2000 Ruling 2000-0027373 - Term Preferred Shares

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: Amendment to facts and request for extension.

Position: Okay.

Reasons: Does not affect the ruling given in file # 992747.

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Attention: XXXXXXXXXX

XXXXXXXXXX, 2000

Dear Sirs:

Re: XXXXXXXXXX - Advance Income Tax Ruling - Business Number XXXXXXXXXX

This is in response to your letter of XXXXXXXXXX, requesting an extension of time for completing the proposed transactions in the advance income tax ruling (File # 992747) (the "Ruling") issued to your firm on behalf of the above-noted taxpayers on XXXXXXXXXX, 1999. We also acknowledge receipt of your letter of XXXXXXXXXX.

You have advised us that the amalgamation referred to in paragraph 16 of the Ruling occurred on XXXXXXXXXX and that XXXXXXXXXX ("Amalco") is the amalgamated corporation, BCO's business number (XXXXXXXXXX) is now Amalco's business number, the Amalco Debt is currently in excess of $XXXXXXXXXX and the intention of Amalco is to subscribe for Preferred Shares for an aggregate subscription price of not more than $XXXXXXXXXX. Accordingly, you have requested the following amendments to the proposed transactions.

The Ruling is amended as follows:

1. Paragraph 19 is deleted and replaced with the following:

The dividend rate for the Preferred Shares will be a spread over Amalco's cost of funds allocated to the capital used to invest in the Preferred Shares.

2. Paragraph 20 is deleted and replaced with the following:

Amalco will subscribe for Preferred Shares for a subscription price of $XXXXXXXXXX per share for an aggregate subscription price not greater than $XXXXXXXXXX and will pay the subscription price by assigning to ACO the equivalent principal amount of debt (which debt consists of BCO Debt which is now owed to Amalco by virtue of the amalgamation of BCO and CCO and advances made by Amalco to ACO subsequent to that amalgamation, referred to as "Amalco Debt"). The Amalco Debt so assigned will cease to exist upon the assignment thereof because the interests of ACO as both debtor and creditor merge. ACO and Amalco will jointly elect in prescribed form and in accordance with subsection 85(6) of the Act to have the provisions of subsection 85(1) of the Act apply to the assignment of the Amalco Debt in consideration for the issuance of the Preferred Shares.

3. Paragraph 21 is deleted and replaced with the following:

The remaining Amalco Debt will be repaid in accordance with the terms thereof as amended from time to time by mutual consent with interest thereon at a spread over Amalco's'cost of funds allocated to the capital used to lend or advance to ACO.

We confirm that the above amendments will not affect the rulings given, except to substitute Amalco for BCO in Ruling A, and that they will continue to be binding on the Agency in the manner set forth in the Ruling provided that the proposed transactions are completed by XXXXXXXXXX.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch