2000 Ruling 2000-0031583 - Reduction in PUC of Public Corp.

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: Reduction of paid-up capital in a public corporation

Position: Amount paid not received as a dividend by recipient

Reasons: Reduction in paid-up capital made in the course of the reorganization of the public corporation's business

XXXXXXXXXX
XXXXXXXXXX              2000-003158
XXXXXXXXXX
                              XXXXXXXXXX
Attention:  XXXXXXXXXX 

XXXXXXXXXX, 2000

Dear Sirs:

Re: XXXXXXXXXX ("Holdco")
Advance Income Tax Ruling

We are writing in response to your letter of XXXXXXXXXX in which you requested advance income tax rulings on behalf of the above-noted taxpayer. We acknowledge receipt of your letters of XXXXXXXXXX and our telephone conversations in connection herewith.

We understand that to the best of your knowledge and that of Holdco, none of the issues involved herein:

(a) is in an earlier return of Holdco or a related person;

(b) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of Holdco or a related person;

(c) is under objection by Holdco or a related person;

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

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

You advised that the proposed transactions described herein, will have no impact on outstanding tax liabilities of Holdco or a related person.

DEFINITIONS

In this letter unless otherwise expressly stated:

(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;

(b) "ACB" means "adjusted cost base" and has the meaning assigned by section 54;

(c) "affiliated persons" has the meaning set out in subsection 251.1(1);

(d) "Amalco" has the meaning set out in Paragraph 37;

(e) "Amalco Common Shares" has the meaning set out in Paragraph 37;

(f) "XXXXXXXXXX/Aco" means XXXXXXXXXX as described in Paragraph 19;

(g) "XXXXXXXXXX/Aco Common Shares" has the meaning set out in Paragraph 20;

(h) "XXXXXXXXXX" has the meaning set out in Paragraph 32;

(i) "Common Shares" has the meaning set out in Paragraph 4;

(j) "XXXXXXXXXX/Bco" means XXXXXXXXXX, as described in Paragraph 23;

(k) "XXXXXXXXXX/Bco Common Shares" has the meaning set out in Paragraph 24;

(l) "Financing Shares" means shares of XXXXXXXXXX/Fco issued by it for cash consideration of less than XXXXXXXXXX per share;

(m) "Holdco" means XXXXXXXXXX, as described in Paragraph 1;

(n) "XXXXXXXXXX/Cco" means XXXXXXXXXX, as described in Paragraph 11;

(o) "XXXXXXXXXX/Cco Common Shares" has the meaning set out in Paragraph 12;

(p) "XXXXXXXXXX/Dco" means XXXXXXXXXX, as described in Paragraph 27;

(q) "XXXXXXXXXX/Dco XXXXXXXXXX" has the meaning set out in Paragraph 28;

(r) "XXXXXXXXXX Business" has the meaning set out in Paragraph 36;

(s) "Newco" has the meaning set out in Paragraph 34;

(t) "Newco Shares" has the meaning set out in Paragraph 34;

(u) "Paragraph" refers to a numbered paragraph in this letter;

(v) "public corporation" has the meaning assigned by subsection 89(1);

(w) "PUC" means "paid-up capital" and has the meaning assigned by subsection 89(1);

(x) "Shareholders" has the meaning set out in Paragraph 5;

(y) "stated capital" has the meaning assigned by the XXXXXXXXXX;

(z) "Subco" has the meaning set out in Paragraph 35;

(aa) "Subsidiary Shares" has the meaning set out in Paragraph 36;

(bb) "tax benefit" has the meaning set out in subsection 245(1);

(cc) "taxable Canadian corporation" has the meaning assigned by subsection 89(1);

(dd) "XXXXXXXXXX/Eco" means XXXXXXXXXX, as described in Paragraph 15;

(ee) "XXXXXXXXXX/Eco Common Shares" has the meaning set out in Paragraph 16;

(ff) "XXXXXXXXXX/Fco" means XXXXXXXXXX, as described in Paragraph 33; and

(gg) XXXXXXXXXX.

In this letter unless otherwise stated, each reference to an amount expressed in dollars is a reference to Canadian dollars.

