2002 Ruling 2001-0091663 - Split-up Butterfly under 55(3)(b)

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: This is a split-up butterfly of Aco among Father's three adult children. The major assets consist of shares of Fco which were acquired on the sale of Gco to Fco. The main issues relate to the rebalancing transfer of assets by the three children and their respective holding companies to the father and his holding company.

Position: See Ruling.

Reasons: See Ruling.

XXXXXXXXXX 2001-009166

XXXXXXXXXX, 2002

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling

We are writing in response to your letter of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayers. We also acknowledge receipt of your facsimiles as well as the information provided in various telephone conversations.

Throughout this letter, certain individuals and corporations will be referred to as follows:

XXXXXXXXXX . Aco

XXXXXXXXXX Father
XXXXXXXXXX Foundation
XXXXXXXXXX Bco

XXXXXXXXXX Sibling1
XXXXXXXXXX Trust1
XXXXXXXXXX Cco

XXXXXXXXXX Sibling2
XXXXXXXXXX Trust2
XXXXXXXXXX . Dco

XXXXXXXXXX Sibling3
XXXXXXXXXX Trust3
XXXXXXXXXX Eco

XXXXXXXXXX . Fco
XXXXXXXXXX Gco
XXXXXXXXXX . Hco
XXXXXXXXXX Ico
XXXXXXXXXX . Jco

The Tax Services Office of Aco and Bco is XXXXXXXXXX; the Tax Services Office of Cco and Dco is XXXXXXXXXX; and the Tax Services Office of Eco is XXXXXXXXXX. Aco, Bco, Cco, Dco and Eco file their corporate tax returns at the XXXXXXXXXX Taxation Centre. Aco, Bco, Cco, Dco and Eco are resident in Canada for the purposes of the Act.

To the best of your knowledge, and that of any of the taxpayers, none of the issues involved in this ruling request is:

(i) involved in an earlier return of any of the taxpayers or a related person;

(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of any of the taxpayers or a related person;

(iii) under objection by any of the taxpayers or a related person;

(iv) before the courts; or

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

The taxpayers have represented that the proposed transactions will not affect their ability to pay any of their outstanding tax liabilities.

Unless otherwise indicated, all references to monetary amounts are in Canadian dollars.

DEFINITIONS

In this letter, unless otherwise expressly stated, the following terms have the meanings specified:

1. (a.1) "Act" means the Income Tax Act (Canada), 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.1) "adjusted cost base" ("ACB") has the meaning assigned to that term by section 54;

(c.1) XXXXXXXXXX;

(d.1) XXXXXXXXXX;

(e.1) "Agency" means the Canada Customs and Revenue Agency;

(f.1) "agreed amount" in respect of a property means the amount that the transferor and the transferee of the property have agreed upon in an election under subsection 85(1);

(g.1) "Amalco" has the meaning ascribed to it in Paragraph 62 below;

(h.1) "Amalco2" has the meaning ascribed to it in Paragraph 81 below;

(i.1) "Amalco Class XXXXXXXXXX Preference Shares" has the meaning ascribed to it in Paragraph 62 below;

(j.1) "Amalco Note" and "Amalco Notes" have the meaning ascribed to them in Paragraph 66 below;

(k.1) "Amalco Redemption Note1" has the meaning ascribed to it in Paragraph 71 below;

(l.1) "Amalco Redemption Note2" has the meaning ascribed to it in Paragraph 71 below;

(m.1) "Amalco Redemption Note3" has the meaning ascribed to it in Paragraph 71 below;

(n.1) "Amending USA" means the agreement among Father, the Siblings, the Family Trusts and the Holdcos entered into on XXXXXXXXXX that amends the USA;

(o.1) "XXXXXXXXXX Debt" has the meaning ascribed to it in Clause 32(f)(viii) below;

(p.1) "XXXXXXXXXX Warrant" has the meaning ascribed to it in Paragraph 29 below;

(q.1) "arm's length" has the meaning assigned to that term by section 251;

(r.1) "Bco Debt" has the meaning ascribed to it in Clause 32(f)(i) below;

(s.1) "Building Lease" and "Building Leases" have the meaning ascribed to them in Paragraph 65 below;

(t.1) "Butterfly Redemption Amount" means an amount per share determined by the formula:

Transfer Proportion * A / B

where:

A is the FMV of all the shares of Amalco immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below; and

B is XXXXXXXXXX;

(u.1) "capital dividend" has the meaning assigned to that term by section 83;

(v.1) "capital dividend account" ("CDA") has the meaning assigned to that term by subsection 89(1);

(w.1) "capital property" has the meaning assigned to that term by section 54;

(x.1) "Cash Debts" means all amounts receivable by Amalco from Father or the Siblings or any corporation controlled by, or any Specified Relative or niece or nephew of, Father or the Siblings immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below;

(y.1) "Cco Debt" has the meaning ascribed to it in Clause 32(f)(ii) below;

(z.1) "Clause" refers to a numbered clause in this letter;

(a.2) "cost amount" has the meaning assigned to that term by subsection 248(1);

(b.2) "Dco Debt" has the meaning ascribed to it in Clause 32(f)(iii) below;

(c.2) "Dco Special Debt" has the meaning ascribed to it in Clause 32(f)(v) below;

(d.2) "Determination Date" means a date agreed to by Aco, Father, the Siblings and the Holdcos, which date will be before the Effective Date and immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below;

(e.2) "disposition" has the meaning assigned to that term by subsection 248(1);

(f.2) "dividend rental arrangement" has the meaning assigned to that term by subsection 248(1);

(g.2) "Eco Debt" has the meaning ascribed to it in Clause 32(f)(iv) below;

(h.2) "Eco Special Debt" has the meaning ascribed to it in Clause 32(f)(vi) below;

(i.2) "Effective Date" has the meaning ascribed to it in Paragraph 85 below;

(j.2) "eligible property" has the meaning assigned to that term by subsection 85(1.1);

(k.2) "Employeeco" has the meaning ascribed to it in Paragraph 58.1 below;

(l.2) "XXXXXXXXXX Shares" means the shares of Hco XXXXXXXXXX;

(m.2) "Family" means the family that includes Father and the Siblings;

(n.2) "Family Trust" means any one of Trust1, Trust2 or Trust3, and "Family Trusts" means, collectively, Trust1, Trust2 and Trust3;

(o.2) "Father Debt" has the meaning ascribed to it in Clause 32(f)(vii) below;

(p.2) "Father Ico Debt" has the meaning ascribed to it in Paragraph 37 below;

(q.2) "XXXXXXXXXX Warrant" has the meaning ascribed to it in Paragraph 29 below;

(r.2) "FMV" means fair market value;

(s.2) "guarantee agreement" has the meaning assigned to that term by subsection 112(2.2);

(t.2) "Holdco" means Bco or any one of the Siblings' Holdcos, and "Holdcos" means, collectively, Bco and the Siblings' Holdcos;

(u.2) "Kco" has the meaning ascribed to it in Paragraph 57 below;

(v.2) "Kco Cash Amount" means

A - B

where:

A is an amount equal to the Transfer Proportion of the aggregate of (i) the cash, GICs and T-Bills of Amalco immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below, and (ii) an estimate, as at the Determination Date, of the sum of the expected principal amounts of the Cash Debts immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below; and

B is an estimate, as at the Determination Date, of the sum of the expected principal amounts of the debts referred to in Paragraph 68(a) below immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below;

(w.2) "Kco Redemption Note" has the meaning ascribed to it in Paragraph 69 below;

(x.2) "Lco" has the meaning ascribed to it in Paragraph 57 below;

(y.2) "Lco Cash Amount" means

A - B

where:

A is an amount equal to the Transfer Proportion of the aggregate of (i) the cash, GICs and T-Bills of Amalco immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below, and (ii) an estimate, as at the Determination Date, of the sum of the expected principal amounts of the Cash Debts immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below; and

B is an estimate, as at the Determination Date, of the sum of the expected principal amounts of the debts referred to in Paragraph 68(b) below immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below;

(z.2) "Lco Redemption Note" has the meaning ascribed to it in Paragraph 69 below;

(a.3) "Mco" has the meaning ascribed to it in Paragraph 57 below;

(b.3) "Mco Cash Amount" means

A - B

where:

A is an amount equal to the Transfer Proportion of the aggregate of (i) the cash, GICs and T-Bills of Amalco immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below, and (ii) an estimate, as at the Determination Date, of the sum of the expected principal amounts of the Cash Debts immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below; and

B is an estimate, as at the Determination Date, of the sum of the expected principal amounts of the debts referred to in Paragraph 68(c) below immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below;

(c.3) "Mco Redemption Note" has the meaning ascribed to it in Paragraph 69 below;

(d.3) XXXXXXXXXX;

(e.3) "new corporation" has the meaning assigned to that term by subsection 87(1);

(f.3) XXXXXXXXXX;

(g.3) XXXXXXXXXX;

(h.3) "XXXXXXXXXX corporation" means a corporation governed by the XXXXXXXXXX;

(i.3) "XXXXXXXXXX Warrant" has the meaning ascribed to it in Paragraph 29 below;

(j.3) "XXXXXXXXXX Shares" means the XXXXXXXXXX shares of Fco with a par value of XXXXXXXXXX each;

(k.3) "paid-up capital" ("PUC") has the meaning assigned to that term by subsection 89(1);

(l.3) "Paragraph" refers to a numbered paragraph in this letter;

(m.3) "parent" has the meaning assigned to that term by subsection 88(1);

(n.3) "personal trust" has the meaning assigned to that term by subsection 248(1);

(o.3) "Post-Butterfly XXXXXXXXXX Shares Rebalancing Proportion" means a fixed fraction or percentage agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 below, which fraction or percentage is intended to represent their best estimate of the result of the following formula:

20% * (A - B) - (A - 3 * Transfer Proportion * A)
3 * Transfer Proportion * A

where:

A is the net FMV, on the Determination Date, of all the XXXXXXXXXX Shares which are expected to be owned by Amalco immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below; and

B is equal to $XXXXXXXXXX;

(p.3) "Post-Butterfly Other Assets Rebalancing Proportion" means a fixed fraction or percentage agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 below, which fraction or percentage is intended to represent their best estimate of the result of the following formula:

20% * A - (A - 3 * Transfer Proportion * A)
3 * Transfer Proportion * A

where:

A is the net FMV, on the Determination Date, of all assets, other than XXXXXXXXXX Shares, which are expected to be owned by Amalco immediately before the transfers of property to the Siblings' Subs described in Paragraph 68 below;

(q.3) "predecessor corporation" has the meaning assigned to that term by subsection 87(1);

(r.3) "private corporation" has the meaning assigned to that term by subsection 89(1);

(s.3) "private foundation" has the meaning assigned to that term by subsection 149.1(1);

(t.3) "proceeds of disposition" ("POD") has the meaning assigned to that term by section 54;

(u.3) "public corporation" has the meaning assigned to that term by subsection 89(1);

(v.3) "Realco" and "Realcos" have the meaning ascribed to them in Paragraph 58 below;

(w.3) "Realco Note" and "Realco Notes" have the meaning ascribed to them in Paragraph 66 below;

(x.3) "Real Properties" means Ico's income producing properties listed in Subparagraph 37(a) below;

(y.3) "Real Property Current Assets" means the current assets of Amalco in respect of the Real Properties, including the accounts receivable and prepaid expenses;

(z.3) "Real Property Current Liabilities" means the current liabilities of Amalco in respect of the Real Properties, other than (i) the current portion of the long-term liabilities of Amalco, and (ii) the accrued interest on such long-term liabilities and the bank debt, if any;

(a.4) "Regulations" means the Income Tax Regulations;

(b.4) "Reimbursement Note" and "Reimbursement Notes" have the meaning ascribed to them in Paragraph 65 below;

(c.4) "Restricted Shares" has the meaning ascribed to it in Subparagraph 49(b) below;

(d.4) "series of transactions or events" includes the transactions or events referred to in subsection 248(10);

(e.4) "Sibling" means any one of Sibling1, Sibling2 or Sibling3, and "Siblings" means, collectively, Sibling1, Sibling2 and Sibling3;

(f.4) "Sibling's Holdco" means any one of Cco, Dco or Eco, and "Siblings' Holdcos" means, collectively, Cco, Dco and Eco;

(g.4) "Sibling's Sub" means any one of Kco, Lco or Mco, and "Siblings' Subs" means, collectively, Kco, Lco and Mco;

(h.4) "Sibling1 Debt" has the meaning ascribed to it in Clause 32(f)(ix) below;

(i.4) "Sibling3 Debt" has the meaning ascribed to it in Clause 32(f)(x) below;

(j.4) "Space Leases" has the meaning ascribed to it in Paragraph 65 below;

(k.4) "Specified Relative" means a spouse, mother-in-law, father-in-law or a person who was previously such a person;

(l.4) "stated capital" and "stated capital account" have the meaning assigned to those terms by XXXXXXXXXX;

(m.4) "Subparagraph" refers to a numbered subparagraph in this letter;

(n.4) "subsidiary" has the meaning assigned to that term by subsection 88(1);

(o.4) "substantial interest" has the meaning assigned to that term by subsection 191(2);

(p.4) XXXXXXXXXX;

(q.4) "taxable Canadian corporation" ("TCC") has the meaning assigned to that term by subsection 89(1);

(r.4) "taxable dividend" has the meaning assigned to that term by subsection 89(1);

(s.4) "Titleco" and "Titlecos" have the meaning ascribed to them in Paragraph 59 below;

(t.4) "Transfer Proportion" means a fixed fraction or percentage agreed to by Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 below, which fraction or percentage will be their best estimate of the proportion that the FMV of all the shares of Aco owned by each Sibling's Holdco on the Determination Date is of the FMV of all the shares of Aco on the Determination Date;

(u.4) XXXXXXXXXX;

(v.4) "undepreciated capital cost" ("UCC") has the meaning assigned to that term by subsection 13(21); and

(w.4) "USA" means the unanimous shareholders agreement in respect of Aco among Father, the Siblings and the Family Trusts entered into on XXXXXXXXXX.

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

FACTS

1. Aco is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX. Aco was formed on XXXXXXXXXX on the amalgamation of XXXXXXXXXX Aco's taxation year end is XXXXXXXXXX.

2. Bco is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX. Bco's taxation year end is XXXXXXXXXX.

3. Cco is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX. Cco's taxation year end is XXXXXXXXXX.

4. Dco is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX. Dco's taxation year end is XXXXXXXXXX.

5. Eco is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX . Eco's taxation year end is XXXXXXXXXX.

6. Fco is a corporation formed under the laws of XXXXXXXXXX.

7. Gco is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX.

8. Hco is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX.

9. Ico is a private corporation and a taxable Canadian corporation governed by the XXXXXXXXXX.

10. Jco is a public corporation and a taxable Canadian corporation governed by the XXXXXXXXXX. The Family owns approximately XXXXXXXXXX% of the Jco common shares and the remainder is widely held.

11. Foundation is a non-share capital corporation incorporated under the laws of XXXXXXXXXX on XXXXXXXXXX, and registered as a private foundation under the applicable provisions of the Act.

11.1 Trust1 is a personal trust that was established on XXXXXXXXXX, the sole trustee of which is Sibling1.

11.2 Trust2 is a personal trust that was established on XXXXXXXXXX, the trustees of which are Sibling2 and two other persons (namely, XXXXXXXXXX ) who are not related to Sibling2 or to Father.

11.3. Trust3 is a personal trust that was established on XXXXXXXXXX, the sole trustee of which is Sibling3.

12. Father and the Siblings are each an individual resident in Canada. The Siblings are the children of Father.

13. The authorized and issued share capital of Aco is as follows:

Class of Shares
Authorized Shares
Issued Shares

Common
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX

The Class XXXXXXXXXX shares of Aco are non-voting, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of XXXXXXXXXX% of the redemption amount. The Class XXXXXXXXXX shares rank ahead of all the other classes of shares of Aco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The Class XXXXXXXXXX shares of Aco are non-voting, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of XXXXXXXXXX% of the redemption amount. The redemption amount of these shares is subject, as one of the terms of this class of shares, to a price adjustment provision. The Class XXXXXXXXXX shares rank behind the Class XXXXXXXXXX shares, equally with the Class XXXXXXXXXX shares, and ahead of the Class XXXXXXXXXX and common shares of Aco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The Class XXXXXXXXXX shares of Aco are entitled to one vote per share, are not entitled to receive dividends, and are entitled to receive the original amount paid for them (namely, $XXXXXXXXXX per share) on a liquidation, dissolution or winding-up of the corporation. The Class XXXXXXXXXX shares rank behind the Class XXXXXXXXXX shares, and ahead of the common shares of Aco in respect of distributions on a liquidation, dissolution or winding-up of the corporation.

The Class XXXXXXXXXX shares of Aco are entitled to one vote per share, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of XXXXXXXXXX% of the redemption amount. The redemption amount of these shares is subject, as one of the terms of this class of shares, to a price adjustment provision. The Class XXXXXXXXXX shares rank behind the Class XXXXXXXXXX shares, equally with the Class XXXXXXXXXX shares, and ahead of the Class XXXXXXXXXX and common shares of Aco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The common shares of Aco are entitled to one vote per share, are entitled to dividends if, as and when declared by the board of directors of the corporation, and are entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation. The common shares rank behind all the other classes of shares of Aco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

14. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares of Aco are as follows:

Shareholder
Class of Shares
Number of Shares
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Bco
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX
Cco
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX
Dco
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX
Eco
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

The FMV of the Aco common shares is substantially in excess of their ACB to their holders.

15. The authorized and issued share capital of Bco is as follows:

Class of Shares
Authorized Shares
Issued Shares

Common
XXXXXXXXXX
XXXXXXXXXX

The common shares of Bco are entitled to one vote per share, are entitled to dividends if, as and when declared by the board of directors of the corporation, and are entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation. The corporation is entitled to purchase its common shares only with the consent of the holders of all the common shares or pursuant to the lowest tenders received by the corporation upon a request for tender addressed to all the holders of the common shares.

16. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares of Bco are as follows:

Shareholder
Class of Shares
Number of
Shares
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Father
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

The FMV of the Bco common shares is substantially in excess of their ACB to their holder.

17. The authorized and issued share capital of Cco is as follows:

Class of Shares
Authorized Shares
Issued Shares

Common
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

The Class XXXXXXXXXX shares of Cco are entitled to one vote per share, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of $XXXXXXXXXX per share. The Class XXXXXXXXXX shares rank ahead of all the other classes of shares of Cco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The common shares of Cco are entitled to one vote per share, are entitled to dividends if, as and when declared by the board of directors of the corporation, and are entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation. The common shares rank behind all the other classes of shares of Cco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation. The corporation is entitled to purchase its common shares only with the consent of the holders of all the common shares or pursuant to the lowest tenders received by the corporation upon a request for tender addressed to all the holders of the common shares.

18. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares of Cco are as follows:

Shareholder
Class of Shares
Number of Shares
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Sibling1
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX
Trust1
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

The FMV of the Cco common shares is substantially in excess of their ACB to their holder.

19. The authorized and issued share capital of Dco is as follows:

Class of Shares
Authorized Shares
Issued Shares

Common
XXXXXXXXXX
XXXXXXXXXX
Class XXXXX
XXXXXXXXXX
XXXXXXXXXX

The Class XXXXXXXXXX shares of Dco are entitled to one vote per share, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of $XXXXXXXXXX per share. The Class XXXXXXXXXX shares rank ahead of the common shares of Dco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The common shares of Dco are entitled to one vote per share, are entitled to dividends if, as and when declared by the board of directors of the corporation, and are entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation. The common shares rank behind the Class XXXXXXXXXX shares of Dco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation. The corporation is entitled to purchase its common shares only with the consent of the holders of all the common shares or pursuant to the lowest tenders received by the corporation upon a request for tender addressed to all the holders of the common shares.

20. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares of Dco are as follows:

Shareholder
Class of Shares
Number of Shares
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Sibling2
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX
Trust2
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

The FMV of the Dco common shares is substantially in excess of their ACB to their holders.

21. The authorized and issued share capital of Eco is as follows:

Class of Shares
Authorized Shares
Issued Shares

Common
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXXX Preference
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXXX Preference
XXXXXXXXXX
XXXXXXXXXX

The Class XXXXXXXXXX Preference shares of Eco are entitled to one vote per share, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of $XXXXXXXXXX per share. The Class XXXXXXXXXX Preference shares rank ahead of all the other classes of shares of Eco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The Class XXXXXXXXXX Preference shares of Eco are non-voting, are redeemable and retractable for a redemption amount equal to the original amount paid for them, namely, $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at a rate not in excess of XXXXXXXXXX% of the redemption amount. The Class XXXXXXXXXX Preference shares rank behind the Class XXXXXXXXXX Preference shares, and ahead of the common shares of Eco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The common shares of Eco are entitled to one vote per share, are entitled to dividends if, as and when declared by the board of directors of the corporation, and are entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation. The common shares rank behind all the other classes of shares of Eco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation. The corporation is entitled to purchase its common shares only with the consent of the holders of all the common shares or pursuant to the lowest tenders received by the corporation upon a request for tender addressed to all the holders of the common shares.

22. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares of Eco are as follows:

Shareholder
Class of Shares
Number of Shares
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Sibling3
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX
Trust3
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

The FMV of the Eco common shares is substantially in excess of their ACB to their holder.

23. The XXXXXXXXXX Shares of Fco are traded on the XXXXXXXXXX and, other than those owned by Aco, are widely held. Fco owns, directly and indirectly, all the issued and outstanding shares of XXXXXXXXXX, a company incorporated under the laws of the province of XXXXXXXXXX.

24. All of the issued and outstanding shares of Gco are owned by Hco.

25. The authorized and issued share capital of Hco is as follows:

Class of Shares
Authorized Shares
Issued Shares

Common
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

The XXXXXXXXXX Shares of Hco are non-voting, are not entitled to receive dividends, XXXXXXXXXX, are callable by XXXXXXXXXX in certain circumstances, and are subject to transfer restrictions in respect of arm's length transferees. The XXXXXXXXXX Shares rank ahead of the common shares of Hco in respect of distributions on a liquidation, dissolution or winding-up of the corporation. XXXXXXXXXX.

The common shares of Hco are entitled to one vote per share, are entitled to dividends if, as and when declared by the board of directors of the corporation, and are entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation. The common shares rank behind the XXXXXXXXXX Shares of Hco in respect of distributions on a liquidation, dissolution or winding-up of the corporation.

26. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares of Hco are as follows:

Shareholder
Class of Shares
Number of Shares
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Aco
XXXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX
XXXXXXX
XXXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

The FMV of the XXXXXXXXXX Shares of Hco is substantially in excess of their ACB to their holder.

27. The authorized and issued share capital of Ico is as follows:

Class of Shares
Authorized Shares
Issued Shares

Common
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Class XXXXXXX
XXXXXXXXXX
XXXXXXXXXX

The Class XXXXXXXXXX shares of Ico are non-voting, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of $XXXXXXXXXX per share. The Class XXXXXXXXXX shares rank ahead of all the other classes of shares of Ico in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The Class XXXXXXXXXX shares of Ico are entitled to one vote per share for as long as these shares are owned by the first holder or the spouse of the first holder, are redeemable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to an annual non-cumulative dividend at the rate of $XXXXXXXXXX per share. The Class XXXXXXXXXX shares rank behind the Class XXXXXXXXXX shares, and ahead of the Class XXXXXXXXXX and common shares of Ico in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The Class XXXXXXXXXX shares of Ico are non-voting, are redeemable and retractable for a redemption amount equal to $XXXXXXXXXX per share (plus all declared and unpaid dividends), and are entitled to a monthly non-cumulative dividend at the rate of XXXXXXXXXX% of the redemption amount. The redemption amount of these shares is subject, as one of the terms of this class of shares, to a price adjustment provision. The Class XXXXXXXXXX shares rank behind the Class XXXXXXXXXX shares, equally with the Class XXXXXXXXXX shares, and ahead of the common shares of Ico in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

The common shares of Ico are entitled to one vote per share, are entitled to dividends if, as and when declared by the board of directors of the corporation, and are entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation. The common shares rank behind all the other classes of shares of Ico in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

28. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares of Ico are as follows:

Shareholder
Class of Shares
Number of Shares
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Aco
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXXXX
XXXXXX

The FMV of the Ico common shares is substantially in excess of their ACB to their holder.

29. The authorized and issued capital of Jco is as follows:

Class of Securities
Authorized Securities
Issued Securities

Common Shares
XXXXXXXXXX
XXXXXXXXXX
XXXXX Warrants
XXXXXXXXXX
XXXXXXXXXX
XXXXX Warrants
XXXXXXXXXX
XXXXXXXXXX
XXXXX Warrants
XXXXXXXXXX
XXXXXXXXXX

Each warrant issued on XXXXXXXXXX (a "XXXXXXXXXX Warrant") entitles the holder to acquire, on or before XXXXXXXXXX, subject to Jco having satisfied certain conditions relating to XXXXXXXXXX, one common share of Jco for no additional consideration.

Each warrant issued on XXXXXXXXXX (an "XXXXXXXXXX Warrant") entitles the holder to acquire, on or before XXXXXXXXXX, one common share of Jco for a price of $XXXXXXXXXX. The XXXXXXXXXX Warrants were issued as part of units which comprised the warrants and common shares of Jco.

