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: Supplemental to 2000 - 005654. Change in facts.
Position: N/A
Reasons: N/A
XXXXXXXXXX 2000-008760
XXXXXXXXXX , 2001
Dear Sirs:
Re: XXXXXXXXXX
Advance Income Tax Ruling 2000-005654
issued XXXXXXXXXX, 2000 (the "Ruling")
Further to your request of XXXXXXXXXX, this confirms the following additional amendments to the Ruling as previously amended by supplemental ruling 2000-006369 dated XXXXXXXXXX, 2001:
Definitions
The "Definitions" section of the Ruling is hereby amended as follows:
1. In the definition of "XXXXXXXXXX", the term "XXXXXXXXXX" should be replaced with "XXXXXXXXXX".
Statement of Facts
The "Statement of Facts" section of the Ruling is hereby amended as follows:
2. The last sentence of Paragraph 23 should be deleted.
3. The first sentence of Paragraph 49 should be deleted. In the second sentence of Paragraph 49, the words "XXXXXXXXXX intends to acquire the remaining XXXXXXXXXX% of XXXXXXXXXX" should be replaced with the words "XXXXXXXXXX intends to arrange for the acquisition of the XXXXXXXXXX".
Proposed Transactions
The "Proposed Transactions" section of the Ruling is hereby amended as follows:
4. The last two sentences of Paragraph 66 are deleted, the text of the fourth sentence of Paragraph 66 is amended as described below, and new text is added thereafter, such that Paragraph 66 in its entirety should read as follows:
Using the funds received from XXXXXXXXXX in the immediately preceding step, XXXXXXXXXX will purchase the XXXXXXXXXX Assets from XXXXXXXXXX, for an amount of money (the "XXXXXXXXXX Assets Price") equal to the net fair market value of the XXXXXXXXXX Assets. In addition, XXXXXXXXXX will agree to sell XXXXXXXXXX certain real property used in the XXXXXXXXXX operations (the "XXXXXXXXXX Lands") for a purchase price equal to the fair market value thereof (the "XXXXXXXXXX Lands Purchase Price"), XXXXXXXXXX The sale of the XXXXXXXXXX Lands to XXXXXXXXXX will include an option to permit XXXXXXXXXX to re-purchase them from XXXXXXXXXX, during a specified period in the future, at their fair market value (as of the time of the option exercise). In addition, XXXXXXXXXX will enter into an agreement of purchase and sale for XXXXXXXXXX to purchase the XXXXXXXXXX, in each case for a purchase price of $XXXXXXXXXX (being the fair market value of each of those properties at this time). The aggregate consideration to be paid for the XXXXXXXXXX interests will be adjusted to take into account additional capital contributions as noted below. In the event that the partners in the XXXXXXXXXX partnership make additional capital contributions to XXXXXXXXXX after the date of the XXXXXXXXXX agreement and before the closing of XXXXXXXXXX acquisition of XXXXXXXXXX will also fund or acquire such additional amounts on a dollar-for-dollar basis, as described below. For the XXXXXXXXXX will lend the amounts of the required capital contribution to XXXXXXXXXX on an interest-bearing basis, and XXXXXXXXXX will on-lend the same amounts to XXXXXXXXXX on the same terms, thereby providing XXXXXXXXXX with the funds to make any required capital contributions. On closing, XXXXXXXXXX will assign its creditor position against XXXXXXXXXX for these amounts to XXXXXXXXXX in satisfaction of the corresponding amounts owing by XXXXXXXXXX to XXXXXXXXXX. For the XXXXXXXXXX, the purchase price to be paid by XXXXXXXXXX will be increased by the amount of additional capital contributions made by XXXXXXXXXX (plus a time-value-of-money return equal to the rate of interest on the loans used to fund the capital contributions made by XXXXXXXXXX).