FACTS

1. Holdco was incorporated under the XXXXXXXXXX Business Corporations Act, XXXXXXXXXX, as amended, on XXXXXXXXXX and was continued under the XXXXXXXXXX, on XXXXXXXXXX. Holdco is a taxable Canadian corporation and public corporation.

Holdco is a holding company whose principal assets are shares of its wholly-owned subsidiary companies. Each such subsidiary company is directly or indirectly engaged in the XXXXXXXXXX.

2.. Holdco's federal tax account number is XXXXXXXXXX and it files its tax returns at the XXXXXXXXXX Tax Centre.

3. Holdco's fiscal period is XXXXXXXXXX.

4. The authorized share capital of Holdco consists of an unlimited number of common shares (the "Common Shares") with no par value. As at XXXXXXXXXX Common Shares were issued and outstanding, of which approximately XXXXXXXXXX Common Shares were held in escrow pending release on XXXXXXXXXX. In addition, as at XXXXXXXXXX, there were outstanding options to purchase an aggregate of XXXXXXXXXX Common Shares granted in the ordinary course to directors, officers, employees and consultants under Holdco's stock option plan.

5. The holders of the Common Shares (the "Shareholders") are entitled to receive, on a pro rata basis, such dividends as may be declared by the directors of Holdco. In the event of the liquidation, dissolution, or winding-up of Holdco, the Shareholders are entitled to receive, on a pro rata basis, all of the assets of Holdco remaining after payment of all its liabilities. The Common Shares are entitled to one vote per share.

No Shareholder is an affiliated person with respect to Holdco, and no Shareholder will at the end of the period that begins XXXXXXXXXX days before and ends XXXXXXXXXX days after the transfer referred to in paragraph 36 below, be an affiliated person with respect to Holdco.

6. The stated capital and PUC of the issued and outstanding Common Shares is approximately $XXXXXXXXXX per Common Share.

The PUC of the Common Shares arises:

(i) principally, from the issuance of such shares for cash; and

(ii) from the issuance of such shares as consideration for the acquisition of XXXXXXXXXX and shares of corporations holding XXXXXXXXXX.

7. Holdco has not paid dividends on the Common Shares in the last XXXXXXXXXX years.

8. The Common Shares are listed for trading on XXXXXXXXXX Stock Exchange. As at XXXXXXXXXX, the Common Shares traded between $XXXXXXXXXX to $XXXXXXXXXX per share and for the preceding XXXXXXXXXX weeks the Common Shares traded at a range between $XXXXXXXXXX and $XXXXXXXXXX per share.

9. The only persons who, to the knowledge of the directors and officers of Holdco, beneficially own or exercise control or direction over more than 10% of the Common Shares are the trustees of the XXXXXXXXXX and the trustees of the XXXXXXXXXX.

10.

XXXXXXXXXX

The XXXXXXXXXX Businesses

XXXXXXXXXX/Cco

11. XXXXXXXXXX/Cco was incorporated under the laws of XXXXXXXXXX/Cco's fiscal period is XXXXXXXXXX/Cco holds investments relating to XXXXXXXXXX.

12. The authorized share capital of XXXXXXXXXX/Cco consists of XXXXXXXXXX common shares with a par value of US $XXXXXXXXXX per share. As at XXXXXXXXXX shares (the "XXXXXXXXXX/Cco Common Shares") were issued and outstanding. All the issued and outstanding XXXXXXXXXX/Cco Common Shares are held by Holdco.

The first XXXXXXXXXX/Cco Common Shares were issued for US$XXXXXXXXXX and the remaining XXXXXXXXXX/Cco Common Shares were issued in satisfaction of loans owing to Holdco in the amount of US $XXXXXXXXXX.

13. A holder of the XXXXXXXXXX/Cco Common Shares is entitled to receive, on a pro rata basis, such dividends as may be declared by the directors of XXXXXXXXXX/Cco. In the event of the liquidation, dissolution, or winding-up of XXXXXXXXXX/Cco, a holder is entitled to receive, on a pro rata basis, all of the assets of XXXXXXXXXX/Cco remaining after payment of all its liabilities. The XXXXXXXXXX/Cco Common Shares are entitled to one vote per share.

14. The ACB to Holdco of the XXXXXXXXXX/Cco Common Shares is $XXXXXXXXXX. The fair market value of the XXXXXXXXXX/Cco Common Shares, as of XXXXXXXXXX, is approximately US $XXXXXXXXXX.

XXXXXXXXXX/Eco

15. XXXXXXXXXX/Eco was incorporated under the laws of XXXXXXXXXX fiscal period is XXXXXXXXXX/Eco holds investments relating to XXXXXXXXXX.

16. The authorized share capital of XXXXXXXXXX/Eco consists of an unlimited number of common shares (the "XXXXXXXXXX/Eco Common Shares") with no par value. As at XXXXXXXXXX/Eco Common Shares were issued and outstanding. All the issued and outstanding XXXXXXXXXX/Eco Common Shares are held by Holdco.

17. A holder of the XXXXXXXXXX/Eco Common Shares is entitled to receive, on a pro rata basis, such dividends as may be declared by the directors of XXXXXXXXXX/Eco. In the event of the liquidation, dissolution, or winding-up of XXXXXXXXXX/Eco, a holder is entitled to receive, on a pro rata basis, all of the assets of XXXXXXXXXX/Eco remaining after payment of all its liabilities. The XXXXXXXXXX/Eco Common Shares are entitled to one vote per share.

18. The ACB of the XXXXXXXXXX/Eco Common Shares to Holdco is $XXXXXXXXXX. The fair market value of the XXXXXXXXXX/Eco Common Shares, as of XXXXXXXXXX, is approximately US $XXXXXXXXXX.

XXXXXXXXXX/Aco

19. XXXXXXXXXX/Aco was incorporated under the laws of XXXXXXXXXX/Aco's fiscal period is XXXXXXXXXX. XXXXXXXXXX/Aco holds investments relating to XXXXXXXXXX.

20. The authorized share capital of XXXXXXXXXX/Aco consists of XXXXXXXXXX common shares with a par value of US $XXXXXXXXXX per share. As at XXXXXXXXXX shares (the "XXXXXXXXXX/Aco Common Shares") were issued and outstanding. All the issued and outstanding XXXXXXXXXX/Aco Common Shares are held by Holdco.

The first XXXXXXXXXX/Aco Common Shares were issued for US$XXXXXXXXXX and the remaining XXXXXXXXXX/Aco Common Shares were issued in satisfaction of loans owing to Holdco in the amount of US $XXXXXXXXXX.

21. A holder of XXXXXXXXXX/Aco Common Shares is entitled to receive, on a pro rata basis, such dividends as may be declared by the directors of XXXXXXXXXX/Aco. In the event of the liquidation, dissolution, or winding-up of XXXXXXXXXX/Aco, a holder is entitled to receive, on a pro rata basis, all of the assets of XXXXXXXXXX/Aco remaining after payment of all its liabilities. The XXXXXXXXXX/Aco Common Shares are entitled to one vote per share.

22. The ACB to Holdco of the XXXXXXXXXX/Aco Common Shares is $XXXXXXXXXX. The fair market value of the XXXXXXXXXX/Aco Common Shares, as of XXXXXXXXXX, is approximately US $XXXXXXXXXX.

XXXXXXXXXX/Bco

23. XXXXXXXXXX/Bco was incorporated under the laws of XXXXXXXXXX/Bco's fiscal period is XXXXXXXXXX/Bco provides administration services to other XXXXXXXXXX companies in the Holdco group.

24. The authorized share capital of XXXXXXXXXX/Bco consists of XXXXXXXXXX ordinary shares. As at XXXXXXXXXX ordinary shares with a par value of XXXXXXXXXX per share (the "XXXXXXXXXX/Bco Common Shares") were issued and outstanding. All the issued and outstanding XXXXXXXXXX/Bco Common Shares are held by Holdco.

25. The holders of the XXXXXXXXXX/Bco Common Shares are entitled to receive, on a pro rata basis, such dividends as may be declared by the directors of XXXXXXXXXX/Bco. In the event of the liquidation, dissolution, or winding-up of XXXXXXXXXX/Bco, the holders are entitled to receive, on a pro rata basis, all of the assets of XXXXXXXXXX/Bco remaining after payment of all its liabilities. XXXXXXXXXX/Bco Common Shares are entitled to one vote per share.

26. The ACB to Holdco of the XXXXXXXXXX/Bco Common Shares is $XXXXXXXXXX. The fair market value of the XXXXXXXXXX/Bco Common Shares, as of XXXXXXXXXX, is XXXXXXXXXX.

XXXXXXXXXX/Dco

27. XXXXXXXXXX/Dco was incorporated under the laws of XXXXXXXXXX/Dco's fiscal period is XXXXXXXXXX/Dco is in the business of XXXXXXXXXX.

28. The XXXXXXXXXX of XXXXXXXXXX/Dco is XXXXXXXXXX. As at XXXXXXXXXX of XXXXXXXXXX (the "XXXXXXXXXX/Dco XXXXXXXXXX ) was issued and outstanding. All the issued and outstanding XXXXXXXXXX/Dco XXXXXXXXXX is held by Holdco.

29. A holder of the XXXXXXXXXX/Dco XXXXXXXXXX is entitled to receive, on a pro rata basis, such dividends as may be declared by the directors of XXXXXXXXXX/Dco. In the event of the liquidation, dissolution, or winding-up of XXXXXXXXXX/Dco, a holder is entitled to receive, on a pro rata basis, all of the assets of XXXXXXXXXX/Dco remaining after payment of all its liabilities. A holder of XXXXXXXXXX/Dco XXXXXXXXXX is entitled to vote on a pro rata basis.

30. The ACB to Holdco of the XXXXXXXXXX/Dco XXXXXXXXXX is $XXXXXXXXXX. The fair market value of the XXXXXXXXXX/Dco XXXXXXXXXX , as at XXXXXXXXXX, is approximately US $XXXXXXXXXX.

Events Lending to the Reorganization

31.

XXXXXXXXXX

32.

XXXXXXXXXX

33. XXXXXXXXXX. Pursuant to the Agreements, Amalco (a new corporation created on the amalgamation of Holdco and Subco described in Paragraph 37), will acquire all the outstanding shares of XXXXXXXXXX/Fco that it does not already own by the issuance of a combination of shares, convertible debentures and options. The details of the share, debenture and option consideration to be issued is described below.

      Issue of Share, Debenture
      and Option Consideration                       Type                  % of Amalco

      Issued to principals of debentures convertible into       XXXXXXXXXX%
      XXXXXXXXXX/Fco    XXXXXXXXXX Amalco Common Shares
               "            XXXXXXXXXX Amalco Common  Share  -
      Issued to non-principals  XXXXXXXXXX  Amalco Common Share XXXXXXXXXX %

      "           XXXXXXXXXX options          XXXXXXXXXX %

      Total shares issued or
      issuable to XXXXXXXXXX/
      Fco shareholders or
      or option holders                    XXXXXXXXXX       XXXXXXXXXX

Total Amalco Common Shares XXXXXXXXXX
(fully diluted)

The XXXXXXXXXX Amalco options issued in exchange for XXXXXXXXXX/Fco options are not exercisable until the expiry of at least XXXXXXXXXX following the closing. The Agreements will also provide that the XXXXXXXXXX Amalco Common Share described above may increase to a maximum of XXXXXXXXXX % (calculated on a fully diluted basis, based on the number of Amalco Common Shares issued and issuable on the closing date), which increase would be represented by Amalco Common Shares (or convertible debentures which would be exercisable shortly after issuance into Amalco Common Shares), if certain conditions are met.

The convertible debentures are being issued in order to establish with certainty the amount of XXXXXXXXXX payable in respect of the sale of the XXXXXXXXXX/Fco shares by the principals of XXXXXXXXXX/Fco. XXXXXXXXXX.

XXXXXXXXXX may issue shares for cash consideration of less than XXXXXXXXXX per share (the "Financing Shares") to raise additional cash. If such Financing Shares are issued, their holders will be entitled to receive Amalco Common Shares on the acquisition of XXXXXXXXXX/Fco on the same exchange ratio as applied to the other XXXXXXXXXX/Fco shareholders.

The Agreements require that, at closing, Amalco will have approximately XXXXXXXXXX net cash less certain advances to XXXXXXXXXX/Fco (approximately $XXXXXXXXXX Canadian), after payment of all costs associated with the transaction. As part of the transaction, Amalco indicated that it will spin-off all of its current XXXXXXXXXX assets, as well as the balance of the company's net cash to a new company, the shares of which would be distributed to the existing Shareholders of record immediately prior to the completion of the acquisition of XXXXXXXXXX/Fco.

34. A new corporation has been incorporated, XXXXXXXXXX ("Newco"), under the XXXXXXXXXX. The authorized capital of Newco consists of an unlimited number of common shares (the "Newco Shares"). The holders of the Newco Shares will be entitled to receive equally, on a share-for-share basis, such dividends as may be declared, and to receive equally, share-for-share, the property of Newco on its liquidation, dissolution and winding-up. The Newco Shares will also be entitled to one vote per share.

35. Holdco has incorporated a new corporation, XXXXXXXXXX ("Subco"), under the XXXXXXXXXX. The authorized capital of Subco consists of an unlimited number of common shares. A holder of Subco common shares will be entitled to receive equally, on a share-for-share basis, such dividends as may be declared, and to receive equally, share-for-share, the property of Subco on its liquidation, dissolution and winding-up. The Subco common shares will also be entitled to one vote per share.

Holdco subscribed for 1 Subco common share on incorporation for a nominal amount.

PROPOSED TRANSACTIONS

36. Holdco will transfer, at fair market value, to Newco all of its XXXXXXXXXX assets consisting of the XXXXXXXXXX/Cco Common Shares, XXXXXXXXXX/Eco Common Shares, XXXXXXXXXX/Aco Common Shares, XXXXXXXXXX/Bco Common Shares and XXXXXXXXXX/Dco XXXXXXXXXX (collectively, the "Subsidiary Shares"), an amount of cash and certain other unsubstantial assets (collectively, the "XXXXXXXXXX Business"). In consideration for he transfer of the XXXXXXXXXX Business, Newco will issue to Holdco Newco Shares with a fair market value equal to the fair market value of the XXXXXXXXXX Business at the time of the disposition.

Newco will add to the stated capital account in respect of the Newco Shares an amount equal to the fair market value of the XXXXXXXXXX Business so transferred.

The aggregate fair market value of the Subsidiary Shares transferred is less than Holdco's ACB of such Subsidiary Shares.

37. Holdco and Subco (referred to in this paragraph as "predecessor corporations") will amalgamate under the provisions of the XXXXXXXXXX to form a new corporation ("Amalco") in such manner that:

(a) all of the property (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of Amalco by virtue of the amalgamation;

(b) all of the liabilities (except amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Amalco by virtue of the amalgamation; and

(c) all of the shareholders (except any predecessor corporation and dissenting shareholder) who owned shares of the capital stock of any predecessor corporation immediately before the amalgamation, will receive shares of the capital stock of Amalco (the "Amalco Common Shares"), on a one for one basis, because of the amalgamation.

The shareholders who are entitled to dissent from the amalgamation will cease to be shareholders of Holdco on the effective date of the amalgamation and each such shareholder will be entitled to be paid by Amalco the fair value of the existing shares in respect of which the right to dissent is exercised.

38. Following the Amalgamation referred to in Paragraph 37, the PUC of the issued and outstanding Amalco Common Shares will be reduced by an amount equal to the fair market value of the Newco Shares at that time. The payment in respect of the reduction in PUC of the Amalco Common Shares will be made by the distribution of the Newco Shares to each Amalco shareholder of record immediately prior to the completion of the acquisition of XXXXXXXXXX/Fco on a basis proportionate to the number of Amalco Common Shares held by each particular Amalco shareholder on such date. The management of Holdco estimates that the aggregate fair market value of the Newco Shares is $XXXXXXXXXX.

