2000 2000-0029971 - Supplemental Ruling

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: Change in facts and proposed transactions.

Position: Supplemental Ruling granted.

Reasons: Repayment transactions have not been completed.

XXXXXXXXXX
XXXXXXXXXX 2000-002997
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 2000

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling #2000-000208 - Additional Information

This is in reply to your letter dated XXXXXXXXXX, wherein you provided additional information with respect to advance income tax ruling #2000-000208 dated XXXXXXXXXX, 2000 (the "2000 Ruling") issued to the above mentioned taxpayer and request that we confirm that such information will not affect the ruling given in the 2000 Ruling. Unless otherwise indicated, all capitalized terms have the meaning given to such terms in the 2000 Ruling.

We understand that the proposed merger of Pubco, XXXXXXXXXX that was described in paragraph 5 of the 2000 Ruling, resulted in an acquisition of control of Cansub by XXXXXXXXXX and a deemed taxation year end of Cansub immediately before the merger. You advise that since the proposed merger closed on XXXXXXXXXX, subsection 249(4) of the Act deemed the taxation year of Cansub which commenced on XXXXXXXXXX to have ended on XXXXXXXXXX, rather than XXXXXXXXXX as contemplated in the 2000 Ruling.

You also indicate that at the time the proposed merger closed (and subsequent to the issuance of the 2000 Ruling), Cansub had made Loans to U.S. Parent, as described in paragraph 6 of the 2000 Ruling, in an aggregate amount of Cdn. $XXXXXXXXXX (US $XXXXXXXXXX) (the "Pre-Merger Loans"). These Pre-Merger Loans represented Cansub's estimated net after-tax earnings (as computed under U.S. tax principles) for the 2000 calendar year determined before the merger closed.

You advise that subsequent to the merger, Cansub may adjust the outstanding balance of the Pre-Merger Loans, if necessary, during a particular calendar quarter in accordance with revised estimates of Cansub's net after-tax earnings (as computed under U.S. tax principles in U.S. dollars) for the 2000 calendar year. As noted in paragraph 6 of the 2000 Ruling, these adjustments may involve Cansub advancing additional funds to U.S. Parent where the revised estimate of Cansub's net after-tax earnings for the 2000 calendar year are increased. Any additional advances made subsequent to the merger are hereinafter referred to as the "Post Merger Loans".

Although the Pre-Merger Loans and certain of the quarterly adjustments described in paragraph 6 of the 2000 Ruling have already occurred, the proposed repayment of these loans as described in paragraphs 8 to 10 of the 2000 Ruling have not yet taken place.

You also advise us that as a result of the deemed year end of Cansub described above, all references to "XXXXXXXXXX" in paragraphs 8 and 10 and in Ruling A of the 2000 Ruling should be replaced by references to "XXXXXXXXXX".

You have also advised us that the facts, proposed transactions and additional information contained in the 2000 Ruling otherwise remain as set out therein.

Notwithstanding the amendments described herein, we confirm that, subject to the conditions set out in the 2000 Ruling, the Ruling A given in the 2000 Ruling, as amended herein, will continue to be binding on the Canada Customs and Revenue Agency ("CCRA") in accordance with the practice outlined in Information Circular 70-6R3, dated December 30, 1996, provided that the proposed transactions are completed in the manner described in the 2000 Ruling, as amended herein, by XXXXXXXXXX.

Yours truly,

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