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: In-house loss consolidation
Position: Interest deductible; similar to 9924123
Reasons:
XXXXXXXXXX 2002-013308
XXXXXXXXXX, 2002
Dear XXXXXXXXXX:
Re: ADVANCE INCOME TAX RULING
XXXXXXXXXX
(collectively referred to herein as "the Applicants")
This is in reply to your letter of XXXXXXXXXX in which you request an advance income tax ruling on behalf of the taxpayers. We also acknowledge the information provided in subsequent correspondence and during our various telephone conversations in connection with your request.
You have advised that to the best of the knowledge of the responsible officers of each of the Applicants and yourselves, none of the issues involved in this Ruling: is in an earlier tax return of any of the Applicants or a related person;
(i) is being considered by a tax services office or taxation centre in connection with a previously filed tax return or of any of the Applicants or a related person;
(ii) is under objection by any of the Applicants or a related person;
(iii) is before the courts; or
(iv) is the subject of a ruling previously issued by the Income Tax Rulings Directorate of Canada Customs and Revenue Agency ("CCRA")
You have advised that to the best of the knowledge of the responsible officers of each of the Applicants, the Proposed Transactions will not have any impact on existing outstanding tax liabilities, if any, of any of the Applicants.
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
DEFINITIONS
The following definitions apply in respect of this Advance Income Tax Ruling:
(a) "ACo", as described in Paragraph 13, means ZCo;
(b) "ACB" means "adjusted cost base" as that expression is defined in section 54;
(c) "Act" means the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), 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;
(d) "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);
(e) "affiliated persons" has the meaning assigned by subsection 251.1(1);
(f) "BCo", as described in Paragraph 13, means WCo;
(g) "CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended;
(h) "CCo", as described in Paragraph 13, means ZCo;
(i) "capital property" has the meaning assigned by section 54;
(j) "Canadian corporation" has the meaning assigned by subsection 89(1);
(k) "cost amount" has the meaning assigned by subsection 248(1);
(l) "DCo", as described in Paragraph 13, means WCo;
(m) "disposition" has the meaning assigned by subsection 248(1);
(n) "dividend rental arrangement" has the meaning assigned by subsection 248(1);
(o) "ECo", as described in Paragraph 13, means ZCo;
(p) "FCo", as described in Paragraph 13, means WCo;
(q) "FMV" means fair market value;
(r) "forgiven amount" has the meaning assigned by subsections 80(1) or 80.01(1);
(s) "guarantee agreement" has the meaning assigned by subsection 112(2.2);
(t) "Holdco" means the new corporation described in Paragraph 19;
(u) "Holdco Shares" means the common shares of Holdco described in Paragraph 19;
(v) "Newlossco(s)" means any of Newlossco1, Newlossco2, Newlossco3, Newlossco4, Newlossco5, or Newlossco6;
(w) "Newlossco1" means the new corporation described in Paragraph 19;
(x) "Newlossco1 Note" means the note payable described in Paragraph 22;
(y) "Newlossco1 Note A" means the note payable described in Paragraph 26;
(z) "Newlossco1 Note B" means the note payable described in Paragraph 33;
(aa) "Newlossco1 Preferred Shares" means the preferred shares of Newlossco1 described in Paragraph 19;
(bb) "Newlossco2" means the new corporation described in Paragraph 19;
(cc) "Newlossco2 Note" means the note payable described in Paragraph 23;
(dd) "Newlossco2 Note A" means the note payable described in Paragraph 26;
(ee) "Newlossco2 Note B" means the note payable described in Paragraph 33;
(ff) "Newlossco2 Preferred Shares" means the preferred shares of Newlossco2 described in Paragraph 19;
(gg) "Newlossco3" means the new corporation described in Paragraph 41;
(hh) "Newlossco3 Note" means the note payable described in Paragraph 42;
(ii) "Newlossco3 Note A" means the note payable described in Paragraph 46;
(jj) "Newlossco3 Note B" means the note payable described in Paragraph 53;
(kk) "Newlossco3 Preferred Shares" means the preferred shares of Newlossco3 described in Paragraph 41;
(ll) "Newlossco4" means the new corporation described in Paragraph 41;
(mm) "Newlossco4 Note" means the note payable described in Paragraph 43;
(nn) "Newlossco4 Note A" means the note payable described in Paragraph 46;
(oo) "Newlossco4 Note B" means the note payable described in Paragraph 53;
(pp) "Newlossco4 Preferred Shares" means the preferred shares of Newlossco4 described in Paragraph 41;
(qq) "Newlossco5" means the new corporation described in Paragraph 61;
(rr) "Newlossco5 Note" means the note payable described in Paragraph 62;
(ss) "Newlossco5 Note A" means the note payable described in Paragraph 66;
(tt) "Newlossco5 Note B" means the note payable described in Paragraph 73;
(uu) "Newlossco5 Preferred Shares" means the preferred shares of Newlossco5 described in Paragraph 61;
(vv) "Newlossco6" means the new corporation described in Paragraph 61;
(ww) "Newlossco6 Note" means the note payable described in Paragraph 63;
(xx) "Newlossco6 Note A" means the note payable described in Paragraph 66;
(yy) "Newlossco6 Note B" means the note payable described in Paragraph 73;
(zz) "Newlossco6 Preferred Shares" means the preferred shares of Newlossco6 described in Paragraph 61;
(aaa) "Newsubco(s)" means any of Newsubco A, Newsubco B, Newsubco C, Newsubco D, Newsubco E or Newsubco F;
(bbb) "Newsubco A" means the corporation formed on the amalgamation of ACo and Newlossco1 as set out in Paragraph 38;
(ccc) "Newsubco B" means the corporation formed on the amalgamation of BCo and Newlossco2 as set out in Paragraph 39;
(ddd) "Newsubco C" means the corporation formed on the amalgamation of CCo and Newlossco3 as set out in Paragraph 58;
(eee) "Newsubco D" means the corporation formed on the amalgamation of DCo and Newlossco4 as set out in Paragraph 59;
(fff) "Newsubco E" means the corporation formed on the amalgamation of ECo and Newlossco5 as set out in Paragraph 78;
(ggg) "Newsubco F" means the corporation formed on the amalgamation of FCo and Newlossco6 as set out in Paragraph 79;
(hhh) "non-capital loss" has the meaning assigned by subsection 111(8);
(iii) "Opco" means XXXXXXXXXX;
(jjj) "Opco Group" means Opco and Canadian corporations controlled by Opco;
(kkk) "operating subsidiary(ies)" means one or more of the corporations that make up the Opco Group;
(lll) "PUC" means "paid-up capital" and has the meaning assigned by subsection 89(1);
(mmm) "Paragraph" means a numbered paragraph in this Advance Income Tax Ruling;
(nnn) "Parentco" means XXXXXXXXXX;
(ooo) XXXXXXXXXX;
(ppp) "Portion A" means a percentage that, for the purposes of the Proposed Transactions in this letter, is assumed to be XXXXXXXXXX%;
(qqq) "Portion B" means a percentage that is equal to XXXXXXXXXX% less Portion A;
(rrr) "Portion C" means a percentage that, for the purposes of the Proposed Transactions in this letter, is assumed to be XXXXXXXXXX%;
(sss) "Portion D" means a percentage that is equal to XXXXXXXXXX% less Portion C;
(ttt) "Portion E" means a percentage that, for the purposes of the Proposed Transactions in this letter, is assumed to be XXXXXXXXXX%;
(uuu) "Portion F" means a percentage that is equal to XXXXXXXXXX% less Portion E;
(vvv) "predecessor corporation" has the meaning assigned by subsection 87(1);
(www) "principal amount" has the meaning assigned by subsection 248(1);
(xxx) "Prior Ruling" means, XXXXXXXXXX, as referred to in Paragraph 7;
(yyy) "proceeds of disposition" has the meaning assigned by section 54;
(zzz) "Proposed Transactions" means the various transactions that are the subject of this Advance Income Tax Ruling and described in Paragraphs 19 to 81;
(aaaa) "Pubco" means XXXXXXXXXX;
(bbbb) "public corporation" has the meaning assigned by subsection 89(1);
(cccc) "restricted financial institution" has the meaning assigned by subsection 248(1);
(dddd) "series of transactions or events" includes the transactions or events referred to in subsection 248(10);
(eeee) "specified financial institution" has the meaning assigned by subsection 248(1);
(ffff) "stated capital account" has the meaning assigned by section 26 of the CBCA;
(gggg) "taxable Canadian corporation" has the meaning assigned by subsection 89(1);
(hhhh) "transferred assets" means shares of YCo and XCo that represent capital property to Opco;
(iiii) "WCo" means XXXXXXXXXX, a wholly owned subsidiary of Opco;
(jjjj) "Wind-upco(s)" means any of Wind-upco1, Wind-upco2, or Wind-upco3;
(kkkk) "Wind-upco1" means the new corporation described in Paragraph 19;
(llll) "Wind-upco1 Class A Shares" means the Class A preferred shares of Wind-upco1 described in Paragraph 19;
(mmmm) "Wind-upco1 Class B Shares" means the Class B preferred shares of Wind-upco1 described in Paragraph 19;
(nnnn) "Wind-upco1 Note 1" means the note payable described in Paragraph 34;
(oooo) "Wind-upco1 Note 2" means the note payable described in Paragraph 34;
(pppp) "Wind-upco2" means the new corporation described in Paragraph 41;
(qqqq) "Wind-upco2 Class A Shares" means the Class A preferred shares of Wind-upco2 described in Paragraph 41;
(rrrr) "Wind-upco2 Class B Shares" means the Class B preferred shares of Wind-upco2 described in Paragraph 41;
(ssss) "Wind-upco2 Note 1" means the note payable described in Paragraph 54;
(tttt) "Wind-upco2 Note 2" means the note payable described in Paragraph 54;
(uuuu) "Wind-upco3" means the new corporation described in Paragraph 61;
(vvvv) "Wind-upco3 Class A Shares" means the Class A preferred shares of Wind-upco3 described in Paragraph 61;
(wwww) "Wind-upco3 Class B Shares" means the Class B preferred shares of Wind-upco3 described in Paragraph 61;
(xxxx) "Wind-upco3 Note 1" means the note payable described in Paragraph 74;
(yyyy) "Wind-upco3 Note 2" means the note payable described in Paragraph 74;
(zzzz) "XCo" means XXXXXXXXXX, a wholly owned subsidiary of Opco;
(aaaaa) "YCo" means XXXXXXXXXX, a wholly owned subsidiary of Opco; and
(bbbbb) "ZCo" means XXXXXXXXXX, a wholly owned subsidiary of Opco.
FACTS
1. Pubco is a public corporation and a taxable Canadian corporation with its head office at XXXXXXXXXX. Pubco deals with the XXXXXXXXXX Tax Services Office and files its corporate income tax returns at the XXXXXXXXXX Taxation Centre.
2. Pubco has a XXXXXXXXXX fiscal and taxation year-end.
3. Opco is a taxable Canadian corporation that was incorporated pursuant to XXXXXXXXXX and continued under the CBCA. Opco has its head office at XXXXXXXXXX . Opco deals with the XXXXXXXXXX Tax Services Office and files its corporate income tax returns at the XXXXXXXXXX Taxation Centre.
4. Opco has a XXXXXXXXXX fiscal and taxation year-end.
5. All of the issued and outstanding shares of Opco are held by Pubco.
6. Opco is the main Canadian operating company in the Opco Group that carries on the operation of XXXXXXXXXX in Canada and the U.S., as well as XXXXXXXXXX operations and inter-group financing.
7. XXXXXXXXXX.
8. Opco, formerly a public corporation, elected in connection with the Plan of Arrangement to no longer be a public corporation pursuant to subparagraph (c)(i) of the definition of "public corporation" in subsection 89(1).
9. Based on the trading value of the shares of Pubco, the FMV of the Opco shares is estimated to be approximately $XXXXXXXXXX. No formal valuation of the Opco shares or of any of the subsidiaries of Opco has, or will be done. The adjusted cost base of the Opco shares to Pubco is approximately $XXXXXXXXXX.
10. Opco reported non-capital losses carried forward at XXXXXXXXXX of approximately $XXXXXXXXXX, which are scheduled to expire as follows:
XXXXXXXXXX.
11. Opco's ACB in the transferred assets is approximately $XXXXXXXXXX. The FMV of the transferred assets is greater than Opco's ACB in such assets.
12. YCo and XCo are expected to pay annual dividends during the period covered by the Proposed Transactions.
13. ACo, BCo, CCo, DCo, ECo and FCo are the designations for potentially profitable taxable Canadian corporations within the Opco Group that will be selected for use in the Proposed Transactions based on their expected taxable income. Each of Opco, ACo, BCo, CCo, DCo, ECo and FCo will be affiliated persons throughout the Proposed Transactions.
14. XCo is a taxable Canadian corporation that has its head office at XXXXXXXXXX XCo deals with the XXXXXXXXXX Tax Services Office and files its corporate income tax returns at the XXXXXXXXXX Taxation Centre.
15. XCo has a XXXXXXXXXX fiscal and taxation year-end.
16. YCo is a taxable Canadian corporation that has its head office at XXXXXXXXXX YCo deals with the XXXXXXXXXX Tax Services Office and files its corporate income tax returns at the XXXXXXXXXX Taxation Centre.
17. YCo has a XXXXXXXXXX fiscal and taxation year-end.
18. WCo is a taxable Canadian corporation that has its head office at XXXXXXXXXX WCo deals with the XXXXXXXXXX Tax Services Office and files its corporate income tax returns at the XXXXXXXXXX Taxation Centre.
WCo has a XXXXXXXXXX fiscal and taxation year-end.
PROPOSED TRANSACTIONS
Based on current projections of taxable income, it is contemplated that the Proposed Transactions will be undertaken as set out below. Transactions occurring on a particular date will occur in the order presented herein.
Opco will incorporate Holdco, Newlossco1, Newlossco2, and Wind-upco1
19. Opco will incorporate Holdco, Newlossco1, Newlossco2 and Wind-upco1 under the CBCA. Each of Holdco, Newlossco1, Newlossco2, and Wind-upco1 will be a taxable Canadian corporation.
Holdco's authorized share capital will consist solely of common shares ("Holdco Shares").
Newlossco1's authorized share capital will consist of common shares and a class of non-voting, preferred, redeemable shares ("Newlossco1 Preferred Shares"). The Newlossco1 Preferred Shares will be entitled to non-cumulative dividends not exceeding XXXXXXXXXX% of the redemption amount. The aggregate redemption amount of the Newlossco1 Preferred Shares will be equal to Portion A of the FMV of the Holdco Shares at the time of the redemption less the principal amount of the debt issued or assumed by Newlossco1 on the acquisition of the Holdco Shares.
Newlossco2's authorized share capital will consist of common shares and a class of non-voting, preferred, redeemable shares ("Newlossco2 Preferred Shares"). The Newlossco2 Preferred Shares will be entitled to non-cumulative dividends not exceeding XXXXXXXXXX% of the redemption amount. The aggregate redemption amount of the Newlossco2 Preferred Shares will be equal to Portion B of the FMV of the Holdco Shares at the time of the redemption less the principal amount of the debt issued or assumed by Newlossco2 on the acquisition of the Holdco Shares.
Wind-upco1's authorized share capital will consist of common shares and two classes of non-voting, preferred, redeemable shares (Wind-upco1 Class A Shares and Wind-upco1 Class B Shares). The aggregate redemption amount of the Wind-upco1 Class A Shares will be equal to the FMV of the shares of Holdco at the time of the redemption less the principal amount of the debt issued or assumed by Wind-upco1 on the acquisition of the Holdco Shares. The redemption amount of the Wind-upco1 Class B Shares will be equal to the FMV of the consideration received by Wind-upco1 on the issuance of such shares.
On incorporation, Opco will subscribe for XXXXXXXXXX common shares of each of Holdco, and Wind-upco1 for a total amount of $XXXXXXXXXX in each case. Opco will subscribe for XXXXXXXXXX common shares of each of Newlossco1, and Newlossco2 for a total amount of $XXXXXXXXXX in each case.
Each of Holdco, Newlossco1, Newlossco2 and Wind-upco1 will select the date on which its fiscal and taxation year will end, unless their respective taxation year terminates prematurely as a result of an amalgamation pursuant to section 87.
Opco will transfer the transferred assets to Holdco
20. Opco will transfer to Holdco the transferred assets for consideration consisting solely of Holdco Shares. Holdco will add to the stated capital account maintained for the Holdco Shares an amount equal to the FMV of the transferred assets. Subsection 85(2.1) will result in a deduction in computing the PUC of the Holdco Shares, such that the amount of PUC of the Holdco Shares, will be equal to the cost amount to Holdco of the transferred assets.
21. Opco and Holdco will jointly elect, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the transferred assets. The agreed amount in respect of the transferred assets will be the lesser of the FMV of the transferred assets and their cost amount at that time.
Opco will transfer the Holdco Shares to Newlossco1 and Newlossco2
22. Opco will transfer to Newlossco1 Portion A of its Holdco Shares for consideration consisting of the Newlossco1 Note, a note payable to Opco with a principal amount not to exceed the ACB of the Holdco Shares transferred, and XXXXXXXXXX Newlossco1 Preferred Shares.
23. Opco will transfer to Newlossco2 its remaining Holdco Shares (being Portion B of the outstanding Holdco shares) for consideration consisting of the Newlossco2Note, a note payable to Opco with a principal amount not to exceed the ACB of the Holdco Shares transferred, and XXXXXXXXXX Newlossco2 Preferred Shares.
24. The Newlossco1 Note and the Newlossco2 Note will be interest-bearing at an annual rate of XXXXXXXXXX% and have a term of XXXXXXXXXX years with certain early prepayment options.
25. Opco will jointly elect with Newlossco1, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco shares. The agreed amount in respect of the Holdco shares transferred will be the lesser of the FMV of the Holdco shares transferred and their cost amount at that time, and will not be less than the principal amount of the Newlossco1 Note.
Newlossco1 will add to the stated capital account maintained for the Newlossco1 Preferred Shares an amount equal to the amount by which the FMV of the Holdco Shares received by Newlossco1 exceeds the principal amount of the Newlossco1 Note. Subsection 85(2.1) will result in a reduction in computing the PUC of the Newlossco1 Preferred Shares, such that the amount of PUC of the Newlossco1 Preferred Shares will be equal to the cost amount to Newlossco1 of the Holdco Shares transferred less the principal amount of the Newlossco1 Note.
