2003 Income Tax Severed Letter 2003-0030681 - DEBT FORGIVENESS LOANS SHARES

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:

Exchange of B Co shares for A Co shares was unrelated to this ruling - Employee was a minor shareholder of B Co.

Position: No impact on rulings

Reasons:

XXXXXXXXXX 								2003-003068

XXXXXXXXXX, 2003

Re: Supplementary Advance Income Tax Ruling - XXXXXXXXXX

This is in reply to your facsimile transmissions of XXXXXXXXXX and is supplemental to our advance income tax ruling number 2002-015218 dated XXXXXXXXXX, 2002 and supplementary advance income tax ruling number 2003-000987 dated XXXXXXXXXX, 2003 (collectively, the "Ruling").

As a result of your letter, the following changes will be made to the Ruling:

1. Delete the word "are" in last sentence in paragraph 3 and insert the word "were" in its place.

Add the following paragraph immediately after paragraph 15:

"15.1. A Co and B Co have entered into an Arrangement Agreement in respect of a Plan of Arrangement (the "Arrangement"), which was approved at the annual and special meeting of the shareholders of B Co held on XXXXXXXXXX and effective on or about XXXXXXXXXX. Pursuant to the Arrangement, the shareholders of B Co. exchanged their shares of B Co. in exchange for shares of A Co, with the result that following the completion of the Arrangement, B Co. became a wholly-owned subsidiary of A Co.

The share exchange ratio was determined based upon fairness opinions delivered by the financial advisors. Prior to the effective time of the Arrangement, the Employee held XXXXXXXXXX B Co. shares out of a total of XXXXXXXXXX issued and outstanding B Co. shares, representing approximately XXXXXXXXXX% of the issued and outstanding B Co. shares. The B Co. shares held by the Employee represented approximately XXXXXXXXXX% of the B Co. shares which were outstanding prior to the share exchange, other than those shares which were held by A Co.

On XXXXXXXXXX, pursuant to a Certificate and Articles of Arrangement of B Co. dated as at that date, the Employee's XXXXXXXXXX B Co. shares were exchanged for an aggregate of XXXXXXXXXX A Co. shares."

2. Delete paragraph 16 and insert the following in its place:

"All of the A Co. shares held by Employee which are held as security for the Share Purchase Loans, will be sold and the net proceeds thereof, net of any costs of disposition, will be applied to reduce the outstanding balance of the Share Purchase Loans. All such sales will be carried out at prevailing market prices and to arm's length purchasers. The remaining balance of the Share Purchase Loans, after all of the shares have been sold, is hereafter referred to as the "Deficiency"."

3. In Ruling E, insert ",and 15.1" immediately before the word "above" on the last line in this paragraph.

Notwithstanding the above changes, we hereby confirm that, subject to the conditions set out in the Ruling, the rulings given therein will continue to be binding on the CCRA provided that the Proposed Transactions are completed as described in the Ruling on or before XXXXXXXXXX.

If we can be of any further assistance, please contact the writer.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch