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.
Principal Issues: Minor changes to share structure to avoid corporate incest problem.
Position: Amended
Reasons: Changes do not affect rulings provided.
XXXXXXXXXX 2004-009227
XXXXXXXXXX, 2004
Dear XXXXXXXXXX:
Re: XXXXXXXXXX ("Xco")
XXXXXXXXXX ("Yco")
XXXXXXXXXX ("A")
XXXXXXXXXX (the "Estate")
Supplementary Income Tax Ruling Request
Further to your electronic message of XXXXXXXXXX, the following amendments are made to our advance income tax ruling number 2004-8050 (the "Ruling") issued XXXXXXXXXX, 2004 on behalf of the above named corporations.
1. The amount at the end of paragraph 3 of the Ruling will be changed to $US XXXXXXXXXX.
2. Paragraph 17 will be replaced by the following:
The authorized capital of DC will include an unlimited number of voting Common Shares and an unlimited number of non-voting Preferred Shares, redeemable and retractable at $XXXXXXXXXX per share, being the amount paid-up thereon. The Preferred Shares will entitle the holder to a non-cumulative annual dividend to be paid at the discretion of the directors.
3. Paragraph 20 will be replaced by the following:
A will incorporate a new company ("Transferee") under the BCA. Transferee will be a taxable Canadian corporation and a private corporation. The only undertaking of Transferee will be the investing of its funds. The authorized share capital of Transferee will be:
- an unlimited number of voting Common Shares; and
- an unlimited number of voting Class A Special Shares.
The holders of the Common Shares will be entitled to one vote per share and the Class A Special Shares will each have a fraction of a vote determined by a formula that ensures the total number of votes attributable to the Class A Special Shares equals XXXXXXXXXX % of the total number of votes attributable to all of the issued and outstanding voting shares of the Transferee. The Common Shares will be entitled to receive the remaining property of Transferee upon dissolution.
The Class A Special Shares will entitle the holder to a non-cumulative annual dividend to be paid at the discretion of the directors, redeemable and retractable at a redemption price of $XXXXXXXXXX per share.
4. Paragraph 21 will be replaced by the following:
A will transfer all of her shares in DC, being XXXXXXXXXX Common Shares and XXXXXXXXXX Preferred Shares, to Transferee. As sole consideration for such transfer, Transferee will issue to A XXXXXXXXXX Common Shares having a FMV equal to the FMV of the shares of DC transferred by A to Transferee.
A and Transferee will jointly elect, in prescribed form and within the time limits referred to in subsection 85(6), to have the rules in subsection 85(1) apply to the transfers. The agreed amount in each election will be equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii).
Transferee will add to the stated capital accounts maintained for its Common Shares an amount equal to aggregate PUC, immediately before the transfer, attributable to each of the Common Shares and Preferred Shares, respectively, of DC transferred to Transferee by A.
5. The references in paragraphs 24.(b) and 26 to 28 and Ruling C to "Class B Special Shares" will be changed to "Class A Special Shares".
We confirm that the Ruling, as amended herein, remains binding on the Canada Revenue Agency subject to the same limitations and qualifications set out in the Ruling.
Yours truly,
XXXXXXXXXX
Section Manager
for Division Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch
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© Her Majesty the Queen in Right of Canada, 2004
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© Sa Majesté la Reine du Chef du Canada, 2004