Opco will jointly elect with Newlossco2, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco shares. The agreed amount in respect of the Holdco shares transferred will be the lesser of the FMV of the Holdco shares transferred and their cost amount at that time, and will not be less than the principal amount of the Newlossco2 Note.
Newlossco2 will add to the stated capital account maintained for the Newlossco2 Preferred Shares an amount equal to the amount by which the FMV of the Holdco Shares received by Newlossco2 exceeds the principal amount of the Newlossco2 Note. Subsection 85(2.1) will result in a reduction in computing the PUC of the Newlossco2 Preferred Shares, such that the amount of PUC of the Newlossco2 Preferred Shares will be equal to the cost amount to Newlossco2 of the Holdco Shares transferred less the principal amount of the Newlossco2 Note.
Opco will lend money to Newlossco1 and Newlossco2
26. On a business day in XXXXXXXXXX or XXXXXXXXXX, each of Newlossco1 and Newlossco2 will issue demand notes payable bearing interest at a rate of XXXXXXXXXX%, the Newlossco1 Note A and Newlossco2 Note A, respectively, to Opco for cash in the amount of the non-capital losses of each of Newlossco1 and Newlossco2 at that time (which will approximate the interest expense incurred by each of Newlossco1 and Newlossco2 on the Newlossco1 Note and Newlossco2 Note, respectively).
27. The cash received from the issuance of the Newlossco1 Note A and Newlossco2 Note A will permit each of Newlossco1 and Newlossco2 to pay amounts owing, including interest expense owing to Opco.
Opco will transfer its Newlossco1 Preferred Shares and Newlossco2 Preferred Shares to Wind-upco1
28. On the same day referred to in Paragraph 26, Opco will transfer to Wind-upco1, at FMV, all of its Newlossco1 Preferred Shares and Newlossco2 Preferred Shares. As sole consideration Wind-upco1 will issue to Opco common shares with a FMV equal to the aggregate FMV of the Newlossco1 Preferred Shares and Newlossco2 Preferred Shares at that time.
29. Opco will jointly elect with Wind-upco1, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Newlossco1 Preferred Shares and Newlossco2 Preferred Shares. The agreed amount in respect of the Newlossco1 Preferred Shares and Newlossco2 Preferred Shares transferred will be the lesser of their FMV and their cost amount at that time.
Wind-upco1 will add to the stated capital account maintained for its common shares an amount not to exceed the aggregate of the cost amounts of the properties transferred.
Newlossco1 and Newlossco2 will transfer Holdco Shares to Wind-upco1
30. On the same day referred to in Paragraph 26, Newlossco1 will transfer to Wind-upco1, at FMV, its Holdco Shares. As consideration for the transfer, Wind-upco1 will assume the Newlossco1 Note issued to Opco and will issue Wind-upco1 Class A Shares to Newlossco1.
Newlossco2 will transfer to Wind-upco1, at FMV, its Holdco Shares. As consideration for the transfer, Wind-upco1 will assume the Newlossco2 Note issued to Opco and will issue Wind-upco1 Class A Shares to Newlossco2.
31. Wind-upco1 will jointly elect with Newlossco1, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco Shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time.
Wind-upco1 will add to the stated capital account maintained for its Wind-upco1 Class A Shares an amount equal to the FMV of the Holdco Shares transferred. Subsection 85(2.1) will result in a reduction in computing the PUC of the Wind-upco1 Class A Shares, such that the amount added to the PUC of the Wind-upco1 Class A Shares will be equal to the cost amount to Wind-upco1 of the Holdco Shares transferred less the principal amount of the Newlossco1 Note.
Wind-upco1 will jointly elect with Newlossco2, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time.
Wind-upco1 will add to the stated capital account maintained for its Wind-upco1 Class A Shares an amount equal to the FMV of the Holdco Shares transferred. Subsection 85(2.1) will result in a reduction in computing the PUC of the Wind-upco1 Class A Shares, such that the amount added to the PUC of the Wind-upco1 Class A Shares will be equal to the cost amount to Wind-upco1 of the Holdco Shares transferred less the principal amount of the Newlossco2 Note.
32. To ensure that no interest expense accumulates in Wind-upco1, immediately after the transfer of Holdco Shares in Paragraph 30, Wind-upco1 will issue to Opco Wind-upco1 Class B Shares with a redemption price and stated capital account equal to the aggregate principal amounts of the Newlossco1 Note and Newlossco2 Note. As consideration, Opco will surrender the Newlossco1 Note and Newlossco2 Note.
Newlosscos and Wind-upco1 will cross-redeem preferred shares
33. On the same day referred to in Paragraph 26, Newlossco1 will redeem its Newlossco1 Preferred Shares held by Wind-upco1. The consideration will be a demand non-interest-bearing note, Newlossco1 Note B, with a principal amount and FMV equal to the redemption value of the Newlossco1 Preferred Shares.
On the same day referred to in Paragraph 26, Newlossco2 will redeem its Newlossco2 Preferred Shares held by Wind-upco1. The consideration will be a demand non-interest-bearing note, Newlossco2 Note B, with a principal amount and FMV equal to the redemption value of the Newlossco2 Preferred Shares.
34. On the same day referred to in Paragraph 26, Wind-upco1 will redeem its Wind-upco1 Class A Shares held by Newlossco1. The consideration will be a demand non-interest-bearing note, Wind-upco1 Note 1, with a principal amount and FMV equal to the redemption value of the Wind-upco1 Class A Shares held by Newlossco1. Newlossco1 will accept the Wind-upco1 Note 1 in full satisfaction of the redemption amount of the Wind-upco1 Class A Shares.
On the same day referred to in Paragraph 26, Wind-upco1 will redeem its Wind-upco1 Class A Shares held by Newlossco2. The consideration will be a demand non-interest-bearing note, Wind-upco1 Note 2, with a principal amount and FMV equal to the redemption value of the Wind-upco1 Class A Shares held by Newlossco2. Newlossco2 will accept the Wind-upco1 Note 2 in full satisfaction of the redemption amount of the Wind-upco1 Class A Shares.
Newlosscos and Wind-upco1 will cross-cancel Notes
35. Subsequent to, but on the same day as the redemptions described in Paragraphs 33 and 34, the Newlossco1 Note B and the Wind-upco1 Note 1 will be set off against each other and cancelled in full satisfaction of the obligations under each note, and the Newlossco2 Note B and the Wind-upco1 Note 2 will be set off against each other and cancelled in full satisfaction of the obligations under each note.
Opco will sell Newlossco1 and Newlossco2 to Profitable Canadian Subsidiaries
36. ACo will acquire all of the shares of Newlossco1 and the Newlossco1 Note A from Opco for FMV consideration consisting of cash. The FMV will reflect, inter alia, interest rates, statutory income tax rates, the estimated time of utilization of the non-capital losses of Newlossco1 and other considerations.
BCo will acquire all of the shares of Newlossco2 and the Newlossco2 Note A from Opco for FMV consideration consisting of cash. The FMV will reflect, inter alia, interest rates, statutory income tax rates, the estimated time of utilization of the non-capital losses of Newlossco2 and other considerations.
37. Each of Newlossco1 and Newlossco2 will have a taxation year end. Each of Newlossco1 and Newlossco2 will file corporate income tax returns for its first taxation year. Each of Newlossco1 and Newlossco2 will have incurred a non-capital loss that will approximate the interest expense on the Newlossco1 Note or Newlossco2 Note, as the case may be, held by Opco for that taxation year.
ACo and BCo will amalgamate with Newlosscos
38. Following the acquisition by ACo of all the shares of Newlossco1, ACo and Newlossco1 will be amalgamated pursuant to section 184 of the CBCA to form one corporation, Newsubco A, in such manner that:
(a) all of the property of the predecessor corporations immediately before the merger (except the shares of Newlossco1) will become property of Newsubco A by virtue of the merger;
(b) all of the liabilities of the predecessor corporations immediately before the merger (except the Newlossco1 Note A) will become liabilities of Newsubco A by virtue of the merger; and
(c) all of the shares of the predecessor corporations (except those of ACo) will be cancelled on the merger. The shares of ACo owned by its shareholders immediately before the merger will become shares of Newsubco A to those shareholders immediately after the merger.
39. Following the acquisition by BCo of all the shares of Newlossco2, BCo and Newlossco2 will be amalgamated pursuant to section 184 of the CBCA to form one corporation, Newsubco B, in such manner that:
(a) all of the property of the predecessor corporations immediately before the merger (except the shares of Newlossco2) will become property of Newsubco B by virtue of the merger;
(b) all of the liabilities of the predecessor corporations immediately before the merger (except Newlossco2 Note A) will become liabilities of Newsubco B by virtue of the merger; and
(c) all of the shares of the predecessor corporations (except those of BCo) will be cancelled on the merger. The shares of BCo owned by its shareholders
immediately before the merger will become shares of Newsubco B to those shareholders immediately after the merger.
Opco will wind-up Wind-upco1
40. Pursuant to section 210 of the CBCA, Opco will cause Wind-upco1 to be wound up and dissolved. A resolution of the shareholder, Opco, authorizing and requiring that Wind-upco1 be wound up will be passed after the transfers of assets and redemptions of shares as described in Paragraphs 20 through 37. In addition, a general conveyance of assets and assumption of liabilities will be executed between Opco and Wind-upco1.
Opco will incorporate Newlossco3, Newlossco4, and Wind-upco2
41. Opco will incorporate Newlossco3, Newlossco4 and Wind-upco2 under the CBCA. Each of Newlossco3, Newlossco4, and Wind-upco2 will be a taxable Canadian corporation.
Newlossco3's authorized share capital will consist of common shares and a class of non-voting, preferred, redeemable shares ("Newlossco3 Preferred Shares"). The Newlossco3 Preferred Shares will be entitled to non-cumulative dividends not exceeding XXXXXXXXXX% of the redemption amount. The aggregate redemption amount of the Newlossco3 Preferred Shares will be equal to Portion C of the FMV of the Holdco Shares at the time of the redemption less the principal amount of the debt issued or assumed by Newlossco3 on the acquisition of the Holdco Shares.
Newlossco4's authorized share capital will consist of common shares and a class of non-voting, preferred, redeemable shares ("Newlossco3 Preferred Shares"). The Newlossco4 Preferred Shares will be entitled to non-cumulative dividends not exceeding XXXXXXXXXX% of the redemption amount. The aggregate redemption amount of the Newlossco4 Preferred Shares will be equal to Portion D of the FMV of the Holdco Shares at the time of the redemption less the principal amount of the debt issued or assumed by Newlossco4 on the acquisition of the Holdco Shares.
Wind-upco2's authorized share capital will consist of common shares and two classes of non-voting, preferred, redeemable shares (Wind-upco2 Class A Shares and Wind-upco2 Class B Shares). The aggregate redemption amount of the Wind-upco2 Class A Shares will be equal to the FMV of the shares of Holdco at the time of the redemption less the principal amount of the debt issued or assumed by Wind-upco2 on the acquisition of the Holdco Shares. The redemption amount of the Wind-upco2 Class B Shares will be equal to the FMV of the consideration received by Wind-upco2 on the issuance of such shares.
On incorporation, Opco will subscribe for XXXXXXXXXX common shares of Wind-upco2 for a total amount of $XXXXXXXXXX. Opco will subscribe for XXXXXXXXXX common shares of each of Newlossco3, and Newlossco4 for a total amount of $XXXXXXXXXX in each case.
Each of Newlossco3, Newlossco4 and Wind-upco2 will select the date on which its fiscal and taxation year will end, unless their respective taxation year terminates prematurely as a result of an amalgamation pursuant to section 87.
Opco will transfer the Holdco Shares to Newlossco3 and Newlossco4
42. On a business day during XXXXXXXXXX after the winding-up of Wind-upco1 into Opco, Opco will transfer to Newlossco3 Portion C of its Holdco Shares for consideration consisting of the Newlossco3 Note, a note payable to Opco with a principal amount not to exceed the ACB of the Holdco Shares transferred, and XXXXXXXXXX Newlossco3 Preferred Shares.
43. Opco will transfer to Newlossco4 its remaining Holdco Shares (being Portion D of the outstanding Holdco Shares) for consideration consisting of the Newlossco4 Note, a note payable to Opco with a principal amount not to exceed the ACB of the Holdco shares transferred, and XXXXXXXXXX Newlossco4 Preferred Shares.
44. The Newlossco3 Note and the Newlossco4 Note will be interest-bearing at an annual rate of XXXXXXXXXX% and have a term of XXXXXXXXXX years with certain early prepayment options.
45. Opco will jointly elect with Newlossco3, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco Shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time, and will not be less than the principal amount of the Newlossco3 Note.
Newlossco3 will add to the stated capital account maintained for the Newlossco3 Preferred Shares an amount equal to the amount by which the FMV of the Holdco Shares received by Newlossco3 exceeds the principal amount of the Newlossco3 Note. Subsection 85(2.1) will result in a reduction in computing the PUC of the Newlossco3 Preferred Shares, such that the amount of PUC of the Newlossco3 Preferred Shares will be equal to the cost amount to Newlossco3 of the Holdco Shares less the principal amount of the Newlossco3 Note.
Opco will jointly elect with Newlossco4, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco Shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time, and will not be less than the principal amount of the Newlossco4 Note.
Newlossco4 will add to the stated capital account maintained for the Newlossco4 Preferred Shares an amount equal to the amount by which the FMV of the Holdco Shares received by Newlossco4 exceeds the principal amount of the Newlossco4 Note. Subsection 85(2.1) will result in a reduction in computing the PUC of the Newlossco4 Preferred Shares, such that the amount of PUC of the Newlossco4 Preferred Shares will be equal to the cost amount to Newlossco4 of the Holdco Shares less the principal amount of the Newlossco4 Note.
Opco will lend money to Newlossco3 and Newlossco4
46. On a particular day in late XXXXXXXXXX, each of Newlossco3 and Newlossco4 will issue demand notes payable, bearing interest at a rate of XXXXXXXXXX %, the Newlossco3 Note A and Newlossco4 Note A, respectively, to Opco for cash in the amount of the non-capital losses of each of Newlossco3 and Newlossco4 at that time (which will approximate the interest expense incurred by each of Newlossco3 and Newlossco4 on the Newlossco3 Note and Newlossco4 Note, respectively).
47. The cash received from the issuance of the Newlossco3 Note A and Newlossco4 Note A will permit each of Newlossco3 and Newlossco4 to pay amounts owing, including interest expense owing to Opco.
Opco will transfer its Newlossco3 Preferred Shares and Newlossco4 Preferred Shares to Wind-upco2
48. On the same day as the transaction set out in Paragraph 46, Opco will transfer to Wind-upco2, at FMV, all of its Newlossco3 Preferred Shares and Newlossco4 Preferred Shares. As sole consideration Wind-upco2 will issue to Opco common shares with a FMV equal to the aggregate FMV of the Newlossco3 Preferred Shares and Newlossco4 Preferred Shares at that time.
49. Opco will jointly elect with Wind-upco2, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Newlossco3 Preferred Shares and Newlossco4 Preferred Shares. The agreed amount in respect of the Newlossco3 Preferred Shares and Newlossco4 Preferred Shares transferred will be the lesser of their FMV and their cost amount at that time.
Wind-upco2 will add to the stated capital account maintained for its common shares an amount not to exceed the aggregate of the cost amount of the properties transferred.
Newlossco3 and Newlossco4 will transfer Holdco Shares to Wind-upco2
50. On the same day as the transaction set out in Paragraph 46, Newlossco3 will transfer to Wind-upco2, at FMV, its Holdco Shares. As consideration for the transfer, Wind-upco2 will assume the Newlossco3 Note issued to Opco and will issue Wind-upco2 Class A Shares to Newlossco3.
On the same day as the transaction set out in Paragraph 46, Newlossco4 will transfer to Wind-upco2, at FMV, its Holdco Shares. As consideration for the transfer, Wind-upco2 will assume the Newlossco4 Note issued to Opco and will issue Wind-upco2 Class A Shares to Newlossco4.
51. Wind-upco2 will jointly elect with Newlossco3, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco Shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time.
Wind-upco2 will add to the stated capital account maintained for its Wind-upco2 Class A Shares an amount equal to the FMV of the Holdco Shares transferred. Subsection 85(2.1) will result in a reduction in computing the PUC of the Wind-upco2 Class A Shares, such that the amount added to the PUC of the Wind-upco2 Class A Shares will be equal to the cost amount to Wind-upco2 of the Holdco Shares transferred less the principal amount of the Newlossco3 Note.
Wind-upco2 will jointly elect with Newlossco4, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco shares. The agreed amount in respect of the Holdco shares transferred will be the lesser of the FMV of the Holdco shares transferred and their cost amount at that time.
Wind-upco2 will add to the stated capital account maintained for its Wind-upco2 Class A Shares an amount equal to the FMV of the Holdco Shares transferred. Subsection 85(2.1) will result in a reduction in computing the PUC of the Wind-upco2 Class A Shares, such that the amount added to the PUC of the Wind-upco2 Class A Shares will be equal to the cost amount to Wind-upco2 of the Holdco Shares transferred less the principal amount of the Newlossco4 Note.
52. To ensure that no interest expense accumulates in Wind-upco2, immediately after the transfer of Holdco Shares in Paragraph 48, Wind-upco2 will issue to Opco Wind-upco2 Class B Shares with a redemption price and stated capital account equal to the aggregate principal amounts of the Newlossco3 Note and Newlossco4 Note. As consideration, Opco will surrender the Newlossco3 Note and Newlossco4 Note.
Newlosscos and Wind-upco2 will cross-redeem preferred shares
53. On the same day as the transaction set out in Paragraph 46, Newlossco3 will redeem its Newlossco3 Preferred Shares held by Wind-upco2. The consideration will be a demand non-interest-bearing note, Newlossco3 Note B, with a principal amount and FMV equal to the redemption value of the Newlossco3 Preferred Shares.
On the same day as the transaction set out in Paragraph 46, Newlossco4 will redeem its Newlossco4 Preferred Shares held by Wind-upco2. The consideration will be a demand non-interest-bearing note, Newlossco4 Note B, with a principal amount and FMV equal to the redemption value of the Newlossco4 Preferred Shares.
54. On the same day as the transaction set out in Paragraph 46, Wind-upco2 will redeem its Wind-upco2 Class A Shares held by Newlossco3. The consideration will be a demand non-interest-bearing note, Wind-upco2 Note 1, with a principal amount and FMV equal to the redemption value of the Wind-upco2 Class A Shares held by Newlossco3. Newlossco3 will accept the Wind-upco2 Note 1 in full satisfaction of the redemption amount of the Wind-upco2 Class A Shares.
On the same day as the transaction set out in Paragraph 46, Wind-upco2 will redeem its Wind-upco2 Class A Shares held by Newlossco4. The consideration will be a demand non-interest-bearing note, Wind-upco2 Note 2, with a principal amount and FMV equal to the redemption value of the Wind-upco2 Class A Shares held by Newlossco4. Newlossco4 will accept the Wind-upco2 Note 2 in full satisfaction of the redemption amount of the Wind-upco2 Class A Shares.
Newlosscos and Wind-upco2 will cross-cancel Notes
55. On the same day as the transaction set out in Paragraph 46, the Newlossco3 Note B and the Wind-upco2 Note 1 will be set off against each other and cancelled in full satisfaction of the obligations under each note, and the Newlossco4 Note B and the Wind-upco2 Note 2 will be set off against each other and cancelled in full satisfaction of the obligations under each note.
Opco will sell Newlossco3 and Newlossco4 to Profitable Canadian Subsidiaries
56. On the same day as the transaction set out in Paragraph 46, CCo will acquire all of the shares of Newlossco3 and the Newlossco3 Note A from Opco for FMV consideration consisting of cash. The FMV will reflect, inter alia, interest rates, statutory income tax rates, the estimated time of utilization of the non-capital losses of Newlossco3 and other considerations.
On the same day as the transaction set out in Paragraph 46, DCo will acquire all of the shares of Newlossco4 and the Newlossco4 Note A from Opco for FMV consideration consisting of cash. The FMV will reflect, inter alia, interest rates, statutory income tax rates, the estimated time of utilization of the non-capital losses of Newlossco4 and other considerations.
57. Each of Newlossco3 and Newlossco4 will have a taxation year-end. Each of Newlossco3 and Newlossco4 will file corporate income tax returns for its first taxation year. Each of Newlossco3 and Newlossco4 will have incurred a non-capital loss that will approximate the interest expense on the Newlossco3 Note or Newlossco4 Note, as the case may be, held by Opco for that taxation year.
CCo and DCo will amalgamate with Newlosscos
58. Following the acquisition by CCo of all the shares of Newlossco3, CCo and Newlossco3 will be amalgamated pursuant to section 184 of the CBCA to form one corporation, Newsubco C, in such manner that:
(a) all of the property of the predecessor corporations immediately before the merger (except the shares of Newlossco3) will become property of Newsubco C by virtue of the merger;
(b) all of the liabilities of the predecessor corporations immediately before the merger (except the Newlossco3 Note A) will become liabilities of Newsubco C by virtue of the merger; and
(c) all of the shares of the predecessor corporations (except those of CCo) will be cancelled on the merger. The shares of CCo owned by its shareholders immediately before the merger will become shares of Newsubco C to those shareholders immediately after the merger.
59. Following the acquisition by DCo of all the shares of Newlossco4, DCo and Newlossco4 will be amalgamated pursuant to section 184 of the CBCA to form one corporation, Newsubco D, in such manner that:
(a) all of the property of the predecessor corporations immediately before the merger (except the shares of Newlossco4) will become property of Newsubco D by virtue of the merger;
(b) all of the liabilities of the predecessor corporations immediately before the merger (except Newlossco4 Note A) will become liabilities of Newsubco D by virtue of the merger; and
(c) all of the shares of the predecessor corporations (except those of DCo) will be cancelled on the merger. The shares of DCo owned by its shareholders immediately before the merger will become shares of Newsubco D to those shareholders immediately after the merger.
Opco will wind-up Wind-upco2
60. Pursuant to section 210 of the CBCA, Opco will cause Wind-upco2 to be wound up and dissolved. A resolution of the shareholder, Opco, authorizing and requiring that Wind-upco2 be wound up will be passed after the transfers of assets and redemptions of shares as described in Paragraphs 42 through 57. In addition, a general conveyance of assets and assumption of liabilities will be executed between Opco and Wind-upco2.
Opco will incorporate Newlossco5, Newlossco6, and Wind-upco3
61. Opco will incorporate Newlossco5, Newlossco6 and Wind-upco3 under the CBCA. Each of Newlossco5, Newlossco6, and Wind-upco3 will be a taxable Canadian corporation.
Newlossco5's authorized share capital will consist of common shares and a class of non-voting, preferred, redeemable shares ("Newlossco5 Preferred Shares"). The Newlossco5 Preferred Shares will be entitled to non-cumulative dividends not exceeding XXXXXXXXXX% of the redemption amount. The aggregate redemption amount of the Newlossco5 Preferred Shares will be equal to Portion E of the FMV of the Holdco Shares at the time of the redemption less the principal amount of the debt issued or assumed by Newlossco5 on the acquisition of the Holdco Shares.
Newlossco6's authorized share capital will consist of common shares and a class of non-voting, preferred, redeemable shares ("Newlossco5 Preferred Shares"). The Newlossco6 Preferred Shares will be entitled to non-cumulative dividends not exceeding XXXXXXXXXX% of the redemption amount. The aggregate redemption amount of the Newlossco6 Preferred Shares will be equal to Portion F of the FMV of the Holdco Shares at the time of the redemption less the principal amount of the debt issued or assumed by Newlossco6 on the acquisition of the Holdco Shares.
Wind-upco3's authorized share capital will consist of common shares and two classes of non-voting, preferred, redeemable shares (Wind-upco3 Class A Shares and Wind-upco3 Class B Shares). The aggregate redemption amount of the Wind-upco3 Class A Shares will be equal to the FMV of the shares of Holdco at the time of the redemption less the principal amount of the debt issued or assumed by Wind-upco3 on the acquisition of the Holdco Shares. The redemption amount of the Wind-upco3 Class B Shares will be equal to the FMV of the consideration received by Wind-upco3 on the issuance of such shares.
On incorporation, Opco will subscribe for XXXXXXXXXX common shares of Wind-upco3 for a total amount of $XXXXXXXXXX. Opco will subscribe for XXXXXXXXXX common shares of each of Newlossco5, and Newlossco6 for a total amount of $XXXXXXXXXX in each case.
Each of Newlossco5, Newlossco6 and Wind-upco3 will select the date on which its fiscal and taxation year will end, unless their respective taxation year terminates prematurely as a result of an amalgamation pursuant to section 87.
Opco will transfer the Holdco Shares to Newlossco5 and Newlossco6
62. On a business day during XXXXXXXXXX after the winding-up of Wind-upco2 into Opco, Opco will transfer to Newlossco5 Portion E of its Holdco Shares for consideration consisting of the Newlossco5 Note, a note payable to Opco with a principal amount not to exceed the ACB of the Holdco Shares transferred, and XXXXXXXXXX Newlossco5 Preferred Shares.
63. Opco will transfer to Newlossco6 its remaining Holdco Shares (being Portion F of the outstanding Holdco Shares) for consideration consisting of the Newlossco6 Note, a note payable to Opco with a principal amount not to exceed the ACB of the Holdco shares transferred, and XXXXXXXXXX Newlossco6 Preferred Shares.
64. The Newlossco5 Note and the Newlossco6 Note will be interest-bearing at an annual rate of XXXXXXXXXX% and have a term of XXXXXXXXXX years with certain early prepayment options.
65. Opco will jointly elect with Newlossco5, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco Shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time, and will not be less than the principal amount of the Newlossco5 Note.
Newlossco5 will add to the stated capital account maintained for the Newlossco5 Preferred Shares an amount equal to the amount by which the FMV of the Holdco Shares received by Newlossco5 exceeds the principal amount of the Newlossco5 Note. Subsection 85(2.1) will result in a reduction in computing the PUC of the Newlossco5 Preferred Shares, such that the amount of PUC of the Newlossco5 Preferred Shares will be equal to the cost amount to Newlossco5 of the Holdco Shares less the principal amount of the Newlossco5 Note.
Opco will jointly elect with Newlossco6, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco Shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time, and will not be less than the principal amount of the Newlossco6 Note.
Newlossco6 will add to the stated capital account maintained for the Newlossco6 Preferred Shares an amount equal to the amount by which the FMV of the Holdco Shares received by Newlossco6 exceeds the principal amount of the Newlossco6 Note. Subsection 85(2.1) will result in a reduction in computing the PUC of the Newlossco6 Preferred Shares, such that the amount of PUC of the Newlossco6 Preferred Shares will be equal to the cost amount to Newlossco6 of the Holdco Shares less the principal amount of the Newlossco6 Note.
Opco will lend money to Newlossco5 and Newlossco6
66. On a particular day in late XXXXXXXXXX, each of Newlossco5 and Newlossco6 will issue demand notes payable, bearing interest at a rate of XXXXXXXXXX%, the Newlossco5 Note A and Newlossco6 Note A, respectively, to Opco for cash in the amount of the non-capital losses of each of Newlossco5 and Newlossco6 at that time (which will approximate the interest expense incurred by each of Newlossco5 and Newlossco6 on the Newlossco5 Note and Newlossco6 Note, respectively).
67. The cash received from the issuance of the Newlossco5 Note A and Newlossco6 Note A will permit each of Newlossco5 and Newlossco6 to pay amounts owing, including interest expense owing to Opco.
Opco will transfer its Newlossco5 Preferred Shares and Newlossco6 Preferred Shares to Wind-upco3
68. On the same day as the transaction set out in Paragraph 66, Opco will transfer to Wind-upco3, at FMV, all of its Newlossco5 Preferred Shares and Newlossco6 Preferred Shares. As sole consideration Wind-upco3 will issue to Opco common shares with a FMV equal to the aggregate FMV of the Newlossco5 Preferred Shares and Newlossco6 Preferred Shares at that time.
69. Opco will jointly elect with Wind-upco3, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Newlossco5 Preferred Shares and Newlossco6 Preferred Shares. The agreed amount in respect of the Newlossco5 Preferred Shares and Newlossco6 Preferred Shares transferred will be the lesser of their FMV and their cost amount at that time.
Wind-upco3 will add to the stated capital account maintained for its common shares an amount not to exceed the aggregate of the cost amount of the properties transferred.
Newlossco5 and Newlossco6 will transfer Holdco Shares to Wind-upco3
70. On the same day as the transaction set out in Paragraph 66, Newlossco5 will transfer to Wind-upco3, at FMV, its Holdco Shares. As consideration for the transfer, Wind-upco3 will assume the Newlossco5 Note issued to Opco and will issue Wind-upco3 Class A Shares to Newlossco5.
On the same day as the transaction set out in Paragraph 66, Newlossco6 will transfer to Wind-upco3, at FMV, its Holdco Shares. As consideration for the transfer, Wind-upco3 will assume the Newlossco6 Note issued to Opco and will issue Wind-upco3 Class A Shares to Newlossco6.
71. Wind-upco3 will jointly elect with Newlossco5, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco Shares. The agreed amount in respect of the Holdco Shares transferred will be the lesser of the FMV of the Holdco Shares transferred and their cost amount at that time.
Wind-upco3 will add to the stated capital account maintained for its Wind-upco3 Class A Shares an amount equal to the FMVof the Holdco Shares transferred. Subsection 85(2.1) will result in a reduction in computing the PUC of the Wind-upco3 Class A Shares, such that the amount added to the PUC of the Wind-upco3 Class A Shares will be equal to the cost amount to Wind-upco3 of the Holdco Shares transferred less the principal amount of the Newlossco5 Note.
Wind-upco3 will jointly elect with Newlossco6, in prescribed form and within the time allowed by subsection 85(6), to have the rules of subsection 85(1) apply to the transfer of the Holdco shares. The agreed amount in respect of the Holdco shares transferred will be the lesser of the FMV of the Holdco shares transferred and their cost amount at that time.
Wind-upco3 will add to the stated capital account maintained for its Wind-upco3 Class A Shares an amount equal to the FMV of the Holdco Shares transferred. Subsection 85(2.1) will result in a reduction in computing the PUC of the Wind-upco3 Class A Shares, such that the amount added to the PUC of the Wind-upco3 Class A Shares will be equal to the cost amount to Wind-upco3 of the Holdco Shares transferred less the principal amount of the Newlossco6 Note.
72. To ensure that no interest expense accumulates in Wind-upco3, immediately after the transfer of Holdco Shares in Paragraph 70, Wind-upco3 will issue to Opco Wind-upco3 Class B Shares with a redemption price and stated capital account equal to the aggregate principal amounts of the Newlossco5 Note and Newlossco6 Note. As consideration, Opco will surrender the Newlossco5 Note and Newlossco6 Note.
Newlosscos and Wind-upco3 will cross-redeem preferred shares
73. On the same day as the transaction set out in Paragraph 66, Newlossco5 will redeem its Newlossco5 Preferred Shares held by Wind-upco3. The consideration will be a demand non-interest-bearing note, Newlossco5 Note B, with a principal amount and FMV equal to the redemption value of the Newlossco5 Preferred Shares.
On the same day as the transaction set out in Paragraph 66, Newlossco6 will redeem its Newlossco6 Preferred Shares held by Wind-upco3. The consideration will be a demand non-interest-bearing note, Newlossco6 Note B, with a principal amount and FMV equal to the redemption value of the Newlossco6 Preferred Shares.
74. On the same day as the transaction set out in Paragraph 66, Wind-upco3 will redeem its Wind-upco3 Class A Shares held by Newlossco5. The consideration will be a demand non-interest-bearing note, Wind-upco3 Note 1, with a principal amount and FMV equal to the redemption value of the Wind-upco3 Class A Shares held by Newlossco5. Newlossco5 will accept the Wind-upco3 Note 1 in full satisfaction of the redemption amount of the Wind-upco3 Class A Shares.
On the same day as the transaction set out in Paragraph 66, Wind-upco3 will redeem its Wind-upco3 Class A Shares held by Newlossco6. The consideration will be a demand non-interest-bearing note, Wind-upco3 Note 2, with a principal amount and FMV equal to the redemption value of the Wind-upco3 Class A Shares held by Newlossco6. Newlossco6 will accept the Wind-upco3 Note 2 in full satisfaction of the redemption amount of the Wind-upco3 Class A Shares.
Newlosscos and Wind-upco3 will cross-cancel Notes
75. On the same day as the transaction set out in Paragraph 66, the Newlossco5 Note B and the Wind-upco3 Note 1 will be set off against each other and cancelled in full satisfaction of the obligations under each note, and the Newlossco6 Note B and the Wind-upco3 Note 2 will be set off against each other and cancelled in full satisfaction of the obligations under each note.
Opco will sell Newlossco5 and Newlossco6 to Profitable Canadian Subsidiaries
76. On the same day as the transaction set out in Paragraph 66, ECo will acquire all of the shares of Newlossco5 and the Newlossco5 Note A from Opco for FMV consideration consisting of cash. The FMV will reflect, inter alia, interest rates, statutory income tax rates, the estimated time of utilization of the non-capital losses of Newlossco5 and other considerations.
On the same day as the transaction set out in Paragraph 66, FCo will acquire all of the shares of Newlossco6 and the Newlossco6 Note A from Opco for FMV consideration consisting of cash. The FMV will reflect, inter alia, interest rates, statutory income tax rates, the estimated time of utilization of the non-capital losses of Newlossco6 and other considerations.
77. Each of Newlossco5 and Newlossco6 will have a taxation year-end on the same day as the transaction described in Paragraph 76. Each of Newlossco5 and Newlossco6 will file corporate income tax returns for its first taxation year. Each of Newlossco5 and Newlossco6 will have incurred a non-capital loss that will approximate the interest expense on the Newlossco5 Note or Newlossco6 Note, as the case may be, held by Opco for that taxation year.
ECo and FCo will amalgamate with Newlosscos
78. Following the acquisition by ECo of all the shares of Newlossco5, ECo and Newlossco5 will be amalgamated pursuant to section 184 of the CBCA to form one corporation, Newsubco E, in such manner that:
(a) all of the property of the predecessor corporations immediately before the merger (except the shares of Newlossco5) will become property of Newsubco E by virtue of the merger;
(b) all of the liabilities of the predecessor corporations immediately before the merger (except the Newlossco5 Note A) will become liabilities of Newsubco E by virtue of the merger; and
(c) all of the shares of the predecessor corporations (except those of ECo) will be cancelled on the merger. The shares of ECo owned by its shareholders
immediately before the merger will become shares of Newsubco E to those shareholders immediately after the merger.
79. Following the acquisition by FCo of all the shares of Newlossco6, FCo and Newlossco6 will be amalgamated pursuant to section 184 of the CBCA to form one corporation, Newsubco F, in such manner that:
(a) all of the property of the predecessor corporations immediately before the merger (except the shares of Newlossco6) will become property of Newsubco F by virtue of the merger;
(b) all of the liabilities of the predecessor corporations immediately before the merger (except Newlossco6 Note A) will become liabilities of Newsubco F by virtue of the merger; and
(c) all of the shares of the predecessor corporations (except those of FCo) will be cancelled on the merger. The shares of FCo owned by its shareholders immediately before the merger will become shares of Newsubco F to those shareholders immediately after the merger.
Opco will wind-up Wind-upco3
80. Pursuant to section 210 of the CBCA, Opco will cause Wind-upco3 to be wound up and dissolved. A resolution of the shareholder, Opco, authorizing and requiring that Wind-upco3 be wound up will be passed after the transfers of assets and redemptions of shares as described in Paragraphs 62 through 77. In addition, a general conveyance of assets and assumption of liabilities will be executed between Opco and Wind-upco3.
81. Opco will, under section 210 of the CBCA, cause Holdco to be wound up and dissolved. A resolution of the shareholder, Opco, authorizing and requiring that Holdco be wound up will be passed after the wind-up of Wind-upco3 as described in Paragraph 80. In addition, a general conveyance of assets and assumption of liabilities will be executed between Opco and Holdco.
82. None of the corporations referred to herein (including the corporations to be incorporated as described in the Proposed Transactions) is or will be, at any time during the series of transactions herein described, a specified financial institution or a restricted financial institution.
83. There will not be at any time prior to the completion of the Proposed Transactions, any agreements or undertakings which constitute or include a guarantee agreement in respect of any of the issued shares referred to herein (including the shares to be issued as described in the Proposed Transactions).
84. None of the issued shares referred to herein (including the shares to be issued as described in the Proposed Transactions) is or will be the subject of a dividend rental agreement.
85. None of the issued shares referred to herein (including the shares to be issued as described in the Proposed Transactions) has 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).
86. None of the corporations referred to herein (including the corporations to be incorporated as described in the Proposed Transactions) is or will be, at any time before the completion of the Proposed Transactions, a corporation described in any of the paragraphs (a) to (f) of the definition "financial intermediary corporation" in subsection 191(1).
PURPOSE OF THE PROPOSED TRANSACTIONS
The Proposed Transactions have been designed specifically to transfer a portion of Opco's non-capital losses to Canadian resident subsidiary corporations. There is no economic or other advantage or benefit conferred on any of the companies that are party to the Proposed Transactions. In particular, the tax attributes of Opco and the related corporations remain the same except for the transfer of the loss. There is no advantage or benefit conferred on any shareholder of the companies. The Proposed Transactions are not being undertaken to facilitate the use of any non-capital losses after the time that Opco's non-capital losses would otherwise have expired. The economic substance of the Proposed Transactions is that a portion of the non-capital losses of Opco will be replaced with cash. The Proposed Transactions and agreements related thereto will reflect the bona fide intention of the parties to transfer the non-capital losses at their FMV.
RULINGS REQUESTED AND GIVEN
Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions, and purpose of the proposed transactions and provided further that the proposed transactions are carried out as described above, our rulings are as follows:
A. Provided that:
1. each of Newlossco1 and Newlossco2 holds its proportion of the Holdco Shares for the purpose of gaining or producing income (other than income which is exempt from taxation) from the Holdco Shares; and
2. each of Newlossco1 and Newlossco2 has a legal obligation to pay interest in respect of the Newlossco1 Note in the case of Newlossco1, the Newlossco2 Note in the case of Newlossco2;
each of Newlossco1 and Newlossco2 will be entitled to deduct, in computing its income for a taxation year, the lesser of such interest and a reasonable amount in respect thereof paid in the year or payable in respect of the year (depending on the method Newlossco1 and Newlossco2 regularly follow in computing their income for the purposes of the Act) under paragraph 20(1)(c).
B. Provided that:
1. each of Newlossco3 and Newlossco4 holds its proportion of the Holdco Shares for the purpose of gaining or producing income (other than income which is exempt from taxation) from the Holdco Shares; and
2. each of Newlossco3 and Newlossco4 has a legal obligation to pay interest in respect of the Newlossco3 Note in the case of Newlossco3, the Newlossco4 Note in the case of Newlossco4;
each of Newlossco3 and Newlossco4 will be entitled to deduct, in computing its income for a taxation year, the lesser of such interest and a reasonable amount in respect thereof paid in the year or payable in respect of the year (depending on the method Newlossco3 and Newlossco4 regularly follow in computing their income for the purposes of the Act) under paragraph 20(1)(c).
C. Provided that:
1. each of Newlossco5 and Newlossco6 holds its proportion of the Holdco Shares for the purpose of gaining or producing income (other than income which is exempt from taxation) from the Holdco Shares; and
2. each of Newlossco5 and Newlossco6 has a legal obligation to pay interest in respect of the Newlossco5 Note in the case of Newlossco5, the Newlossco6 Note in the case of Newlossco6;
each of Newlossco5 and Newlossco6 will be entitled to deduct, in computing its income for a taxation year, the lesser of such interest and a reasonable amount in respect thereof paid in the year or payable in respect of the year (depending on the method Newlossco5 and Newlossco6 regularly follow in computing their income for the purposes of the Act) under paragraph 20(1)(c).
D. The provisions of subsection 85(1) will apply to:
1. the transfer by Opco of its shares of YCo and XCo to Holdco described in Paragraph 20;
2. the transfer by Opco of its Holdco Shares to Newlossco1 described in Paragraph 22;
3. the transfer by Opco of its Holdco Shares to Newlossco2 described in Paragraph 23;
4. the transfer by Opco of its Newlossco1 Preferred Shares to Wind-upco1 described in Paragraph 28;
5. the transfer by Opco of Newlossco2 Preferred Shares to Wind-upco1 described in Paragraph 28;
6. the transfer by Newlossco1 of its Holdco Shares to Wind-upco1 described in Paragraph 30;
7. the transfer by Newlossco2 of its Holdco Shares to Wind-upco1 described in Paragraph 30;
8. the transfer by Opco of its Holdco Shares to Newlossco3 described in Paragraph 42;
9. the transfer by Opco of its Holdco Shares to Newlossco4 described in Paragraph 43;
10. the transfer by Opco of its Newlossco3 Preferred Shares to Wind-upco2 described in Paragraph 48;
11. the transfer by Opco of its Newlossco4 Preferred Shares to Wind-upco2 described in Paragraph 48;
12. the transfer by Newlossco3 of its Holdco Shares to Wind-upco2 described in Paragraph 50;
13. the transfer by Newlossco4 of its Holdco Shares to Wind-upco2 described in Paragraph 50;
14. the transfer by Opco of its Holdco Shares to Newlossco5 described in Paragraph 62;
15. the transfer by Opco of its Holdco Shares to Newlossco6 described in Paragraph 63;
16. the transfer by Opco of its Newlossco5 Preferred Shares to Wind-upco3 described in Paragraph 68;
17. the transfer by Opco of its Newlossco6 Preferred Shares to Wind-upco3 described in Paragraph 68;
18. the transfer by Newlossco5 of its Holdco Shares to Wind-upco3 described in Paragraph 70; and
19. the transfer by Newlossco6 of its Holdco Shares to Wind-upco3 described in Paragraph 70;
with the result that the agreed amount in respect of the transferred shares will, in each case, be deemed pursuant to paragraph 85(1)(a) to be the proceeds of disposition thereof to the transferor and the cost thereof to the transferee.
E. With respect to:
? the redemption by Newlossco1 of its Newlossco1 Preferred Shares held by Wind-upco1 described in Paragraph 33;
? the redemption by Newlossco 2 of its Newlossco2 Preferred Shares held by Wind-upco1 described in Paragraph 33;
? the redemption by Wind-upco1 of its Wind-upco1 Class A Shares held by Newlossco1 and Newlossco2 described in Paragraph 34;
? the redemption by Newlossco3 of its Newlossco3 Preferred Shares held by Wind-upco2 described in Paragraph 53;
? the redemption by Newlossco4 of its Newlossco4 Preferred Shares held by Wind-upco2 described in Paragraph 53;
? the redemption by Wind-upco2 of its Wind-upco2 Class A Shares held by Newlossco3 and Newlossco4 described in Paragraph 54;
? the redemption by Newlossco5 of its Newlossco5 Preferred Shares held by Wind-upco3 described in Paragraph 73;
? the redemption by Newlossco6 of its Newlossco6 Preferred Shares held by Wind-upco3 described in Paragraph 73; and
? the redemption by Wind-upco3 of its Wind-upco3 Class A Shares held by Newlossco5 and Newlossco6 described in Paragraph 74:
1. the amount, if any, by which the amount paid to redeem the particular shares exceeds the PUC of the particular shares immediately before the redemption
(i) will be deemed by paragraph 84(3)(a) to be a dividend paid at that time by the issuer of such shares; and
(ii) will be deemed by paragraph 84(3)(b) to be a dividend received at that time by the holder of such shares;
2. to the extent that a dividend described in 1(ii) above is a taxable dividend, such dividend will, pursuant to subsection 112(1), be deductible in computing the taxable income of the recipient for the year in which the dividend is deemed to have been received, and, for greater certainty, such deduction will not be precluded by any of subsections 112(2.1), (2.2), (2.3) or (2.4);
3. by virtue of the application of paragraph (j) of the definition "proceeds of disposition" in section 54, the amount of the deemed dividend described in 1(ii) above will be excluded from the proceeds of disposition of the share, and any loss arising from the disposition of the share will be reduced by the amount of such dividends pursuant to subsection 112(3);
4. Part IV.l will not impose any tax liability on Newlossco1, Newlossco2, Newlossco3, Newlossco4, Newlossco5, Newlossco6, Wind-upco1, Wind-upco2 or Wind-upco3 as a result of the deemed dividend referred to in 1(ii) above because such dividend will be a dividend described in paragraph (b) of the definition of "excepted dividend" in section 187.1; and
5. Part VI.l will not impose any tax liability on Newlossco1, Newlossco2, Newlossco3, Newlossco4, Newlossco5, Newlossco6, Wind-upco1, Wind-upco2 or Wind-upco3 as a result of the deemed dividend referred to in 1(i) above because such dividend will be a dividend described in paragraph (a) of the definition of "excluded dividend" in subsection 191(1).
F. Upon the amalgamation of ACo and Newlossco1 described in Paragraph 38; BCo and Newlossco2 described in Paragraph 39; CCo and Newlossco3 described in Paragraph 58; DCo and Newlossco4 described in Paragraph 59; ECo and Newlossco5 described in Paragraph 78; FCo and Newlossco6 described in Paragraph 79:
1. each amalgamation will be a merger as described in subsection 87(1);
2. the provisions of subsection 87(1.1) will apply to deem the shareholders of ACo to have received shares of the capital stock of Newsubco A by virtue of the merger as consideration for the disposition of the shares of the capital stock of ACo;
3. the provisions of subsection 87(1.1) will apply to deem the shareholders of BCo to have received shares of the capital stock of Newsubco B by virtue of the merger as consideration for the disposition of the shares of the capital stock of BCo;
4. the provisions of subsection 87(1.1) will apply to deem the shareholders of CCo to have received shares of the capital stock of Newsubco C by virtue of the merger as consideration for the disposition of the shares of the capital stock of CCo;
5. the provisions of subsection 87(1.1) will apply to deem the shareholders of DCo to have received shares of the capital stock of Newsubco D by virtue of the merger as consideration for the disposition of the shares of the capital stock of DCo;
6. the provisions of subsection 87(1.1) will apply to deem the shareholders of ECo to have received shares of the capital stock of Newsubco E by virtue of the merger as consideration for the disposition of the shares of the capital stock of ECo;
7. the provisions of subsection 87(1.1) will apply to deem the shareholders of FCo to have received shares of the capital stock of Newsubco F by virtue of the merger as consideration for the disposition of the shares of the capital stock of FCo;
8. the provisions of subsection 87(2.1) will apply to deem Newsubco A and Newsubco B to be the same corporation as, and a continuation of, each of Newlossco1 and ACo, and each of Newlossco2 and BCo, respectively, for the purposes, and subject to the restrictions, described in subsection 87(2.1). On this basis and subject to the rules contained in section 111, the non-capital losses of Newlossco1 and Newlossco2 will be available to be utilized by each of Newsubco A and Newsubco B, respectively;
9. the provisions of subsection 87(2.1) will apply to deem Newsubco C and Newsubco D to be the same corporation as, and a continuation of, each of Newlossco3 and CCo, and each of Newlossco4 and DCo, respectively, for the purposes, and subject to the restrictions, described in subsection 87(2.1). On this basis and subject to the rules contained in section 111, the
non-capital losses of Newlossco3 and Newlossco4 will be available to be utilized by each of Newsubco C and Newsubco D, respectively;
10. the provisions of subsection 87(2.1) will apply to deem Newsubco E and Newsubco F to be the same corporation as, and a continuation of, each of Newlossco5 and ECo, and each of Newlossco6 and FCo, respectively, for the purposes, and subject to the restrictions, described in subsection 87(2.1). On this basis and subject to the rules contained in section 111, the non-capital losses of Newlossco5 and Newlossco6 will be available to be utilized by each of Newsubco E and Newsubco F, respectively;
11. the provisions of paragraph 87(2)(a) will apply to deem each of Newsubco A and Newsubco B to be a new corporation, the first taxation year of which commences immediately after the amalgamation, and the predecessor corporations will be deemed to have taxation years ended immediately prior to the amalgamations;
12. the provisions of paragraph 87(2)(a) will apply to deem each of Newsubco C and Newsubco D to be a new corporation, the first taxation year of which commences immediately after the amalgamation, and the predecessor corporations will be deemed to have taxation years ended immediately prior to the amalgamations; and
13. the provisions of paragraph 87(2)(a) will apply to deem each of Newsubco E and Newsubco F to be a new corporation, the first taxation year of which commences immediately after the amalgamation, and the predecessor corporations will be deemed to have taxation years ended immediately prior to the amalgamations.
G. After the winding-up of:
1. Wind-upco1 into Opco described in Paragraph 40 is completed;
2. Wind-upco2 into Opco described in Paragraph 60 is completed;
3. Wind-upco3 into Opco described in Paragraph 80 is completed; and
4. Holdco into Opco described in Paragraph 81 is completed;
the provisions of subsection 88(1) will apply to each winding-up such that:
5. each property of Wind-upco1, Wind-upco2, Wind-upco3 and Holdco distributed to Opco on the particular winding-up will be deemed by paragraph 88(1)(a) to have been disposed of by Wind-upco1, Wind-upco2, Wind-upco3 and Holdco, as the case may be, for proceeds of disposition determined under that paragraph;
6. the shares of the capital stock of each of Wind-upco1, Wind-upco2, Wind-upco3 and Holdco held by Opco immediately before the particular winding-up will be deemed by paragraph 88(1)(b) to have been disposed of by Opco for proceeds determined under that paragraph; and
7. each property of Wind-upco1, Wind-upco2, Wind-upco3 and Holdco distributed to Opco on the particular winding-up will be deemed, by paragraph 88(1)(c) to have been acquired by Opco for an amount equal to the amount deemed by paragraph 88(1)(a) to be Wind-upco1's, Wind-upco2's, Wind-upco3's or Holdco's, as the case may be, proceeds of disposition of the property and no more.
H. By virtue of paragraph 55(3)(a), the provisions of subsection 55(2) will not apply in respect of the taxable dividends described in Ruling E above, provided that as part of the series of transactions or events as part of which the dividends were received, there is no disposition or significant increase in interest as described in subparagraphs 55(3)(a)(i) to 55(3)(a)(v) which has not been described herein as a Proposed Transaction.
I. No forgiven amount will arise as a result of the settlements described in paragraphs 32, 52 and 72, provided that:
1. the FMV of the Wind-upco1 Class B Shares issued to Opco, as a consequence of the settlement of the Newlossco1 Note and the Newlossco2 Note described in Paragraph 32, and the amount of the increase in the FMV of other shares of Wind-upco1 held by Opco at that time is equal to the aggregate of the principal amount of the Newlossco1 Note and the Newlossco2 Note;
2. the FMV of the Wind-upco2 Class B Shares issued to Opco, as a consequence of the settlement of the Newlossco3 Note and the Newlossco4 Note described in Paragraph 52, and the amount of the increase in the FMV of other shares of Wind-upco2 held by Opco at that time is equal to the aggregate of the principal amount of the Newlossco3 Note and the Newlossco4 Note; and
3. the FMV of the Wind-upco3 Class B Shares issued to Opco, as a consequence of the settlement of the Newlossco5 Note and the Newlossco6 Note described in Paragraph 72, and the amount of the increase in the FMV of other shares of Wind-upco3 held by Opco at that time is equal to the aggregate of the principal amount of the Newlossco5 Note and the Newlossco6 Note.
J. The set-off and cancellation of the notes described in Paragraphs 35, 55 and 75 above will not give rise to a forgiven amount.
K. With respect to the
1. sale by Opco of the Newlossco1 Note A to ACo described in Paragraph 36;
2. sale by Opco of the Newlossco2 Note A to BCo described in Paragraph 36;
3. sale by Opco of the Newlossco3 Note A to CCo described in Paragraph 56;
4. sale by Opco of the Newlossco4 Note A to DCo described in Paragraph 56;
5. sale by Opco of the Newlossco5 Note A to ECo described in Paragraph 76; and
6. sale by Opco of the Newlossco6 Note A to FCo described in Paragraph 76
paragraph 40(2)(e.1) will apply with the result that the amount of the capital loss realized by Opco on the disposition will, in each case, be deemed to be nil. For greater, certainty, subparagraph 40(2)(g)(ii) will not apply to any of the dispositions noted above in Ruling K.
L. With respect to the dispositions noted in Ruling K above, paragraph 53(1)(f.1) will apply such that
1. ACo's ACB in respect of Newlossco1 Note A will include the amount of the capital loss that would otherwise have been realized by Opco;
2. BCo's ACB in respect of Newlossco2 Note A will include the amount of the capital loss that would otherwise have been realized by Opco;
3. CCo's ACB in respect of Newlossco3 Note A will include the amount of the capital loss that would otherwise have been realized by Opco;
4. DCo's ACB in respect of Newlossco4 Note A will include the amount of the capital loss that would otherwise have been realized by Opco;
5. ECo's ACB in respect of Newlossco5 Note A will include the amount of the capital loss that would otherwise have been realized by Opco; and
6. FCo's ACB in respect of Newlossco6 Note A will include the amount of the capital loss that would otherwise have been realized by Opco.
M. With respect to the
1. settlement of the Newlossco1 Note A on the amalgamation of Newlossco1 and ACo described in Paragraph 38;
2. settlement of the Newlossco2 Note A on the amalgamation of Newlossco2 and BCo described in Paragraph 39;
3. settlement of the Newlossco3 Note A on the amalgamation of Newlossco3 and CCo described in Paragraph 58;
4. settlement of the Newlossco4 Note A on the amalgamation of Newlossco4 and DCo described in Paragraph 59;
5. settlement of the Newlossco5 Note A on the amalgamation of Newlossco5 and ECo described in Paragraph 78; and
6. settlement of the Newlossco6 Note A on the amalgamation of Newlossco6 and FCo described in Paragraph 79
no forgiven amount will arise.
N. Paragraph 12(1)(x) will have no application in respect of the Proposed Transactions described in Paragraphs 26, 46 and 66 above.
O. Subsections 15(1), 56(2), and 246(1) will not apply to the Proposed Transactions in and by themselves.
P. The provisions of subsection 245(2) will not apply, as a result of the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.
Q. XXXXXXXXXX.
The rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002 and are binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed before XXXXXXXXXX .
Nothing in this ruling should be construed as implying that Canada Customs and Revenue Agency is making a determination or ruling in respect of:
1. the cost or fair market value of any particular asset;
2. the paid-up capital of any shares referred to herein; or
3. any tax consequences relating to the 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
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