transfer of funds from the Agentco's Account to the Owner's Accounts in proportion to their Project Interests without passing through the Operator's Account.

19. The services that will be provided by Agentco's Project Employees and Project Secondees to the Project Owners in carrying out the Production Operation under the Service Agreement and Agency Agreement will include the following:

XXXXXXXXXX.

20. The Project Operator will provide an indemnity to the Project Owners whereby the Project Operator will indemnify the Project Owners for losses, damages or liabilities caused by the Gross Negligence of Agentco or the Wilful Misconduct of certain senior Project Employees or Project Secondees. The effect will be that the Project Owners, as principals, will be liable for any and all costs, damages and liabilities of Agentco except that if they are caused by the Gross Negligence of Agentco or by the Wilful Misconduct of these senior Project Employees or Project Secondees, the Project Owners will have a right of indemnification from the Project Operator.

21. Besides the services provided by Project Employees and Project Secondees as described in 16 and 19 above, the other services in respect of the Production Operation will be performed by Third Party Contractors and their employees, including the provision of XXXXXXXXXX through third party contracts with the Project Operator, or will be performed by employees of the Project Operator, who are not Project Secondees. The Project Operator will pay Third Party Contractors for the services provided by employees of such contractors. Similarly, the Project Operator will make payments in respect of employees of the Project Operator, who are not Project Secondees, for their services provided in respect of the Production Operation. For greater certainty, "Employment Costs" and Secondment Costs" as referred to in this ruling letter do not include any payments (for these other services) made by the Project Operator to Third Party Contractors or in respect of employees of the Project Operator, who are not Project Secondees.

Purpose of Proposed Transactions

22. The purpose of the Proposed Transactions is to allow the Project Owners to be able to arrange for the employment of employees to work on Project A in a coordinated fashion through the use of an agent and in a manner that will allow the salaries and wages of the employees who perform the duties on or in respect of Project A to be salaries and wages of the Project Owners for the purpose of subparagraph 402(3)(a)(ii) of the Regulations.

23. The purpose of the share structure of Agentco is to allow A Co. to be able to centralize corporate control of Agentco through ownership of the shares in Agentco, thereby allowing A Co. to appoint the Board of Directors of Agentco and, through the Board, appoint the management of Agentco.

24. The purpose of the Service Agreement is to identify exactly what work Agentco's Project Employees and Project Secondees will be doing on Project A and to coordinate the role of Agentco and the functions to be performed by Agentco with the responsibilities of the Project Operator.

Rulings Given

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

In calculating "taxable income earned in the year in a province" for the purposes of XXXXXXXXXX Part IV of the Regulations,

(A) where a Project Owner is a corporation, the aggregate of the Employment Costs and Secondment Costs incurred and paid by Agentco in a taxation year of the corporation (to the extent the amounts paid to Project Employees and Project Secondees would qualify as "salary or wages" to them within the meaning of the expression in subsection 248(1) of the Act, and net of any Balance Amount relating to such "salary or wages") in respect of Project Employees and Project Secondees of a permanent establishment of the corporation or Agentco in XXXXXXXXXX multiplied by that corporation's Project Interest will be considered, for the purposes of subparagraph 402(3)(a)(ii) of the Regulations, to be salaries and wages paid by the corporation in that year to employees of the permanent establishment in XXXXXXXXXX;

(B) where a Project Owner is a partnership and a corporation is a partner of the partnership, pursuant to subsection 402(6) of the Regulations, the aggregate of the Employment Costs and Secondment Costs incurred and paid by Agentco in a fiscal period of the partnership ending in or coinciding with a taxation year of the corporation (to the extent the amounts paid to Project Employees and Project Secondees would qualify as "salary or wages" to them within the meaning of the expression in subsection 248(1) of the Act, and net of any Balance Amount relating to such "salary or wages") in respect of Project Employees and Project Secondees of a permanent establishment of the partnership or Agentco in XXXXXXXXXX multiplied by that partnership's Project Interest attributable to the corporation in proportion to its interest in the partnership will be considered, for the purposes of subparagraph 402(3)(a)(ii) of the Regulations, to be salaries and wages paid by the corporation in that year to employees of the permanent establishment in XXXXXXXXXX; and

(C) the amounts paid by the Project Operator to a Third Party Contractor or in respect of employees of the Project Operator who are not Project Secondees as described in 21 above, will not be considered as salaries and wages of a Project Owner for the purposes of subparagraph 402(3)(a)(ii) of the Regulations.

The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and Regulations which, if enacted into law, could have an effect on the rulings provided herein. Nothing in this advance income tax ruling should be construed as implying that the Canada Customs and Revenue Agency has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R4 dated January 29, 2001 as amended and is binding on the Canada Customs and Revenue Agency provided that the Service Agreement and Agency Agreement are entered into by XXXXXXXXXX.

Yours truly,

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