5. The text of Paragraph 73 is deleted in its entirety and replaced with the following:
Some time thereafter, XXXXXXXXXX will complete the acquisition of XXXXXXXXXX described in Paragraph 66. This will occur through the following steps:
(1) XXXXXXXXXX will enter into an agreement providing for XXXXXXXXXX to purchase the XXXXXXXXXX for fair market value equal to a fixed price (increased by the amount of additional capital contributions made by XXXXXXXXXX between the time of agreement and the time of closing), plus a reasonable amount that reflects the time-value-of-money until the time of closing;
(2) XXXXXXXXXX will purchase (for cash equal to their fair market value) the only outstanding shares of a recently-incorporated corporation ("XXXXXXXXXX Subco"), XXXXXXXXXX"shelf corporation" without material assets or liabilities that was incorporated and whose shares were issued other than as part of the series of transactions that includes the Proposed Transactions;
(3) XXXXXXXXXX will assign to XXXXXXXXXX Subco both, (i) its interest in the agreement with XXXXXXXXXX described in (1), and (ii) its rights and obligations in the agreement with XXXXXXXXXX described in Paragraph 66 to sell the XXXXXXXXXX (which includes the post-agreement XXXXXXXXXX capital contributions described in Paragraph 66) to XXXXXXXXXX. As payment for this assignment and assumption of obligations by XXXXXXXXXX Subco, XXXXXXXXXX will agree to pay XXXXXXXXXX Subco the amount by which, (i) the amount XXXXXXXXXX Subco must pay to XXXXXXXXXX under the agreement in (1), exceeds, (ii) the amount XXXXXXXXXX Subco will receive from XXXXXXXXXX for the XXXXXXXXXX, as described in Paragraph 66 (note: the amount in (i) will equal or exceed the amount in (ii)). Thus, XXXXXXXXXX Subco will realize neither an economic profit or loss from the assumption of XXXXXXXXXX obligations to purchase and dispose of the XXXXXXXXXX;
(4) XXXXXXXXXX will make a non-interest-bearing loan to XXXXXXXXXX Subco of the remaining amount (i.e., after the assignment payment described in (3)) that XXXXXXXXXX Subco needs to pay XXXXXXXXXX as the purchase price for the XXXXXXXXXX;
(5) XXXXXXXXXX Subco will pay the cash received in (3) and the cash borrowed in (4) to XXXXXXXXXX, to complete the purchase of the XXXXXXXXXX;
(6) XXXXXXXXXX Subco will sell the XXXXXXXXXX to XXXXXXXXXX for cash, as described in Paragraph 66;
(7) XXXXXXXXXX Subco will use the cash received from XXXXXXXXXX described in (6) to repay the loan from XXXXXXXXXX described in (4), leaving XXXXXXXXXX Subco with no material assets or liabilities;
(8) XXXXXXXXXX will sell the XXXXXXXXXX Option and the various agreements described in the definition of the term "XXXXXXXXXX" to XXXXXXXXXX for cash not exceeding their aggregate fair market values;
(9) XXXXXXXXXX will exercise the XXXXXXXXXX Option to purchase the shares of XXXXXXXXXX from XXXXXXXXXX, paying an exercise price (as described in Paragraph 23) equal to their fair market value. The total of the amount so paid by XXXXXXXXXX and the amounts paid by XXXXXXXXXX in (8) will equal $XXXXXXXXXX; and
(10) XXXXXXXXXX will repay XXXXXXXXXX the loan of $XXXXXXXXXX described in Paragraph 71. XXXXXXXXXX will also assign to XXXXXXXXXX the amounts owing by XXXXXXXXXX to XXXXXXXXXX described in the second-last sentence of Paragraph 66, in satisfaction of the corresponding amounts owing by XXXXXXXXXX to XXXXXXXXXX.
XXXXXXXXXX may be required to provide interim funding to XXXXXXXXXX Subco. If so, XXXXXXXXXX will provide funds for XXXXXXXXXX Subco's acquisition by making an interest-free loan to XXXXXXXXXX of the amount payable by XXXXXXXXXX for the XXXXXXXXXX (as described in Paragraph 66), which XXXXXXXXXX will use to make the loan to XXXXXXXXXX Subco described in (4) above. XXXXXXXXXX Subco will transfer the XXXXXXXXXX to XXXXXXXXXX in return for the assumption of XXXXXXXXXX Subco's debt to XXXXXXXXXX and such assumed debt will be set-off against XXXXXXXXXX debt to XXXXXXXXXX. These post-approval steps will be undertaken in place of (6) and (7) above.
If XXXXXXXXXX cannot close the transfer of the XXXXXXXXXX by the XXXXXXXXXX Closing Deadline, all of the XXXXXXXXXX Common Shares will automatically be redeemed in accordance with their terms. If XXXXXXXXXX cannot close the transfer of the XXXXXXXXXX by the XXXXXXXXXX Closing Deadline, all of the XXXXXXXXXX Common Shares will automatically be redeemed in accordance with their terms. Similarly, XXXXXXXXXX will close the sale of the XXXXXXXXXX Lands, with XXXXXXXXXX paying the XXXXXXXXXX Lands Purchase Price and XXXXXXXXXX repaying the loan described in Paragraph 72. If this closing has not occurred by XXXXXXXXXX, the obligations of the parties to complete this purchase and sale will expire, and XXXXXXXXXX will repay this loan.
6. The first full paragraph after ruling D on page 29 of the Ruling is hereby deleted and replaced with the following:
These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 and are binding provided that the Proposed Transactions (excluding those described in Paragraph 73) are completed by XXXXXXXXXX and the Proposed Transactions described in Paragraph 73 are completed by XXXXXXXXXX.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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