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:
1. Will the interposition of a foreign holdco between a Canadian holdco and foreign properties affect the ruling given in file 1999-001279 that as long as the investment by the trust in shares and debt of the Canadian holdco is less than 10% then subparagraph 108(2)(b)(v) will not be offended? 2. Will the favourable GAAR ruling be affected?
Position:
1. No. 2. No.
Reasons:
1. The test in subparagraph 108(2)(b)(v) is with regard to the property owned directly by the trust. Subparagraph 108(2)(b)(v) is limited to the first tier of investment. 2. The issues considered with respect to the GAAR ruling are not affected by the additional transaction.
XXXXXXXXXX
XXXXXXXXXX 2000-002834
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear Sirs:
Re: Advance Income Tax Ruling issued XXXXXXXXXX, 2000 (our file 1999-001279)
XXXXXXXXXX (the "Trust")
This is in reply to your letter of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayer.
In this letter, references to statutes are references to the Income Tax Act R.S.C. 1985 (5th Supp.), as amended (the Act), unless otherwise specifically stated.
Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:
Relevant Facts
1. The relevant facts are as stated in 1 through 13 of the advance income tax ruling 1999-001279 (the "First Ruling") which was issued by this directorate on XXXXXXXXXX, 2000 and also include the proposed transactions described in 14 through 18 in the First Ruling which are now completed. The Definitions as contained in the First Ruling apply for purposes of this letter.
Proposed Transactions
2. A new corporation ("USHoldco") will be formed under the laws of a state of the United States. USHoldco will not be resident in Canada for purposes of the Act.
3. Holdco will transfer all of the shares of USCos which it presently owns to USHoldco in exchange for shares of USHoldco and no other consideration, pursuant to subsection 85.1(3) of the Act.
4. Each of Aco, Bco, and Cco will transfer the shares of the LLCs currently owned by Aco, Bco and Cco, respectively, to USHoldco in exchange for shares of USHoldco and no other consideration, pursuant to subsection 85.1(3) of the Act. After these share transfers, all of the USCos and LLCs, which were previously owned directly by Holdco, Aco, Bco, and Cco, will be owned directly by USHoldco, and USHoldco will be owned directly by Holdco, Aco, Bco and Cco.
5. As contained in 19 and 20 of the First Ruling.
Purpose of the Proposed Transactions
6. The purpose of the proposed transactions is to simplify U.S. tax compliance procedures and to ease the administrative burden at the U.S. federal and state tax levels.
7. To the best of your knowledge and the knowledge of the Trust, none of the issues relevant to the rulings being requested is:
a) raised in an earlier return filed by the Trust or a related person,
b) being considered by a tax services office or tax center in connection with a previously-filed tax return of the Trust or a related person,
c) under objection by the Trust or a related person,
d) before the courts in respect of the Trust or a related person, or
e) the subject of a ruling, other than the First Ruling, previously issued by the Income Tax Rulings Directorate to the Trust or a related person.
Ruling Given
Provided that the preceding statements constitute a complete and accurate disclosure of all of the related facts, proposed transactions and purpose of the proposed transactions, and provided that the proposed transactions are completed as described above, we rule that the completion of the proposed transactions as described in 2 through 4 above will not, in and of itself, cause the rulings in our First Ruling not to apply.
The above advance income tax ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 and is binding provided that the proposed transactions are completed on or before XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
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