39. Following the distribution referred to in Paragraph 38, both Newco and Amalco will be continued under the laws of XXXXXXXXXX.

40. The proposed transactions referred to in Paragraphs 37 and 39 will be undertaken primarily for bona fide purposes, as set out in more detail in Paragraph 41, and not to obtain a tax benefit.

PURPOSES OF THE PROPOSED TRANSACTIONS

41. The purposes of the proposed transaction are:

(a) to segregate the current XXXXXXXXXX assets from the XXXXXXXXXX business in order to provide the Amalco shareholders with the opportunity to maximize the value of their investment in each business and facilitate the ongoing funding of each business;

(b) XXXXXXXXXX

(c) in the case of the continuance referred to Paragraph 39, to more closely align the governing jurisdiction of Newco and Amalco with the governing jurisdiction of its underlying assets and to allow it to carry on activities in a more comprehensive and lower cost regime. Holdco was established in a Canadian jurisdiction for administrative convenience and due to the relative difficulty, at that time, for foreign corporations to obtain a listing with the XXXXXXXXXX Stock Exchange. The current regulatory environment is more receptive to foreign corporations being listed on a Canadian stock exchange.

RULINGS

Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, proposed transactions and the purposes of the proposed transactions, we confirm the following:

A. Subject to the application of subsection 40(3), the reduction of the PUC of the Amalco Common Shares and the distribution of Newco Shares on such reduction of PUC, as described in Paragraph 38, will not, in and by itself, result in a disposition by a Shareholder of his, her or its Amalco Common Shares.

B. The amount received by a shareholder of Amalco in respect of the reduction of PUC of the Amalco Common Shares described in Paragraph 38 will, by virtue of subparagraph 53(2)(a)(ii), be deducted in calculating the ACB of the Amalco Common Shares and pursuant to subsection 84(2) no portion of such amount will be deemed to be a dividend for purposes of the Act.

C. Subsection 84(4.1) will not apply to deem any amount paid by Amalco to the Amalco shareholders on the reduction of PUC of the Amalco Common Shares, as described in Paragraph 38, to be a dividend.

D. Subsection 245(2) will not be applied as a result of the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.

E. Provided that at the end of the period that begins 30 days before and ends 30 days after the transfer described in Paragraph 36, no Shareholder is an affiliated person in respect to Amalco and no person affiliated with Amalco owns the shares of Newco, any losses which may be realized on the transfer of the Subsidiary Shares will not be subject to the application of subsections 40(3.3), 40(3.4) and subparagraph 40(2)(g)(i).

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 issued by Revenue Canada and are binding provided that the proposed transactions are completed before XXXXXXXXXX.

These rulings are based on the Act as it currently reads and do not take into account any future amendments, whether currently proposed or not, to the Act.

COMMENTS

1. Nothing in this ruling should be construed as confirmation, express or implied, of:

(a) the determination of the fair market value, ACB or paid-up capital of any particular share referred to herein; or

(b) the tax consequences of any transaction other than those described in the rulings given above and in particular, any transactions that may occur after XXXXXXXXXX.

2. The amount received by an Amalco shareholder, on the PUC reduction described in Paragraph 38, in excess of the ACB to that Amalco shareholder of his, her or its Amalco Common Shares will be deemed to be a gain of that taxpayer for the year from the disposition at that time of such shares pursuant to subsection 40(3).

3. The Canada Customs and Revenue Agency has not determined whether the transactions described in Paragraph 33 would result in an acquisition of control of Amalco for purposes of subsections 10(10), 13(21.2) and (24), 14(12) and 18(15), sections 18.1 and 37, subsection 40(3.4), the definition "superficial loss" in section 54, section 55, subsections 66(11), (11.4) and (11.5), 66.5(3) and 66.7(10) and (11), section 80, paragraph 80.04(4)(h), subsections 85(1.2) and 88(1.1) and (1.2), sections 111 and 127, subsection 249(4) and subsection 256(7).

4. Sections 128.1 and 219.1 will apply on the continuation described in Paragraph 39.

Yours truly,

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