Each warrant issued on XXXXXXXXXX (an "XXXXXXXXXX Warrant") entitles the holder to acquire, on or before XXXXXXXXXX, one common share of Jco for a price of $XXXXXXXXXX. The XXXXXXXXXX Warrants were issued as part of units which comprised the warrants and common shares of Jco.

30. The ownership, aggregate ACB, PUC and redemption amount, and percentage of votes associated with the shares and other securities of Jco owned by the taxpayers named herein are as follows (in addition to the shareholding reflected in the following chart, the XXXXXXXXXX (see Subparagraph 37(c) below) owns shares of Jco):

Shareholder
Class of Securities
Number of Securities
ACB
($)
PUC
($)
Redemption Amount ($)
Votes
(%)

Aco
XXXXXX
XXXXXXXX
XXXXXX
XXXXXX #1
XXXXXXX
XXXXX

XXXXXX
XXXXXXXX
XXXXXX
XXXXXX
XXXXXXX
XXXXX

XXXXXX
XXXXXXXX
XXXXXX
XXXXXX
XXXXXXX
XXXXX

XXXXXX
XXXXXXXX
XXXXXX
XXXXXX
XXXXXXX
XXXXX
Father
XXXXXX
XXXXXXXX
XXXXXX
XXXXXX #2
XXXXXXX
XXXXX

XXXXXX
XXXXXXXX
XXXXXX
XXXXXX
XXXXXXX
XXXXX

The FMV of the Jco common shares held by Aco may be less than, equal to, or greater than their ACB to Aco.

31. Aco is a holding corporation.

32. The main assets owned by Aco as reported in its XXXXXXXXXX financial statements are as follows (see also Paragraph 86 below):

(a) XXXXXXXXXX Shares (XXXXXXXXXX of which are pledged as security for Ico's operating line of credit with the XXXXXXXXXX. At this time, Ico is in the process of negotiating the replacement of this security with a second mortgage on one of the Real Properties (see Clause 38(a)(ix) below)).

The ACB of the Fco XXXXXXXXXX Shares held by Aco is equal to $XXXXXXXXXX and their FMV is substantially in excess of their ACB;

(b) XXXXXXXXXX Shares (XXXXXXXXXX of which are pledged as security for certain indemnities in favour of Fco in connection with the disposition of Gco to Fco (see Paragraph 48 below), some or all of which may be released from such pledge prior to the implementation of the proposed transactions);

(c) shares of Ico as described in Paragraph 28 above;

(d) shares and other securities of Jco as described in Paragraph 30 above;

(e) cash totalling approximately $XXXXXXXXXX , comprising:

(i) $XXXXXXXXXX representing the undistributed portion of the amounts received by Aco from Gco, as described in Subparagraph 48(b) below (including the amount received on XXXXXXXXXX), which amount is invested and is expected to be reinvested, with the interest thereon, in a short term GIC with the XXXXXXXXXX; and

(ii) $XXXXXXXXXX held by Father's solicitor in trust on behalf of Aco, which amount formed part of the US $XXXXXXXXXX received by Aco from Gco on XXXXXXXXXX, as described in Subparagraph 48(b) below, in connection with the disposition of Gco to Fco (see Paragraph 48 below). This amount has since been transferred to Aco, some of which was used to meet Aco's expenses in the ordinary course and the balance of which remains in Aco's bank account and is expected to be used in the same manner; and

(f) amounts receivable from shareholders and others as follows:

(i) $XXXXXXXXXX receivable from Bco (the "Bco Debt").

The Bco Debt represents advances made to Bco totalling $XXXXXXXXXX , which advances were made in XXXXXXXXXX out of the amounts received by Aco from Gco, as described in Subparagraph 48(b) below, less $XXXXXXXXXX repaid on XXXXXXXXXX with the proceeds of the dividends described in Paragraphs 51 and 52 below;

(ii) $XXXXXXXXXX receivable from Cco (the "Cco Debt").

The Cco Debt represents advances made to Cco totalling $XXXXXXXXXX , which advances were made in XXXXXXXXXX out of the amounts received by Aco from Gco, as described in Subparagraph 48(b) below, less $XXXXXXXXXX repaid on XXXXXXXXXX with the proceeds of the dividend described in Paragraph 51 below;

(iii) $XXXXXXXXXX receivable from Dco (the "Dco Debt").

The Dco Debt represents advances made to Dco totalling $XXXXXXXXXX , which advances were made in XXXXXXXXXX out of the amounts received by Aco from Gco, as described in Subparagraph 48(b) below, less $XXXXXXXXXX repaid on XXXXXXXXXX with the proceeds of the dividend described in Paragraph 51 below;

(iv) $XXXXXXXXXX receivable from Eco (the "Eco Debt").

The Eco Debt represents advances made to Eco totalling XXXXXXXXXX, which advances were made in XXXXXXXXXX out of the amounts received by Aco from Gco, as described in Subparagraph 48(b) below, less $XXXXXXXXXX repaid on XXXXXXXXXX with the proceeds of the dividend described in Paragraph 51 below;

(v) an additional $XXXXXXXXXX receivable from Dco (the "Dco Special Debt").

The Dco Special Debt represents an advance made to Dco on XXXXXXXXXX out of the amounts received by Aco in connection with a sale of assets by XXXXXXXXXX (see Subparagraph 37(c) below);

(vi) an additional $XXXXXXXXXX receivable from Eco (the "Eco Special Debt").

The Eco Special Debt represents an advance made to Eco on XXXXXXXXXX out of the amounts received by Aco in connection with a sale of assets by XXXXXXXXXX (see Subparagraph 37(c) below);

(vii) $XXXXXXXXXX receivable from Father (the "Father Debt"), which amount was advanced by Aco in its XXXXXXXXXX taxation year and of which $XXXXXXXXXX was repaid on XXXXXXXXXX, and $XXXXXXXXXX remains outstanding;

(viii) $XXXXXXXXXX receivable from XXXXXXXXXX, the spouse of Father (the "XXXXXXXXXX Debt"), which amount was advanced by Aco in its XXXXXXXXXX taxation year and which was repaid on XXXXXXXXXX;

(ix) $XXXXXXXXXX receivable from Sibling1 (the "Sibling1 Debt"), which amount was advanced by Aco in its XXXXXXXXXX taxation year and which remains outstanding, although some or all of this amount may be repaid prior to the implementation of the proposed transactions; and

(x) $XXXXXXXXXX receivable from Sibling3 (the "Sibling3 Debt"), which amount was advanced by Aco in its XXXXXXXXXX taxation year and which was repaid on XXXXXXXXXX.

33. Aco's main liabilities as reported in its XXXXXXXXXX financial statements are as follows (see also Paragraph 86 below):

(a) amounts payable to Ico totalling $XXXXXXXXXX, comprising:

(i) an estimated $XXXXXXXXXX representing a debt owing by Aco to Ico which arose in connection with the acquisition by Aco of Ico's XXXXXXXXXX% interest in XXXXXXXXXX, Ico's XXXXXXXXXX% interest in XXXXXXXXXX, and all the interest-bearing and non-interest-bearing shareholder loans owing by Gco and its subsidiaries to Ico (see Subparagraph 48(a) below);

(ii) a portion of the amount payable in connection with the Father Debt (i.e., some of the funds were drawn on Ico's bank account); and

(iii) all of the amounts payable in connection with the XXXXXXXXXX Debt, the Sibling1 Debt and the Sibling3 Debt (i.e., the funds were drawn on Ico's bank account);

These debts are reduced by amounts received by Ico on behalf of Aco and are non-interest-bearing, unsecured and payable on demand; and

(b) secured and unsecured, short and long-term indemnities in favour of Fco in connection with the disposition of Gco to Fco (see Paragraph 48 below). The secured indemnities are secured by a pledge of XXXXXXXXXX Shares, some or all of which may be released from such pledge prior to the implementation of the proposed transactions.

Aco will also have liabilities for income tax on its income for the year in which the proposed transactions described herein take place and unpaid taxes, if any, in respect of Aco's XXXXXXXXXX taxation year.

34. The Holdcos are holding companies for the Aco shares which were originally held by Father, the Siblings and the Family Trusts.

35. Fco and Gco each carry on a XXXXXXXXXX business. Hco and XXXXXXXXXX were established to XXXXXXXXXX.

On XXXXXXXXXX, the closing price of an XXXXXXXXXX Share on the XXXXXXXXXX was approximately $XXXXXXXXXX. On XXXXXXXXXX, the closing price of an XXXXXXXXXX Share on the XXXXXXXXXX was approximately $XXXXXXXXXX.

36. Ico is a real estate company which holds primarily income producing properties and, through its wholly-owned subsidiary, XXXXXXXXXX.

37. The main assets owned by Ico as reported in its XXXXXXXXXX financial statements are as follows (see also Paragraph 86 below):

(a) income producing properties (all interests are XXXXXXXXXX% unless otherwise indicated), namely:

XXXXXXXXXX.

The FMV of these properties may be less than, equal to, or greater than their cost amount to Ico;

(b) all of the issued and outstanding shares of XXXXXXXXXX;

(c) all of the issued and outstanding shares of XXXXXXXXXX;

(d) cash totalling $XXXXXXXXXX;

(e) prepaid expenses, accounts receivable and deferred charges relating to tenant improvements and inducements totalling $XXXXXXXXXX (for purposes of the Act, Ico has an unamortized balance of tenant inducement costs totalling approximately $XXXXXXXXXX);

(f) amounts receivable from Aco totalling $XXXXXXXXXX.

For a description of the nature of these amounts receivable see Subparagraph 33(a) above;

(g) an amount receivable from XXXXXXXXXX.

This loan bears interest at an annual rate of XXXXXXXXXX%, is repayable in blended monthly instalments of $XXXXXXXXXX and matures on XXXXXXXXXX;

(h) amounts receivable including the following (some or all of these amounts receivable may be repaid prior to the implementation of the proposed transactions):

(i) $XXXXXXXXXX receivable from Father;

(ii) $XXXXXXXXXX receivable from Sibling2, which amount was repaid on XXXXXXXXXX;

(iii) $XXXXXXXXXX receivable from XXXXXXXXXX, spouse of Sibling1; and

(iv) $XXXXXXXXXX receivable from XXXXXXXXXX, spouse of Sibling3, which amount was repaid on XXXXXXXXXX;

(i) the right to receive from Gco XXXXXXXXXX; and

(j) an interest in XXXXXXXXXX.

As of XXXXXXXXXX, the receivable owed by Father to Ico had grown by $XXXXXXXXXX plus amounts expended by Ico in respect of certain personal expenditures of Father paid for by Ico (the total indebtedness owed by Father to Ico, including the amount referred to in Clause 37(h)(i) above, is referred to as the "Father Ico Debt"). This additional $XXXXXXXXXX amount and the amounts in respect of certain personal expenditures were repaid on XXXXXXXXXX.

38. Ico's main liabilities as reported in its XXXXXXXXXX financial statements are as follows (see also Paragraph 86 below):

(a) mortgages payable totalling $XXXXXXXXXX as follows:

XXXXXXXXXX.

(b) amounts payable as follows:

XXXXXXXXXX.

In addition, as of XXXXXXXXXX, Ico has drawn $XXXXXXXXXX on its operating line of credit at the XXXXXXXXXX in respect of the Father Ico Debt.

39. Jco is a XXXXXXXXXX company which carries on a XXXXXXXXXX business.

40. XXXXXXXXXX.

41. XXXXXXXXXX, Father, the Siblings and the Family Trusts entered into the USA which:

(a) provides for the control of Aco in the event of the death or legal incompetence of Father.

The board of directors of Aco comprises Father, the Siblings and any other person or persons appointed as directors by Father from time to time.

In the event of Father's death, the executors of his will:

(i) are entitled, for a period of XXXXXXXXXX years following his death, to

(A) exercise the voting rights associated with his Class XXXXXXXXXX shares of Aco; and

(B) nominate XXXXXXXXXX directors of the board of directors of Aco.

During this XXXXXXXXXX-year period, the decisions of the board of directors of Aco require the consent of at least XXXXXXXXXX directors who are Siblings and one of the directors nominated by the executors of Father's will; and

(ii) after the XXXXXXXXXX-year period has expired, must tender a sufficient number of Father's Class XXXXXXXXXX shares of Aco to Aco for cancellation, such that his remaining Class XXXXXXXXXX shares represent XXXXXXXXXX% of the number of Aco's voting shares, and transfer these remaining Class XXXXXXXXXX shares to the beneficiary or beneficiaries designated in Father's will. The holder(s) of these shares will be entitled to nominate XXXXXXXXXX directors of the board of directors of Aco, and Father's estate will no longer be entitled to be represented on the board of directors of Aco. The decisions of the board of directors of Aco will require a simple majority of the directors.

In the event that Father dies while legally incompetent, the above mentioned XXXXXXXXXX-year period is deemed to commence on the date on which he was declared to be legally incompetent. In the event that Father is declared to be legally incompetent, the above provisions will apply throughout the period of incompetence as if he were dead. In the event that Father remains legally incompetent for an uninterrupted period exceeding XXXXXXXXXX years, the above provisions will apply as if he died on the date on which he was declared legally incompetent.

In addition, in the event of the death or incapacity of any of the Siblings, that Sibling's personal representative is entitled to nominate a director to replace that Sibling;

(b) restricts the right to exercise the retraction rights associated with certain classes of shares of Aco.

In particular, the holders of the Class XXXXXXXXXX shares have the right to retract such shares at any time during the time that Father is alive and legally competent.

The holders of the Class XXXXXXXXXX shares have the right to retract their shares with the unanimous written consent of all the Siblings. Except where the Siblings give their unanimous written consent, a shareholder's right to issue a notice of retraction to the corporation in respect of the Class XXXXXXXXXX shares is restricted as follows:

(i) after Father's death or in the event that he is declared legally incompetent and remains so for an uninterrupted period exceeding XXXXXXXXXX years, the shareholder has a one time right to request the corporation to liquidate assets and redeem some or all of these shares; and

(ii) notwithstanding (i) above, commencing in the first fiscal year of Aco that begins more than XXXXXXXXXX years after the date of Father's death or date of declaration of legal incompetence, the shareholder is entitled to issue a notice of retraction to the corporation in respect of XXXXXXXXXX% of these shares in each fiscal year of Aco.

The holders of the Class XXXXXXXXXX shares have the right to retract their shares with the unanimous written consent of all the Siblings. Except where the Siblings give their unanimous written consent, a shareholder's right to issue a notice of retraction to the corporation in respect of the Class XXXXXXXXXX shares is suspended during the time that Father is alive and legally competent (or legally incompetent for an uninterrupted period of less than XXXXXXXXXX years) and, at other times, is subject to the same restrictions as described in (i) and (ii) above in respect of the Class XXXXXXXXXX shares; and

(c) restricts the transfer of Aco shares.

In particular, otherwise than with the consent of all the other shareholders, each of the shareholders of Aco is prohibited from executing any transactions or acts in respect of the shareholder's shares of Aco, during that shareholder's life or by that shareholder's will, except for transfers to "permitted transferees" (as defined in the USA) and subject to the following conditions:

(i) the other shareholders have received a written notice from the transferor of the transfer;

(ii) the transferee has entered into an agreement with the other shareholders agreeing to be bound by all the obligations of the transferor as though the transferee was the transferor; and

(iii) the transferor has unconditionally guaranteed to the other shareholders the transferee's performance of those obligations, and the transferor's liability under the guarantee may be enforced without first seeking or exhausting the remedies against the transferee.

42. On XXXXXXXXXX, Father transferred his XXXXXXXXXX Class C shares of Aco to Bco in consideration for XXXXXXXXXX shares of Bco. An election under subsection 85(1) was filed in respect of this transfer.

43. On XXXXXXXXXX, Sibling1 and Trust1 transferred XXXXXXXXXX shares of Aco, respectively, to Cco in consideration for XXXXXXXXXX shares of Cco, respectively. Elections under subsection 85(1) were filed in respect of these transfers.

44. On XXXXXXXXXX, Sibling2 transferred XXXXXXXXXX shares of Aco to Dco in consideration for XXXXXXXXXX shares of Dco. On the same date, Trust2 transferred XXXXXXXXXX shares of Aco to Dco in consideration for XXXXXXXXXX shares of Dco. Elections under subsection 85(1) were filed in respect of these transfers.

On December XXXXXXXXXX Class XXXXXXXXXX shares of Dco were redeemed for an aggregate redemption amount equal to $XXXXXXXXXX. The redemption amount was paid by the issuance of a non-interest-bearing demand promissory note by Dco to Sibling2. An election under subsection 83(2) was filed in respect of the deemed dividend arising on this transaction.

45. On XXXXXXXXXX, Sibling3 and Trust3 transferred XXXXXXXXXX common shares of Aco, respectively, to Eco in consideration for XXXXXXXXXX shares of Eco, respectively. Elections under subsection 85(1) were filed in respect of these transfers. On the same date, Sibling3 also subscribed for XXXXXXXXXX Class XXXXXXXXXX Preference shares of Eco in consideration for $XXXXXXXXXX.

On XXXXXXXXXX Class XXXXXXXXXX Preference shares of Eco were redeemed and on XXXXXXXXXX, a further XXXXXXXXXX Class XXXXXXXXXX Preference shares of Eco were redeemed, for an aggregate redemption amount equal to $XXXXXXXXXX. The redemption amounts were paid by increasing the amounts payable by Eco to Sibling3.

46. On XXXXXXXXXX, Father, the Siblings, the Family Trusts and the Holdcos entered into the Amending USA which re-affirms and updates the USA to reflect the changes to the ownership of the shares of Aco as a result of the introduction of the Holdcos, and Father, the Siblings and the Family Trusts ceasing to be shareholders of Aco.

47. On XXXXXXXXXX, in anticipation of the disposition of Gco to Fco, Aco purchased Gco's interest in Jco, which comprised XXXXXXXXXX, for an aggregate purchase price of $XXXXXXXXXX. In satisfaction of this purchase price, Aco issued to Gco two non-interest-bearing demand promissory notes, one in an amount equal to $XXXXXXXXXX and the other in an amount equal to the balance. These notes were subsequently distributed by Gco to Aco by way of dividends. An election under subsection 83(2) was filed in respect of the $XXXXXXXXXX dividend.

48. On XXXXXXXXXX:

(a) in anticipation of the disposition of Gco to Fco, Aco acquired from Ico:

(i) Ico's XXXXXXXXXX% interest in XXXXXXXXXX and XXXXXXXXXX% interest in XXXXXXXXXX; and

(ii) all the interest-bearing and non-interest-bearing shareholder loans owing by Gco and its subsidiaries to Ico,

in consideration for one or more promissory notes in an amount equal to the FMV thereof.

Gco held the other XXXXXXXXXX% interest in XXXXXXXXXX and XXXXXXXXXX% interest in XXXXXXXXXX .

(b) in anticipation of the disposition of Gco to Fco, Gco issued to Aco a non-interest-bearing promissory note in the amount of XXXXXXXXXX evidencing XXXXXXXXXX of non-interest-bearing shareholder loans owing by Gco and its subsidiaries to Aco. This note has been paid in full by Gco. In particular, XXXXXXXXXX were paid on XXXXXXXXXX, respectively;

(c) interest-bearing and non-interest-bearing shareholder loans totalling XXXXXXXXXX owing by Gco and its subsidiaries to Aco were acquired by Fco from Aco in consideration for the issuance of XXXXXXXXXX XXXXXXXXXX Shares to Aco. The XXXXXXXXXX Shares were issued to Aco by a private placement;

(d) Aco transferred all of the issued and outstanding shares of Gco (namely, XXXXXXXXXX shares), as well as its XXXXXXXXXX% interest in XXXXXXXXXX and XXXXXXXXXX% interest in XXXXXXXXXX, to Hco in consideration for XXXXXXXXXX Shares. The XXXXXXXXXX Shares were issued to Aco by a private placement. Elections under subsection 85(1) were filed in respect of these transfers with an aggregate elected amount of $XXXXXXXXX; and

(e) in addition to the acquisition and XXXXXXXXXX agreements, Aco and Fco entered into:

(i) a registration rights agreement pursuant to which Aco is entitled, in certain circumstances, to require Fco to register Aco's XXXXXXXXXX Shares for trading on XXXXXXXXXX, in the form of XXXXXXXXXX; and

(ii) a compliance agreement pursuant to which, inter alia, Gco is XXXXXXXXX.

XXXXXXXXXX; and

as a result of these transactions, Aco holds XXXXXXXXXX over XXXXXXXXXX% of the issued and outstanding shares of Fco, XXXXXXXXXX.

49. XXXXXXXXXX.

50. The Family intends that certain charitable donations be made by Aco or, upon the completion of the proposed transactions, by the Holdcos. The amount of such donations, including certain donations or commitments that have already been made by Aco, would total $XXXXXXXXXX over the next XXXXXXXXXX years.

The donations that have already been made or committed to are as follows:

(a) Aco has made the following donations:

XXXXXXXXXX.

(b) Aco has committed to make the following donations for the years from XXXXXXXXXX to XXXXXXXXXX (the amounts listed below include some of the donations already made, as described above):

XXXXXXXXXX.

51. On XXXXXXXXXX, Aco declared dividends payable on XXXXXXXXXX in amounts equal to XXXXXXXXXX on its outstanding Class XXXXXXXXXX , respectively. These dividends were paid by offsetting amounts owed to Aco by the recipients of the dividends, as described in Subparagraph 32(f) above. Elections under subsection 83(2) were filed in respect of these dividends.

52. On XXXXXXXXXX, Aco redeemed XXXXXXXXXX of its Class XXXXXXXXXX shares for an aggregate redemption amount equal to $XXXXXXXXXX. The redemption amount was paid by offsetting amounts owed to Aco by Bco, as described in Clause 32(f)(i) above. An election under subsection 83(2) was filed in respect of the deemed dividend arising on this transaction.

53. On XXXXXXXXXX, a draft letter of intent governing the terms and conditions of a proposed distribution of assets of Aco was prepared on behalf of Aco, Father, the Siblings, the Family Trusts and the Holdcos. Aco, Father, the Siblings, the Family Trusts and the Holdcos did not, and do not intend to, fully execute this draft letter of intent.

54. On XXXXXXXXXX, Aco and Jco entered into an agreement pursuant to which XXXXXXXXXX. As a result, Aco and its affiliates own approximately XXXXXXXXXX% of the issued and outstanding shares of Jco. Each warrant issued on XXXXXXXXXX entitles the holder to acquire one common share of Jco, on or before XXXXXXXXXX, for a price of $XXXXXXXXXX.

XXXXXXXXXX.

54.1 With the exception of Paragraphs 50 and 53, and the first subparagraph of Paragraph 54 above, none of the transactions described above was carried out in contemplation of the proposed transactions described below. The decision to carry out each of the transactions described above was made independently of the decision to carry out the proposed transactions. Each of the transactions described above would have been carried out regardless of whether the proposed transactions are carried out.

55. On XXXXXXXXXX, Aco, Father, the Siblings, the Family Trusts and the Holdcos agreed to a term sheet in respect of the proposed transactions. Under such term sheet, the parties agreed to:

(a) the terms and conditions for effecting a butterfly reorganization involving Aco. The proposed transactions set out in this ruling application are based on such terms and conditions;

(b) certain matters relating to their conduct prior to the implementation of the proposed transactions, including:

XXXXXXXXXX.

(c) certain matters relating to their conduct after the implementation of the proposed transactions, including:

(i) XXXXXXXXXX;

(ii) the terms and conditions for implementing the $XXXXXXXXXX charitable giving described in Paragraph 50 above, including the terms and conditions for carrying out the charitable commitments made by Aco prior to the implementation of the proposed transactions;

(iii) the ownership and disposition of assets received by the Siblings' Holdcos and assets retained by Aco on the proposed transactions, including restrictions on dispositions, co-ownership agreements and property management agreements in respect of the Real Properties, and shareholders agreements in respect of XXXXXXXXXX; and

(iv) the resignation of directors of Aco and releases for such directors;

(d) finalize and submit an application for this ruling as soon as possible;

(e) negotiate and enter into a memorandum of understanding which would reflect the terms and conditions of the term sheet, while an application for this ruling is being considered by the Agency;

(f) implement the proposed transactions as soon as possible after the receipt of this ruling;

(g) certain changes to the proposed transactions in certain events, such as the death or mental or physical incapacity of Father. The proposed transactions do not contemplate such changes; and

(h) rights not to proceed with the proposed transactions in certain events, such as if the proposed transactions are not implemented before a certain date, and their conduct if the proposed transactions are not to proceed.

56. While the application for this ruling was being considered by the Agency, Aco, Father, the Siblings, the Family Trusts and the Holdcos decided not to negotiate and enter into a memorandum of understanding to reflect the terms and conditions of the term sheet referred to in Paragraph 55 above and instead will go directly to negotiating and entering into the documents to implement the proposed transactions and the documents referred to in Paragraph 77 below.

PROPOSED TRANSACTIONS

57. The Siblings' Holdcos will each incorporate a new corporation under the provisions of the XXXXXXXXXX ("Kco", "Lco" and "Mco", respectively). Each of the Siblings' Subs will be a private corporation and a taxable Canadian corporation.

The authorized share capital of each of the Siblings' Subs will include an unlimited number of common shares. The common shares of each of the Siblings' Subs will be entitled to one vote per share, will be entitled to dividends if, as and when declared by the board of directors of the corporation, and will be entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation.

On incorporation, each of the Siblings' Holdcos will subscribe for 1 common share of its respective Sibling's Sub for a nominal amount.

58. Ico will incorporate one or more corporations (individually, a "Realco" and, collectively, the "Realcos"). Each of the Realcos will be a private corporation and a taxable Canadian corporation.

The authorized share capital of each of the Realcos will include an unlimited number of common shares. The common shares of each of the Realcos will be entitled to one vote per share, will be entitled to dividends if, as and when declared by the board of directors of the corporation, and will be entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation.

On incorporation, Ico will subscribe for 1 common share of each of the Realcos for a nominal amount.

58.1 Ico will incorporate a corporation ("Employeeco"). Employeeco will be a private corporation and a taxable Canadian corporation.

The authorized share capital of Employeeco will include an unlimited number of common shares. The common shares of Employeeco will be entitled to one vote per share, will be entitled to dividends if, as and when declared by the board of directors of the corporation, and will be entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation.

On incorporation, Ico will subscribe for XXXXXXXXXX common shares of Employeeco for a nominal amount.

59. Ico will incorporate one or more corporations (individually, a "Titleco" and, collectively, the "Titlecos"). Each of the Titlecos will be a private corporation and a taxable Canadian corporation.

The authorized share capital of each of the Titlecos will include an unlimited number of common shares. The common shares of each of the Titlecos will be entitled to one vote per share, will be entitled to dividends if, as and when declared by the board of directors of the corporation, and will be entitled to the remaining assets of the corporation on a liquidation, dissolution or winding-up of the corporation.

On incorporation, Ico will subscribe for XXXXXXXXXX common shares of each of the Titlecos for a nominal amount.

60. Aco may sell some XXXXXXXXXX Shares or common shares of Jco prior to the transfers of property to the Siblings' Subs described in Paragraph 68 below to ensure that Aco has sufficient cash to effect the transfers of property to the Siblings' Subs described in Paragraph 68 below and to generate sufficient gains to utilize any unutilized charitable donation credits or deductions available to Aco. Any such sales would be for cash and would be over the stock exchanges on which the XXXXXXXXXX Shares or the common shares of Jco trade.

61. Ico will transfer legal title (but not beneficial interest) to one or more of its Real Properties to one or more Titlecos. Each Titleco to whom such a transfer is made will execute one or more declarations of trust that any such Real Properties in respect of which it has received legal title will be held by it as bare trustee for Ico or such other person or persons as may be the beneficial owner of such Real Properties from time to time. The only function of each Titleco will be to hold legal title to the one or more Real Properties transferred to it, and will not be able to carry out any actions with regard to such Real Properties without instructions from Ico or such other person or persons as may be the beneficial owner of such Real Properties from time to time.

62. Aco and Ico will amalgamate under the provisions of the XXXXXXXXXX (the continuing corporation resulting from the amalgamation will be referred to as "Amalco").

The authorized share capital of Amalco will be identical to the authorized share capital of Aco, except that Amalco's authorized share capital will also include XXXXXXXXXX Class XXXXXXXXXX Preference shares (the "Amalco Class XXXXXXXXXX Preference Shares"). The Amalco Class XXXXXXXXXX Preference Shares will be non-voting, will be redeemable and retractable for an amount per share equal to the Butterfly Redemption Amount (plus all declared and unpaid dividends), and will be entitled to an annual non-cumulative dividend at the rate of XXXXXXXXXX % of the redemption amount. The Amalco Class XXXXXXXXXX Preference Shares will rank behind the Class XXXXXXXXXX shares, and ahead of the common shares of Amalco in respect of dividends and distributions on a liquidation, dissolution or winding-up of the corporation.

On the amalgamation:

(a) each Class XXXXXXXXXX share of Aco will be converted into one Class XXXXXXXXXX share of Amalco;

(b) each Class XXXXXXXXXX share of Aco will be converted into one Class XXXXXXXXXX share of Amalco;

(c) each Class XXXXXXXXXX share of Aco will be converted into one Class XXXXXXXXXX share and one-half of a common share of Amalco;

(d) each XXXXXXXXXX share of Aco will be converted into the number of Amalco Class XXXXXXXXXX Preference Shares determined by the formula:

1.25 * A / (A + B)

where:

A is the FMV of all the XXXXXXXXXX shares of Aco owned by each Sibling's Holdco immediately before the amalgamation; and

B is the FMV of all the XXXXXXXXXX shares of Aco owned by each Sibling's Holdco immediately before the amalgamation;

(e) each XXXXXXXXXX share of Aco will be converted into the number of Amalco Class XXXXXXXXXX Preference Shares determined by the formula:

B / (A + B)

where A and B have the meanings ascribed to them in Subparagraph (d) above; and

(f) each share of Ico will be cancelled without any repayment of capital in respect thereof.

Also on the amalgamation:

(g) the amount added to the stated capital of the Class XXXXXXXXXX shares of Amalco will be equal to the PUC of the Class XXXXXXXXXX shares, respectively, of Aco immediately before the amalgamation;

(h) the amount added to the stated capital of the Class XXXXXXXXXX shares of Amalco will be equal to XXXXXXXXXX of the PUC of the Class XXXXXXXXXX shares of Aco immediately before the amalgamation;

(i) the amount added to the stated capital of the Amalco Class XXXXXXXXXX Preference Shares will be equal to the aggregate PUC of the XXXXXXXXXX shares of Aco immediately before the amalgamation; and

(j) the amount added to the stated capital of the common shares of Amalco will be equal to XXXXXXXXXX of the PUC of the Class XXXXXXXXXX shares of Aco immediately before the amalgamation.

63. Sibling2 will assume the obligation of Dco to repay the Dco Special Debt and Sibling3 will assume the obligation of Eco to repay the Eco Special Debt. In consideration for such assumption of liabilities, Dco will issue to Sibling2 a non-interest-bearing demand promissory note with a principal amount equal to the principal amount of the Dco Special Debt, and Eco will issue to Sibling3 a non-interest-bearing demand promissory note with a principal amount equal to the principal amount of the Eco Special Debt.

Aco will be a party to the assumption agreement governing the transactions described in this Paragraph and Dco and Eco will be released from their obligations under the Dco Special Debt and the Eco Special Debt, respectively.

64. Amalco will forgive the Dco Special Debt and the Eco Special Debt.

65. Amalco will enter into one or more lease agreements with one or more Realcos under which one or more of the Real Properties will be leased to such Realcos (individually, a "Building Lease" and, collectively, the "Building Leases"). To evidence the legal relationship of the parties as a result of entering into the Building Leases, any existing space leases to tenants in respect of any Real Properties leased to a Realco (the "Space Leases") will be assigned by Amalco to such Realco. As part of the consideration for the Building Leases, each Realco that enters into a Building Lease will reimburse Amalco for Amalco's unamortized balance of tenant inducement costs in respect of the Real Property that is the subject of such Building Lease (as determined for the purposes of the Act) by issuing to Amalco a non-interest-bearing demand promissory note (individually, a "Reimbursement Note" and, collectively, the "Reimbursement Notes") with a principal amount equal to the unamortized balance of tenant inducement costs.

Each Building Lease will be for a fixed term (plus any extensions and renewals), but will be terminable on notice by the co-owners. The rent payable by each Realco to Amalco pursuant to a Building Lease for a year will be equal to a fixed percentage of the net revenues in such year from the Real Property that is the subject of such Building Lease, provided that, if the net revenues for any year are less than a minimum threshold amount, the rent for such year will be equal to the excess of the net revenues for such year over a fixed dollar amount. Net revenues, in respect of a year, means the excess, if any, of revenues for the year over the aggregate of operating expenses for the year and any carry forward of operating expenses from previous years in which there were insufficient revenues for payment of the same. Revenues, in respect of a year, means the gross amounts included in a Realco's income with respect to the Real Property that is the subject of such Building Lease for the year after deducting any available reserves for the year. Operating expenses, in respect of a year, means such of a Realco's costs and expenses for the year which are properly attributable to the leasing, maintenance, operating, supervision and administration of the Real Property that is the subject of such Building Lease for the year, including any deduction for the year in respect of the reimbursement of Amalco's unamortized balance of tenant inducement costs.

66. Amalco will transfer to one or more of the Realcos the business of managing and operating one or more of the Real Properties, including the Real Property Current Assets in respect of such Real Properties, and issue to any Realco to whom such a transfer is made a non-interest-bearing demand promissory note (individually, an "Amalco Note" and, collectively, the "Amalco Notes") with a principal amount equal to $XXXXXXXXXX plus the excess, if any, of the principal amount of the Real Property Current Liabilities over the FMV of the Real Property Current Assets in respect of the Real Properties transferred to such Realco. In consideration for such transfer, each Realco to whom such a transfer is made will assume the Real Property Current Liabilities in respect of the Real Properties so transferred and will issue to Amalco XXXXXXXXXX common shares of its capital and a non-interest-bearing demand promissory note (individually, a "Realco Note" and, collectively, the "Realco Notes") with a principal amount equal to $XXXXXXXXXX less than the excess, if any, of the FMV of the Real Property Current Assets over the principal amount of the Real Property Current Liabilities in respect of the Real Properties transferred to such Realco. Where a Real Property, the management and operation of which has been transferred to a Realco, is the subject of a management agreement with a third party manager, such contract will be included in the assets transferred by Amalco to the Realco.

The liabilities assumed by each such Realco will be allocated (based on their principal amount) to the properties transferred by Amalco to such Realco. The principal amount of the liabilities allocated to a particular property will not exceed the FMV of the property immediately before the transfer.

Amalco and each such Realco will elect, jointly and in prescribed form and within the time referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfer of one or more of the eligible properties transferred by Amalco to such Realco as described in this Paragraph. The agreed amount in respect of each property in respect of which a joint election is made will not be less than the lesser of the cost amount to Amalco of the particular property and the FMV of the particular property at the time of transfer, provided, however, the agreed amount in respect of any particular property will not be less than $XXXXXXXXXX.

Where the principal amount of the liabilities assumed as consideration for the transfer of a particular property equals the FMV of such property, the agreed amount in respect of such property will equal the FMV of the property. Where the principal amount of the liabilities assumed as consideration for the transfer of a particular property is greater than or equal to the cost amount but less than the FMV of such property, the agreed amount in respect of such property will not be less than the principal amount of the liabilities assumed. Where the principal amount of the liabilities assumed as consideration for the transfer of a particular property is less than the cost amount of such property, the agreed amount in respect of such property will not be less than the lesser of the cost amount and the FMV of the property.

With respect to the assumption of certain undertakings of Amalco which relate primarily to prepaid monthly rent and tenant contributions to prepaid common area operating costs, Amalco and each Realco that has assumed any such undertakings in the transactions described in this Paragraph will elect, jointly and in prescribed form and within the time referred to in subsection 20(25), to have the rules in subsection 20(24) apply to Amalco as the payer, and to such Realco as the recipient, in respect of any payment made by Amalco to such Realco in consideration for the assumption by such Realco of those undertakings.

Amalco and each Realco to whom accounts receivable are transferred in the transactions described in this Paragraph will elect, jointly and in prescribed form and within the time referred to in section 22, to have the rules in section 22 apply to the transfer of such accounts receivable.

66.1 The employees of Amalco engaged in managing and operating the Real Properties will become employed by Employeeco. In respect of Real Properties the management and operation of which has been transferred to a Realco, Employeeco will make the services of its employees available to the Realco for a fee payable by the Realco in order to assist the Realco to carry out its management and operation function, including supervising any third-party management agreements. In respect of other Real Properties, Employeeco will make the services of its employees available to the co-owners for a fee payable by the co-owners in order to assist the co-owners in managing and operating the Real Property, including supervising any third-party management agreements.

67. Amalco will effect a series of increases in the stated capital of the Amalco Class E Preference Shares, the aggregate amount of which will be equal to XXXXXXXXXX% of the balance in Amalco's CDA immediately before the time of the commencement of such stated capital increases. Amalco will elect, in prescribed form and within the time referred to in subsection 83(2), to have the rules in subsection 83(2) apply to the full amount of any resulting deemed dividends.

68. Amalco will transfer:

(a) to Kco, all amounts receivable by Amalco from Sibling1 or any corporation controlled by, or any Specified Relative of, Sibling1 immediately before the transfers of property to the Siblings' Subs described in this Paragraph, and an amount of cash, GICs and T-Bills equal to the Kco Cash Amount;

(b) to Lco, all amounts receivable by Amalco from Sibling2 or any corporation controlled by, or any Specified Relative of, Sibling2 immediately before the transfers of property to the Siblings' Subs described in this Paragraph, and an amount of cash, GICs and T-Bills equal to the Lco Cash Amount;

(c) to Mco, all amounts receivable by Amalco from Sibling3 or any corporation controlled by, or any Specified Relative of, Sibling3 immediately before the transfers of property to the Siblings' Subs described in this Paragraph, and an amount of cash, GICs and T-Bills equal to the Mco Cash Amount; and

(d) to each Sibling's Sub, the Transfer Proportion of each of Amalco's assets (other than cash, GICs and T-Bills and the Cash Debts). Such assets will include all the assets of Amalco, whether absolute or contingent, and whether known or unknown, and will include tax refunds of Amalco or any predecessor corporation for the taxation year in which the proposed transactions occur and any prior taxation year. The assets so transferred will also include the Building Leases, the shares of the Realcos, the Titlecos and Employeeco, and the Realco Notes and Reimbursement Notes, if any. In the case of the transfer of any interest in any of the Real Properties, Amalco will transfer an undivided co-ownership interest in the particular property to each Sibling's Sub. In all other cases, Amalco will transfer a divided interest in property to each Sibling's Sub. Further, certain transfers will be of a beneficial interest only, and not a legal interest. For example, since, at the time of the transfer, Amalco may own only a beneficial interest in some or all of the Real Properties, the transfer of such Real Properties will be of a beneficial interest only, in which case the declarations of trust referred to in Paragraph 61 above and any other relevant declarations of trust will be amended to reflect Amalco and the Siblings' Subs as the owners of the beneficial interest in such Real Properties.

As consideration for the transfers of property described above, each Sibling's Sub will assume the Transfer Proportion of each of Amalco's liabilities and will issue XXXXXXXXXX of its common shares to Amalco. The liabilities so assumed will include all the liabilities of Amalco, whether absolute or contingent, and whether known or unknown, and will include any liability for taxes of Amalco or any predecessor corporation for the taxation year in which the proposed transactions occur and any prior taxation year. The liabilities so assumed will also include the Amalco Notes, if any.

The liabilities assumed by each Sibling's Sub will be allocated (based on their principal amount) to the properties transferred by Amalco to such Sibling's Sub. The principal amount of the liabilities allocated to a particular property will not exceed the FMV of the property immediately before the transfer.

Amalco and each Sibling's Sub will elect, jointly and in prescribed form and within the time referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfer of one or more of the eligible properties transferred by Amalco to such Sibling's Sub as described in this Paragraph. The agreed amount in respect of each property in respect of which a joint election is made will not be less than the lesser of the cost amount to Amalco of the particular property and the FMV of the particular property at the time of the transfer, provided, however, the agreed amount in respect of any particular property will not be less than $XXXXXXXXXX.

69. Each Sibling's Sub will purchase for cancellation all of its common shares held by Amalco for an amount equal to the FMV of such shares, and will issue to Amalco, as consideration therefor, a non-interest-bearing demand promissory note with a principal amount equal to the FMV of such shares (the "Kco Redemption Note", the "Lco Redemption Note" and the "Mco Redemption Note", respectively), which Amalco will accept in full satisfaction of the purchase price of such shares.

70. Each Sibling's Sub will be wound up into its respective Sibling's Holdco.

71. Amalco will redeem all the Amalco Class XXXXXXXXXX Preference Shares held by each Sibling's Holdco for an amount equal to the aggregate redemption amount of such shares, and will issue to each Sibling's Holdco, as consideration therefor, a non-interest-bearing demand promissory note with a principal amount equal to the aggregate redemption amount of the Amalco Class XXXXXXXXXX Preference Shares held by the particular Sibling's Holdco (the "Amalco Redemption Note1", the "Amalco Redemption Note2" and the "Amalco Redemption Note3", respectively), which each Sibling's Holdco will accept in full satisfaction of the redemption amount of such shares.

72. The Kco Redemption Note, Lco Redemption Note and Mco Redemption Note will be set off against the Amalco Redemption Note1, Amalco Redemption Note2 and Amalco Redemption Note3, respectively, and all of the notes will be cancelled.

73. Each Sibling's Holdco will transfer to the respective Sibling:

(a) a number of XXXXXXXXXX Shares, such number to be agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above, and being such number of XXXXXXXXXX Shares having a FMV, on the Determination Date, equal to one-third of $XXXXXXXXXX; and

(b) a number of XXXXXXXXXX Shares, such number to be agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above, and such number being some or all of the Post-Butterfly XXXXXXXXXX Shares Rebalancing Proportion of the XXXXXXXXXX Shares transferred to it in the transfers described in Paragraphs 68 and 70 above and remaining after the transfer described in Subparagraph (a) above.

As consideration for the transfers of property described above, each Sibling will issue to its respective Holdco a non-interest-bearing demand promissory note with a principal amount equal to the FMV of the XXXXXXXXXX Shares transferred to the Sibling in the transfers described in this Paragraph.

74. Each Sibling will sell, and Father will purchase from each Sibling, a number of the XXXXXXXXXX Shares transferred to each Sibling in the transfers described in Paragraph 73 above, such number to be agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above, and being such number of XXXXXXXXXX Shares having an aggregate FMV, on the Determination Date, equal to their best estimate, on the Determination Date, of the aggregate of:

(a) the tax payable by such Sibling and the respective Sibling's Holdco, less any tax credits, deductions and refunds (including, for greater certainty, dividend refunds) that may be available to them, as a result of the transfers described in Paragraph 73 above and this Paragraph (including any tax payable and any tax credits, deductions and refunds resulting from the transactions described in Paragraph 79 below); and

(b) in the case of the transfers by Sibling2 and Sibling3, the tax payable by such Sibling as a result of the transaction described in Paragraph 64 above.

As consideration for such sales, Father will pay cash or issue an interest-bearing promissory note (payable according to its terms) to each Sibling in an amount to be agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above, which amount will be equal to their best estimate, on the Determination Date, of the aggregate amount of the tax liability of such Sibling and such Sibling's Holdco referred to in this Paragraph.

Each Sibling will then transfer to Father, for no consideration, the remainder of the XXXXXXXXXX Shares transferred to each Sibling in the transfers described in Paragraph 73 above.

75. Each Sibling's Holdco will sell, and Bco will purchase from each Sibling's Holdco, a portion of the Post-Butterfly Other Assets Rebalancing Proportion of each of the assets (other than cash, GICs, T-Bills, Cash Debts and XXXXXXXXXX Shares) transferred to each Sibling's Holdco in the transfers described in Paragraphs 68 and 70 above, and a number of the XXXXXXXXXX Shares transferred to each Sibling's Holdco in the transfers described in Paragraphs 68 and 70 above and remaining after the transactions described in Paragraph 73 above, such portion and such number to be agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above, and being such portion of the assets and such number of XXXXXXXXXX Shares having an aggregate FMV, on the Determination Date, equal to their best estimate, on the Determination Date, of the aggregate of:

(a) the tax payable by such Sibling's Holdco as a result of the transactions described in this Paragraph (less an amount equal to the Post-Butterfly Other Assets Rebalancing Proportion of the aggregate amount of Cash, GICs, T-Bills and Cash Debts received by such Sibling's Holdco in the transactions described in Paragraphs 68 and 70 above); and

(b) the principal amount of the Post-Butterfly Other Assets Rebalancing Proportion of each of the liabilities assumed by such Sibling's Holdco in the transactions described in Paragraphs 68 and 70 above.

As consideration therefor, Bco will:

(c) assume the Post-Butterfly Other Assets Rebalancing Proportion of each of the liabilities assumed by such Sibling's Holdco in the transactions described in Paragraphs 68 and 70 above; and

(d) pay cash or issue an interest-bearing promissory note (payable according to its terms) to each Sibling's Holdco in an amount to be agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above, which amount will be equal to their best estimate, on the Determination Date, of the amount referred to in Subparagraph (a) above.

Each Sibling's Holdco will transfer to Bco, for no consideration, the Post-Butterfly Other Assets Rebalancing Proportion of each of the assets (other than cash, GICs, T-Bills, Cash Debts and XXXXXXXXXX Shares) transferred to the Siblings' Holdcos in the transfers described in Paragraphs 68 and 70 above (less the portion of such assets already transferred to Bco described in this Paragraph) and the Post-Butterfly XXXXXXXXXX Shares Rebalancing Proportion of the XXXXXXXXXX Shares transferred to the Siblings' Holdcos in the transfers described in Paragraphs 68 and 70 above (less any such shares already transferred to Bco described in this Paragraph and any such shares already transferred to the Siblings described in Paragraph 73 above).

The assets (other than cash, GICs, T-Bills, Cash Debts and XXXXXXXXXX Shares) transferred by each Sibling's Holdco to Bco will comprise the same percentage interest in each of the assets (other than cash, GICs, T-Bills, Cash Debts and XXXXXXXXXX Shares) received by the Sibling's Holdco in the transfers described in Paragraphs 68 and 70 above. The declarations of trust referred to in Paragraph 61 above and any other relevant declarations of trust will be amended to reflect the new percentage interests of Amalco and the Siblings' Holdcos as the owners of the beneficial interest in some or all of the Real Properties.

76. Bco (or its successor corporations) and each Sibling's Holdco will contribute cash and property to Foundation, and/or directly to charities designated by Foundation or agreed to by the parties, having an aggregate FMV equal to XXXXXXXXXX%, in the case of Bco, and one-third of XXXXXXXXXX%, in the case of each Sibling's Holdco, of the difference between

(a) $XXXXXXXXXX; and

(b) an amount to be agreed upon among Aco, Father, the Siblings and the Holdcos prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above, representing charitable donations made by Aco during a period ending prior to the transfers of property to the Siblings' Subs described in Paragraph 68 above.

77. Amalco (or its successor corporations), Father, the Siblings, the Family Trusts and the Holdcos will enter into:

(a) a tax indemnity agreement pursuant to which:

(i) certain parties to the agreement may make certain representations and warranties about the facts disclosed in this ruling application;

(ii) certain parties to the agreement may make certain covenants regarding their dealings in the shares of Amalco (or its successor corporations) and the Holdcos, and the property received by the Siblings' Holdcos on the transfers described in Paragraphs 68 and 70 above and the property retained by Amalco; and

(iii) certain parties to the agreement may provide certain indemnities as to any adverse tax consequences arising from the proposed transactions described herein; and

(b) one or more agreements contemplated in the term sheet described in Paragraph 55 above, and one or more other shareholders agreements or co-owners agreements or other agreements in respect of the ownership or disposition of property received or retained on the proposed transactions described herein.

ADDITIONAL INFORMATION

78. Father and the Siblings may obtain insurance in respect of their exposure to some or all of the known and unknown liabilities of Amalco. The cost of such insurance will be borne XXXXXXXXXX% by Father and one-third of XXXXXXXXXX% by each of the Siblings.

79. Each Sibling may use a portion of the cash received by him or her in, or pursuant to, the transactions described in Paragraph 74 above to repay a portion of the note issued by him or her in the transactions described in Paragraph 73 above. Each Sibling's Holdco may also declare one or more dividends on its shares held by the respective Sibling, or redeem or purchase for cancellation its shares held by the respective Sibling, and will pay such dividends or amounts due on the redemption or purchase for cancellation of shares by issuing to the respective Sibling a non-interest-bearing demand promissory note with a principal amount equal to such dividends or amounts due. Each Sibling may use the promissory note issued to him or her in the transactions described in this Paragraph to repay all or a portion of the promissory note issued by such Sibling to its respective Holdco in Paragraph 73 above. Elections under subsection 83(2) may be filed in respect of any dividends or deemed dividends resulting from the transactions described in this Paragraph.

80. Father may transfer to Bco some of the XXXXXXXXXX Shares transferred and sold to him in the transactions described in Paragraph 74 above. As consideration therefor, Bco will pay cash or issue shares to Father in an amount equal to the FMV of the XXXXXXXXXX Shares so transferred to Bco.

81. Bco and Amalco may amalgamate under the provisions of the XXXXXXXXXX (the continuing corporation resulting from the amalgamation to be referred to as "Amalco2") or Amalco may be wound-up into Bco. In the event that Bco and Amalco amalgamate or Amalco is wound-up into Bco, the declarations of trust referred to in Paragraph 61 above and any other relevant declarations of trust may be amended to reflect Amalco2 and the Siblings' Holdcos as the owners of the beneficial interest in some or all of the Real Properties.

82. Subject to the provisions of the agreements described in Paragraph 77 above, Amalco, Bco (or its successor corporations) and each Sibling's Holdco may dispose of some or all of the assets that were transferred to it or retained by it in the proposed transactions described herein. Such dispositions may be to Amalco, Bco or a Sibling's Holdco. For example, Amalco, Bco (or its successor corporations) and each Sibling's Holdco may:

(a) incorporate a wholly-owned XXXXXXXXXX corporation;

(b) subscribe for common shares in the capital thereof;

(c) transfer to this wholly-owned subsidiary some or all of the XXXXXXXXXX Shares and/or XXXXXXXXXX Shares and/or shares or warrants of Jco that were transferred to it or retained by it in the proposed transactions described herein; and

(d) dispose of some or all of the XXXXXXXXXX Shares and/or XXXXXXXXXX Shares and/or shares or warrants of Jco that were transferred to it or retained by it in the proposed transactions described herein.

83. Subject to the provisions of the agreements described in Paragraph 77 above, Father and each Sibling may reorganize the share capital of Amalco (or its successor corporations) and/or his or her respective Holdco.

84. Each Family Trust may distribute some or all of the common shares of the respective Sibling's Holdco to the respective Sibling in satisfaction of part or all of such Sibling's capital interest in the trust.

85. The proposed transactions described in Paragraphs 57 through 61 above will occur in any order (except that the proposed transaction described in Paragraph 61 above will occur after the proposed transaction described in Paragraph 59 above), on one or more days before the date agreed to by the parties as the date for effecting the transfers of property to the Siblings' Subs described in Paragraph 68 above (the "Effective Date"). The proposed transactions described in Paragraphs 62 through 75 above will occur in the order in which they are set out above on the Effective Date, and the agreements referred to in Paragraph 77 above may also be entered into on the Effective Date. The proposed donations described in Paragraph 76 above will occur further to the demands made by the Foundation or Father, from time to time following the Effective Date, for contributions in specified amounts, not to exceed, in aggregate, the amount specified in Paragraph 76 above in respect of Bco (or its successor corporations) and each Sibling's Holdco. The proposed transactions described in Paragraphs 78 through 84 above may occur in any order on one or more days after the Effective Date.

86. The statements regarding issued and authorized share capital of corporations, ownership, ACB, PUC and redemption amount, and percentage of votes associated with the shares of corporations, and the composition and amounts of assets and liabilities of corporations and other entities, all as set out under the facts above, are all as at XXXXXXXXXX, except as otherwise indicated above and except for:

(a) the number of issued common shares of Jco, as described in Paragraph 29 above, which is as of XXXXXXXXXX; and

(b) the main assets and liabilities of Ico and the share capital of XXXXXXXXXX listed in Paragraphs 37 and 38 above, which are as of XXXXXXXXXX.

87. No property has or will become property of Amalco or any corporation controlled by it or a predecessor corporation of any such corporation, and no liabilities have been or will be incurred by Amalco or any corporation controlled by it or a predecessor corporation of any such corporation, in contemplation of and before the proposed transfers of property described in Paragraph 68 above, except as described herein or in a transaction described in subparagraphs 55(3.1)(a)(i) to (iv).

88. None of the Amalco Class XXXXXXXXXX Preference Shares or any of the Siblings' Subs' common shares are or will be subject to a guarantee agreement or a dividend rental arrangement, and none of such shares have been or will be issued or acquired as part of a transaction or event or series of transactions or events of the type described in subsection 112(2.5).

88.1 On XXXXXXXXXX, Eco paid a dividend of $XXXXXXXXXX on its Class XXXXXXXXXX Preference shares and redeemed XXXXXXXXXX Class XXXXXXXXXX Preference shares for $XXXXXXXXXX immediately thereafter. On XXXXXXXXXX, Eco paid a further dividend of $XXXXXXXXXX on its Class XXXXXXXXXX Preference shares. Elections under subsection 83(2) were filed in respect of the $XXXXXXXXXX and $XXXXXXXXXX dividends.

PURPOSES OF THE PROPOSED TRANSACTIONS

89. The principal purpose of the proposed transactions is to enable Father and each Sibling to have direct ownership of their respective pro rata share of the property of Aco and Ico. This will allow Father and each Sibling to deal with such property (other than any such property held in co-ownership after the butterfly) independently from the others during their lives and by their respective wills.

90. The principal purpose of the proposed transactions described in Paragraphs 73 through 75 above is to allow Father to enjoy a portion of the unexpected and significant increase in the value of the Fco shares. Following the XXXXXXXXXX disposition of Gco to Fco, an unexpected and significant increase in the FMV of the XXXXXXXXXX Shares and XXXXXXXXXX the XXXXXXXXXX Shares, gave rise to an equally unexpected and significant increase in the value of the XXXXXXXXXX shares of Aco. Consequently, Bco's percentage interest in Aco became significantly smaller and the percentage interest of each of the Siblings' Holdcos in Aco became significantly larger than originally intended. The theory of these rebalancing transactions is that Father, directly and through Bco, Aco and Ico (and their successor corporations), should receive or retain XXXXXXXXXX Shares with a FMV of $XXXXXXXXXX plus XXXXXXXXXX% of the property of Aco and Ico (excluding such $XXXXXXXXXX of XXXXXXXXXX Shares) and should assume or be liable for XXXXXXXXXX of the liabilities of Aco and Ico.

91. The purpose of the transactions described in Paragraphs 65 and 66 is to put in place a two-tiered structure for the operation of the Real Properties, whereby the Real Properties would be owned by the co-owners and operated by the Realcos. The purpose of the transactions described in Paragraph 65 is to put in place a particular form of two-tiered structure whereby the Realcos would act as head lessors in respect of the Real Properties. XXXXXXXXXX. The head lease structure also allows the Realcos to reimburse Amalco for Amalco's unamortized balance of tenant inducement costs in respect of the Real Properties. The Realcos will deduct these costs on the same basis as they were deductible by Amalco. This allows the parties to share the benefits of such costs after the butterfly, similar to how they are sharing them before the butterfly, and is consistent with the objective of achieving equality of treatment among the shareholders.

RULINGS GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purposes of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:

A. With respect to the amalgamation of Aco and Ico to form Amalco, as described in paragraph 62 above:

(a) the provisions of subsection 87(1) will apply, such that:

(i) each of the shareholders of the predecessor corporations on each such amalgamation will be deemed by paragraph 87(4)(a) to have disposed of each class of its shares of each predecessor corporation for POD equal to its ACB of such shares immediately before the amalgamation;

(ii) each of the shareholders of the predecessor corporations on each such amalgamation will be deemed by paragraph 87(4)(b) to have acquired any shares of the new corporation issued on the conversion of a class of shares of a predecessor corporation at a cost equal to the POD realized by the particular shareholder in respect of such class of shares of the predecessor corporation, as described in the preceding Subparagraph;

(iii) where a shareholder of a predecessor corporation receives shares of more than one class of the new corporation on the conversion of a class of shares of a predecessor corporation, the shareholder's cost of such shares of any particular class of the new corporation will be equal to the shareholder's cost of all such shares of all classes of the new corporation multiplied by the proportion that the FMV, immediately after the amalgamation, of such shares of the particular class of the new corporation is of the FMV, immediately after the amalgamation, of all such shares of all classes of the new corporation; and

(iv) paragraph 87(2)(j) will apply, with the result that, for the purposes of subsection 20(24), the new corporation will be deemed to be the same corporation as, and a continuation of, each of its predecessor corporations;

(b) subsection 80.01(3) will apply to deem any commercial obligation owing to or by any predecessor corporation by or to another predecessor corporation immediately prior to the amalgamation to have been settled immediately before the time that is immediately before the amalgamation by payment of an amount equal to the amount that would have been the creditor's cost amount of the indebtedness at that time using the assumptions set out in paragraphs 80.01(3)(a) and (b);

(c) Amalco will be entitled to deduct, in computing its income, the undeducted balance of tenant inducement costs of Ico on the same basis as Ico would have been entitled to deduct these amounts;

(d) provided that the new corporation continues to use the property acquired from the predecessor corporations for the purpose of gaining or producing income from such property (other than income which is exempt from taxation), and the new corporation has a legal obligation to pay interest in respect of the liabilities that became its liabilities by virtue of the amalgamation (other than liabilities in respect of which the predecessor corporations were not entitled to deduct interest under paragraph 20(1)(c)), any such interest paid in the year or payable in respect of the year (depending on the method regularly followed by the new corporation in computing its income for the purposes of the Act) by the new corporation in respect of such liabilities, not in excess of a reasonable amount, will be deductible in computing the new corporation's income under paragraph 20(1)(c);

(e) provided that the shares of a predecessor corporation held by the shareholder of the predecessor corporation constituted capital property to such shareholder, the shares of the new corporation will represent capital property to such shareholder for the purposes of the proposed transactions described herein;

(f) pursuant to subsection 1102(14) of the Regulations, each property which, immediately before the amalgamation, is depreciable property of a prescribed class or separate prescribed class of a predecessor corporation and which is acquired by the new corporation on the amalgamation will be depreciable property of the same prescribed class or separate prescribed class, as the case may be, of the new corporation;

(g) provided that the condition specified in paragraph 1100(2.2)(f) or (g) of the Regulations is satisfied, paragraph 1100(2.2)(h) of the Regulations will apply such that no amount will be included by the new corporation under paragraph 1100(2)(a) of the Regulations in respect of depreciable property of a prescribed class that is property acquired by the new corporation on the amalgamation; and

(h) pursuant to subsection 1101(1ad) of the Regulations, each rental property (within the meaning given in subsection 1100(14) of the Regulations) which is acquired by the new corporation on the amalgamation and which would otherwise be rental property of a separate prescribed class under subsection 1101(1ac) of the Regulations will be deemed not to be property of a separate prescribed class of the new corporation under subsection 1101(1ac) of the Regulations provided that such property was a rental property included in a prescribed class of a predecessor corporation other than a separate class prescribed under subsection 1101(1ac) of the Regulations.

B. In respect of the forgiveness of the Dco Special Debt and the Eco Special Debt, as described in paragraph 64 above, subsection 15(2) will apply to include the amount of the forgiven debt in the income of Sibling2 and Sibling3, respectively. For greater certainty, subsection 15(1) and section 80 will not apply in respect of the transactions described in paragraphs 63 and 64 above.

C. Amalco will not be required to include any amount in computing its income for a taxation year in respect of the Building Leases (except as co-owner) or the assignment of the Space Leases. The owners of the Real Properties from time to time will be required to include amounts in income for a taxation year in respect of the Building Leases only to the extent of the rent that is received by them pursuant to the Building Leases in such year.

D. Provided that the principal amount of the Reimbursement Notes reduces Amalco's unamortized balance of tenant inducement costs, no amount will be required to be included by Amalco in computing its income in respect of the receipt of such notes.

E. Each Realco which issued a Reimbursement Note to Amalco, as described in Paragraph 65 above, will be entitled to deduct in computing its income the undeducted balance of tenant inducement costs in respect of which the note was issued on the same basis as Amalco would have been entitled to deduct such amounts.

F. Provided that a Realco continues to use the property acquired by it from Amalco, as described in Paragraph 66 above, for the purpose of gaining or producing income from such property (other than income which is exempt from taxation) and such Realco has a legal obligation to pay interest in respect of the liabilities of Amalco assumed by it, as described in Paragraph 66 above (other than liabilities in respect of which Amalco was not entitled to deduct interest under paragraph 20(1)(c)), any such interest paid in the year or payable in respect of the year (depending on the method regularly followed by such Realco in computing its income for the purposes of the Act) by such Realco in respect of such liabilities, not in excess of a reasonable amount, will be deductible in computing such Realco's income under paragraph 20(1)(c).

G. In respect of the transfer of Amalco's accounts receivable to each Realco, as described in Paragraph 66 above, provided Amalco and such Realco have jointly elected under section 22:

(a) Amalco may deduct, in computing its income for the taxation year in which the accounts receivable are sold, an amount equal to the difference between the face value of the debts so sold to such Realco (other than debts in respect of which Amalco has claimed deductions under paragraph 20(1)(p)) and the consideration paid by such Realco to Amalco for the debts so sold;

(b) such Realco will include an amount equal to the difference described in Ruling H(a) above in computing its income for the taxation year in which the accounts receivable are sold;

(c) the debts so sold will be deemed, for the purposes of paragraphs 20(1)(l) and (p), to have been included in computing such Realco's income for the taxation year in which the accounts receivable are sold or a previous year but no deduction may be made by such Realco under paragraph 20(1)(p) in respect of a debt in respect of which Amalco has previously claimed a deduction under that paragraph; and

(d) each amount deducted by Amalco in computing income for a previous year under paragraph 20(1)(p) in respect of any of the debts so sold will be deemed, for the purpose of paragraph 12(1)(i), to have been so deducted by such Realco.

H. Provided that Amalco has included or will have included an amount in respect of the undertakings described in Paragraph 66 above in computing its income from its business pursuant to paragraph 12(1)(a) for the taxation year which includes the time of the transfer of assets described in Paragraph 66 above or any preceding taxation year, the payment made by Amalco to each Realco as consideration for the assumption by such Realco of those undertakings, to the extent that the payment is reasonable:

(a) may be deducted, pursuant to paragraph 20(24)(a), in computing Amalco's income for its fiscal period in which the payment takes place; and

(b) will be deemed, pursuant to paragraph 20(24)(b), to be an amount described in paragraph 12(1)(a) in respect of such Realco.

I. The provisions of subsection 85(1) will apply to the transfers by Amalco to each Realco, as described in Paragraph 66 above, and the transfers by Amalco to each Sibling's Sub, as described in Paragraph 68 above, of each eligible property which is the subject of an election under subsection 85(1) such that the agreed amount in respect of each such property will be deemed to be the transferor's POD and the transferee's cost thereof pursuant to paragraph 85(1)(a). For the purposes of the joint elections described in Paragraph 68 above, the reference to "the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition . . . " in subparagraph 85(1)(e)(i) will be read to mean the proportion of the UCC to the taxpayer of all the property of that class that the capital cost of the property immediately before the disposition is of the capital cost of all property of that class immediately before the disposition. For greater certainty, paragraph 85(1)(e.2) will not apply to the transfers.

J. As a result of the increases in stated capital of the Amalco Class XXXXXXXXXX Preference Shares by Amalco, as described in Paragraph 67 above, Amalco will be deemed to have paid to each Sibling's Holdco, and each Sibling's Holdco will be deemed to have received, dividends pursuant to subsection 84(1) in an aggregate amount equal to the aggregate increase in PUC of the Amalco Class XXXXXXXXXX Preference Shares owned by that Sibling's Holdco resulting from such increases in stated capital.

Provided that Amalco elects pursuant to subsection 83(2) in respect of the full amount of such dividends, each such dividend will be deemed to be a capital dividend.

The ACB of the Amalco Class XXXXXXXXXX Preference Shares held by each Sibling's Holdco will be increased by an aggregate amount equal to the aggregate increases in stated capital attributable to the Amalco Class XXXXXXXXXX Preference Shares held by such Sibling's Holdco.

K. Provided that a Sibling's Holdco continues to use the property acquired by it from Amalco, as described in Paragraphs 68 and 70 above, for the purpose of gaining or producing income from such property (other than income that is exempt from taxation) and such Sibling's Holdco has a legal obligation to pay interest in respect of the liabilities of Amalco assumed by it, as described in Paragraphs 68 and 70 above (other than liabilities in respect of which Amalco was not entitled to deduct interest under paragraph 20(1)(c)), any such interest paid in the year or payable in respect of the year (depending on the method regularly followed by such Sibling's Holdco in computing its income for the purposes of the Act) by such Sibling's Holdco in respect of such liabilities, not in excess of a reasonable amount, will be deductible in computing such Sibling's Holdco's income under paragraph 20(1)(c).

L. Pursuant to subsection 1102(14) of the Regulations, each property which, immediately before the transfers of property described in Paragraph 68 above, is depreciable property of a prescribed class or separate prescribed class of Amalco and which is acquired by a Sibling's Holdco on the transfers of property described in Paragraphs 68 and 70 above will be depreciable property of the same prescribed class or separate prescribed class, as the case may be, of such Sibling's Holdco.

M. Provided that the condition specified in paragraph 1100(2.2)(g) of the Regulations is satisfied, paragraph 1100(2.2)(h) of the Regulations will apply such that no amount will be included by a Sibling's Sub or a Sibling's Holdco under paragraph 1100(2)(a) of the Regulations in respect of depreciable property of a prescribed class that is property acquired by such Sibling's Sub from Amalco on the transfers of property described in Paragraph 68 above and by such Sibling's Holdco from Amalco on the transfers of property described in Paragraphs 68 and 70 above.

N. Pursuant to subsection 1101(1ad) of the Regulations, each rental property (within the meaning given in subsection 1100(14) of the Regulations) which is acquired by a Sibling's Holdco from Amalco on the transfers described in Paragraphs 68 and 70 above and which would otherwise be a rental property of a separate prescribed class under subsection 1101(1ac) of the Regulations will be deemed not to be property of a separate prescribed class of such Sibling's Holdco under subsection 1101(1ac) of the Regulations provided that such property was a rental property included in a prescribed class of Amalco other than a separate class prescribed under subsection 1101(1ac) of the Regulations.

O. Provided that Bco continues to use the property acquired by it from a Sibling's Holdco on the transfers of property described in Paragraph 75 above for the purpose of gaining or producing income from such property (other than income that is exempt from taxation), and Bco has a legal obligation to pay interest in respect of the liabilities of that Sibling's Holdco assumed by it, as described in Paragraph 75 above (other than liabilities in respect of which the Sibling's Holdco was not entitled to deduct interest under paragraph 20(1)(c)), any such interest paid in the year or payable in respect of the year (depending on the method regularly followed by Bco in computing its income for the purposes of the Act) by Bco in respect of such liabilities, not in excess of a reasonable amount, will be deductible in computing Bco's income under paragraph 20(1)(c).

P. Pursuant to subsection 1102(14) of the Regulations, each property which immediately before the transfers of property described in Paragraph 75 above is depreciable property of a prescribed class or separate prescribed class of a Sibling's Holdco, and which is acquired by Bco on the transfers of property described in Paragraph 75 above, will be depreciable property of the same prescribed class or separate prescribed class, as the case may be, of Bco.

Q. Provided that the condition specified in paragraph 1100(2.2)(f) or (g) of the Regulations is satisfied, paragraph 1100(2.2)(h) of the Regulations will apply such that no amount will be included by Bco under paragraph 1100(2)(a) of the Regulations in respect of depreciable property of a prescribed class that is property acquired by Bco from a Sibling's Holdco on the transfers of property described in Paragraph 75 above.

R. Pursuant to subsection 1101(1ad) of the Regulations, each rental property (within the meaning given in subsection 1100(14) of the Regulations) which is acquired by Bco from a Sibling's Holdco on the transfers of property described in Paragraph 75 above, and which would otherwise be a rental property of a separate prescribed class under subsection 1101(1ac) of the Regulations, will be deemed not to be property of a separate prescribed class of Bco under subsection 1101(1ac) of the Regulations provided that such property was a rental property included in a prescribed class of that Sibling's Holdco other than a separate class prescribed under subsection 1101(1ac) of the Regulations.

S. As a result of the purchase for cancellation by each Sibling's Sub of its common shares held by Amalco, as described in Paragraph 69 above, and the redemption by Amalco of the Amalco Class XXXXXXXXXX Preference Shares held by each Sibling's Holdco, as described in Paragraph 71 above:

(a) by virtue of paragraphs 84(3)(a) and (b):

(i) each Sibling's Sub will be deemed to have paid, and Amalco will be deemed to have received, a taxable dividend equal to the amount by which the aggregate amount paid to purchase the respective common shares exceeds the aggregate PUC thereof, immediately before such purchase; and

(ii) Amalco will be deemed to have paid, and each Sibling's Holdco will be deemed to have received, a taxable dividend equal to the amount by which the aggregate amount paid to redeem the Amalco Class XXXXXXXXXX Preference Shares held by each Sibling's Holdco, respectively, exceeds the aggregate PUC thereof, immediately before such redemption;

(b) the taxable dividends deemed to have been received by Amalco and each Sibling's Holdco, respectively, as a result of the purchases for cancellation and redemptions referred to in Ruling S(a) above will be included in each corporation's income pursuant to subsection 82(1) and paragraph 12(1)(j), and will be deductible by each corporation in computing its taxable income pursuant to subsection 112(1) for the year in which such dividend is deemed to have been received. For greater certainty, the provisions of subsections 112(2.1), (2.2), (2.3) and (2.4) will not apply to deny the application of the subsection 112(1) deduction in respect of such dividends;

(c) the taxable dividends deemed to have been received by Amalco and each Sibling's Holdco, respectively, as a result of the purchases for cancellation and redemptions referred to in Ruling S(a) above will be excluded from the POD of such shares pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54;

(d) the taxable dividends deemed to have been received by Amalco and each Sibling's Holdco, respectively, as a result of the purchases for cancellation and redemptions referred to in Ruling S(a) above will, pursuant to subsection 112(3), reduce any loss arising from the purchases for cancellation or redemptions, as the case may be, to the recipient which would otherwise be determined;

(e) by virtue of subsection 186(2) and paragraph 186(4)(a), each Sibling's Sub will be connected with Amalco, and Amalco will be connected with each Sibling's Holdco. Provided that neither Amalco nor any of the Siblings' Subs is entitled to a dividend refund in respect of its taxation year in which it is deemed to pay the dividends referred to in Ruling S(a)(i) or (ii) above, neither Amalco nor any of the Siblings' Subs will be subject to Part IV tax under subsection 186(1) in respect of such dividends; and

(f) by virtue of paragraph 191(2)(a), each recipient of a deemed dividend will have a substantial interest in the payer of the deemed dividend immediately before the purchases for cancellation and redemptions referred to in Paragraphs 69 and 71 above. Consequently, neither Amalco, nor any of the Siblings' Subs and Siblings' Holdcos will be subject to Part IV.1 tax under section 187.2 or to Part VI.1 tax under section 191.1 in respect of the dividends referred to in Ruling S(a) above by virtue of paragraph (b) of the definition of "excepted dividend" in section 187.1 and paragraph (a) of the definition of "excluded dividend" in subsection 191(1).

T. Provided that, as part of the series of transactions or events that includes the proposed transactions described herein, there is not:

(a) an acquisition of property in the circumstances described in paragraph 55(3.1)(a);

(b) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(c) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii); or

(d) an acquisition of shares in the circumstances described in subparagraph 55(3.1)(b)(iii);

which has not been described herein, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in Ruling S above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption from subsection 55(2) provided by paragraph 55(3)(b).

U. In respect to the winding-up of each Sibling's Sub into the respective Sibling's Holdco, as described in Paragraph 70 above:

(a) the provisions of subsection 88(1) will apply;

(b) the subsidiary will be deemed by paragraph 88(1)(a) to have disposed of each of its properties for POD equal to its ACB of such property immediately before the winding-up;

(c) the shares of the subsidiary held by the parent immediately before the winding-up will be deemed by paragraph 88(1)(b) to have been disposed of by the parent for POD equal to the greater of the amounts described in subparagraphs 88(1)(b)(i) and (ii);

(d) the parent will be deemed by paragraph 88(1)(c) to have acquired each of the properties distributed to it on the winding-up for an amount equal to the POD to the subsidiary of such property; and

(e) provided that each Sibling's Holdco elects in prescribed form and within the time referred to in paragraph 80.01(4)(c) to have the provisions of subsection 80.01(4) apply in respect of the winding-up of each Sibling's Sub, subsection 80.01(4) will apply to deem any commercial obligation owing by or to the subsidiary to or by the parent immediately prior to the winding-up to have been settled (in the case of any obligation owing by the subsidiary to the parent, immediately before the time that is immediately before the winding-up) by payment of an amount equal to the principal amount of the obligation.

V. The repayment of each of the Kco Redemption Note, Lco Redemption Note and Mco Redemption Note held by Amalco, and the Amalco Redemption Note1 held by Cco, the Amalco Redemption Note2 held by Dco and the Amalco Redemption Note3 held by Eco, as described in Paragraph 72 above, will not give rise to a "forgiven amount" within the meaning of subsections 80(1) or 80.01(1). Neither Amalco nor any of the Siblings' Holdcos will realize any gain or incur any loss as a result of the repayment and resultant cancellation of these notes, as described in paragraph 72 above.

W. Paragraph 69(1)(c) will apply to the acquisitions of property for no consideration by Father and Bco, as described in Paragraphs 74 and 75 above, respectively, with the result that the ACB to Father and to Bco, as the case may be, of the assets so acquired, will be equal to the FMV of such assets at the time of their acquisition.

X. The provisions of subsections 15(1), 15(2) (except as explicitly indicated above and except in respect of any Cash Debts owed other than by Canadian corporations), 56(2), 69(1) (except as explicitly indicated above and except in respect of the transactions described in Paragraphs 74 and 75 above), 69(4) and 246(1) will not apply to the proposed transactions described in Paragraphs 57 through 77 above, in and by themselves.

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

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R4 dated January 29, 2001 and are binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed by XXXXXXXXXX.

The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.

COMMENTS

1. Nothing in this ruling should be construed as implying that the Canada Customs and Revenue Agency has agreed to or reviewed:

(a) the determination of the fair market value or ACB of any particular asset or the paid-up capital or safe income on hand in respect of any shares referred to herein; or

(b) any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.

Yours truly,

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

ENDNOTES

1 Not calculated at this time.

2 Not calculated at this time.

??