Income Tax Severed Letters - 2000-10-27

Principal Issues: Income tax implications to Canco and an existing Canco warrant holder when NewCanco common shares are delivered to such holder by Canco pursuant to the NewCanco warrant agreement between Canco and NewCanco.

Position: Canco will receive POD equal to the FMV of the NewCanco Common Shares at the time they are so disposed of to the extent that such POD are not already recognized. A Canco warrant holder receiving NewCanco common shares will generally not have a 15(1) benefit equal to the FMV of those shares at that time if they were dealing at arm's length with Canco and NewCanco.

Reasons: Based on the law.

Principal Issues:

XXXXXXXXXX .

This aspect of the ruling is similar to that which we ruled favourably on in file # 993252, dated XXXXXXXXXX , 2000. The main issues were the same as previous and included the application of sections 18.1 and 143.2, and subsection 96(2.2).

Position: Similar rulings as issued previously.

Reasons: Based on our reading of the legislation and prior rulings given for files 992719, 993252 and 963097.

Principal Issues:
1. Whether the internal reorganization is subject to the provisions of paragraph 55(3)(a)?
2. Whether the PUC reduction is subject to the provisions of subsection 84(2)?

Position:
1. Yes.
2. Yes.

Reasons:
1. It meets the test in paragraph 55(3)(a).
2. The proposed transactions constitute a reorganization of A Co's business.

Principal Issues:
The addition of a redesignation feature to the existing units of a group of mutual fund trusts and the amendment of the declaration of trust to allow multiple Classes of Units for different investor segments so that the manager of the Fund has the flexibility to charge differing management fees to the various investors depending on the size of the investment. The issues are whether the proposed transactions can result in investors (unitholders) being considered to have disposed of their units or being considered to have a greater percentage interest in the income of the Fund than such investor's percentage interest in the capital of the Fund.

Rulings requested are: 1) whether the proposed transactions result in a resettlement of the trust or a disposition of units; 2) whether subsections 104(7.1) and 245(2) apply to the proposed transactions.

Position:
1) Unitholders are not considered to have disposed of their units as a result of the redesignation of the units from one class to another class. Also, the addition of a redesignation feature to the existing units will not result in a disposition of those units; changes to trust indenture are not so significant to precipitate a resettlement. Given that there are no redemption fees on Class Y Units, the fact that on a redesignation of Class X Units to Class Y units, a unitholder will be required to pay an amount equal to any redemption fees that would otherwise have been payable if there had been a redemption merely recognizes that those Class X unitholders who purchased their units on a sales charge basis paid up-front fees, while those who purchased their units on a deferred sales charge basis paid no up-front fees. It thus equalizes the position of all Class X unitholders.

2) Subsections 104(7.1) and 245(2) will not apply to the proposed transactions.

Reasons:
1) Similar positions taken in 990500, 9820753, 9726113 and 9525413.
2) Similar positions taken in 9820753 and 9603753.

Principal Issues: Interest Deductibility

Position: OK

Reasons: Previous Ruling given on Loss Consolidation using Dividends

Principal Issues:
1) Will the proposed amendments to the trust agreement which will allow the Trustee, at year end, to allocate capital gains to unitholders who redeemed their units during the year be legally effective?
2) On the redemption of a unit will the Proceeds of Disposition equal the amount paid less the allocable capital gains allocated in respect of that unit?
3) Will subsection 104(7.1) apply to the proposed transactions?
4) Will subsection 245(2) apply to the proposed transactions?

Position: 1) Yes; 2) Yes; 3) No; 4) No.

Reasons: XXXXXXXXXX, the proposed amendments to the trust agreement in respect of the allocation of capital gains to unitholders who have redeemed their units will be legally effective and subsection 104(7.1) will not apply to the proposed transactions. It was also their view that there was a good argument that Proceeds of Disposition on the redemption of a unit equals the amount paid less any capital gains allocated in respect of that unit. Also, see Doc # 32954. As there are good business reasons for undertaking the proposed transactions, the proposals are not avoidance transactions and GAAR should not be applied.

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.

XXXXXXXXXX 991772

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: Advance Income Tax Ruling for XXXXXXXXXX
(collectively, Fund 1 through Fund XXXXXXXXXX, inclusive, will be referred to as the "Funds", and individually may be referred to as a "Fund")

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.

XXXXXXXXXX 					991913

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling 983067

Principal Issues: Application of Article XVI(4) of the Canada-U.S Tax Convention.

Position: Article XVI(4) applies.

Reasons: Payments satisfy the technical requirements of Article XVI(4).

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 winding up under subsection 88(1) and the bump under paragraph 88(1)(c). Whether the note is substituted property which taints the bump?

POSITION: No, the note was secured by cash and was repaid instantaneously.

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.

XXXXXXXXXX
XXXXXXXXXX 990263
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: Advance Income Tax Ruling for

XXXXXXXXXX

Principal Issues:
Whether arrangement is exempted from SDA definition by virtue of 6801(d);

Position:
Yes;

Reasons:
All requirements in 6801(d) are met.

Principales Questions:

1. Est-ce que la protection offerte en vertu d'un plan de garantie aux acheteurs de XXXXXXXXXX sera de l'assurance aux fins de 138(1) de la Loi?

2. Est-ce XXXXXXXXXX est une autorité compétente aux fins du paragraphe 1400 du Règlement?

Position Adoptée:

Principal Issues: