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 and extension of delay
Position: Granted
Reasons: Minor Changes only
XXXXXXXXXX 2004-010847
XXXXXXXXXX, 2004
Re: Advance Income Tax Ruling
XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX in which you request on behalf of the above named taxpayer (Mco) an extension of the deadline for the implementation of the proposed transactions described in our Advance Tax Ruling (the Ruling) dated XXXXXXXXXX, 2004 on our file number 2004-006195. In addition you advise us that following the completion of a recent Canada Revenue Agency audit of Mco, the adjusted cost base of the XXXXXXXXXX (Nco) shares has been confirmed to be $XXXXXXXXXX.
As requested, the Ruling is amended as follows:
18. Mco owns all XXXXXXXXXX issued and outstanding common shares of Nco having a fair market value of approximately $XXXXXXXXXX , an adjusted cost base of $XXXXXXXXXX (as a result of the bump under 10 above) and nominal paid-up capital.
23. Mco will receive permission from its bank to initiate a $XXXXXXXXXX or less (the Amount) fund transfer to Oco which will result in Mco going into an overdraft position after the making of the loan described in 24 below.
24. Mco will transfer the Amount by means of a demand loan (the "Loan") to Oco. The terms of the loan will be as follows: annual interest of XXXXXXXXXX %; interest paid XXXXXXXXXX ; XXXXXXXXXX year term; renewable on the agreement of the parties and repayable without penalty on XXXXXXXXXX notice. The XXXXXXXXXX % interest rate is based on Mco's historical intercompany, unsecured financing rate and is consistent with a non-investment grade rate (single or double B rating) which averages between XXXXXXXXXX % and XXXXXXXXXX %.
25. Oco will use the Amount received as a result of the Loan to subscribe for common shares of Nco.
26. Nco will use the Amount received as a result of the share subscription to purchase for cancellation common shares held by Mco having a fair market value equal to the Amount.
27. Mco will use the Amount received as a result of the share cancellation to settle its bank overdraft position.
28. Mco will dispose of its remaining common shares of Nco to Oco and Oco will issue common shares to Mco as consideration for the common shares of Nco. Mco will elect under section 85.
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, provided that the proposed transactions are completed by XXXXXXXXXX.
Yours truly,
Section Manager
for Division Director
Financial Industries 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
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