Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Switch of limited and general partners. Redefine debt owing to be equal to debt owing immediately prior to transactions.
Position: Ruling still binding.
Reasons: Switch in partners does not affect issues ruled on.
Original debt to be paid down by the end of the month immediately before the month in which the transactions take place, in order to meet 18(4) thin capitalization requirements.
XXXXXXXXXX 2001-009836
XXXXXXXXXX, 2001
Dear XXXXXXXXXX:
Re: Supplementary Advance Income Tax Ruling to
Advance Income Tax Ruling # 2001-008569
XXXXXXXXXX ("Canco")
XXXXXXXXXX ("US Parent")
XXXXXXXXXX ("US Sub")
This is in reply to your facsimiles dated XXXXXXXXXX, wherein you advised us of changes to be made to the definitions and transactions described in our advance income tax ruling letter dated XXXXXXXXXX, 2001, our file number 2001-008569 (the "Ruling Letter"). According to our telephone conversation with you (XXXXXXXXXX) of XXXXXXXXXX , the proposed transactions set out in the Ruling Letter have not yet been completed.
You indicated to us that the requested amendments are as a result of
(a) the need to replace US Parent with US Sub as the General Partner of the XXXXXXXXXX limited liability partnership described in the Ruling Letter (the "Partnership"), to reflect the original intentions of US Parent and US Sub in entering into the Partnership; and
(b) the taxpayer's desire to ensure that, at all relevant times, Canco's total debt outstanding to specified non-residents does not exceed two times its equity, as described in subsection 18(4) of the Income Tax Act (the "Act").
In particular:
1. The definition of "Canco Debt A" in paragraph (d) and the definition of "Canco Debt B" in paragraph (e) of the section of the Ruling Letter under the heading "Income Tax Act and Other Definitions" are deleted and replaced with the following:
d) "Canco Debt A" means the indebtedness owing by Canco to US Parent in the original principal amount of $XXXXXXXXXX pursuant to an agreement entered into between US Parent and Canco on XXXXXXXXXX.
e) "Canco Debt B" means the indebtedness owing by Canco to the Partnership in an amount equal to the principal and accrued interest of Canco Debt A immediately before the proposed transactions take place. Canco Debt B will be a XXXXXXXXXX term loan with a fixed rate of interest.
2. The following transaction is inserted immediately before paragraph 13 of the Ruling Letter, under the heading "Proposed Transactions":
12A. US Parent and US Sub, as partners in the Partnership, will execute an Extraordinary Resolution In Writing to effect the resignation of US Parent as the general partner and the appointment of US Sub as the general partner of the Partnership. US Parent will continue as a limited partner of the Partnership.
3. Paragraphs 13 and 14 of the Ruling Letter are deleted and replaced with the following:
13. US Parent will subscribe for additional units, at $XXXXXXXXXX per unit, of the Partnership, in a total amount equal to the principal amount of Canco Debt B.
14. The Partnership will make an interest bearing XXXXXXXXXX term loan to Canco (Canco Debt B), which will be documented by a promissory note issued by Canco to the Partnership.
Notwithstanding the above-mentioned changes, we confirm that the rulings previously given in the Ruling Letter will continue to be binding on the Canada Customs and Revenue Agency in the manner described therein, provided that the proposed transactions are completed by XXXXXXXXXX.
Yours truly,
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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© Her Majesty the Queen in Right of Canada, 2001
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