2005 Ruling 2005-0151921R3 - Butterfly Distribution

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: Butterfly distribution - two distributing corporations owned equally by the same shareholders. No new issues.

Position: Favourable rulings issued.

Reasons: The transactions comply with the law.

XXXXXXXXXX 2005-015192

XXXXXXXXXX, 2005

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling Request

This is in reply to your letter of XXXXXXXXXX, as modified by your other correspondence, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers. You have advised us that to the best of your knowledge and that of the taxpayers involved none of the issues involved in this ruling request are:

(i) in an earlier return of the taxpayers or a related person;

(ii) being considered by a tax services office ("TSO") or taxation centre ("TC") in connection with a previously filed tax return of any of the taxpayers or a related person;

(iii) under objection by any of the taxpayers or a related person;

(iv) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired; or

(v) the subject of a ruling previously issued by the Income Tax Rulings Directorate.

The taxpayers have also represented that the proposed transactions described herein will not result in any of the taxpayers or a related person described herein being unable to pay its existing outstanding tax liabilities.

DEFINITIONS

In this letter, the following terms or expressions have the meaning specified:

(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended from time to time and consolidated to the date of this letter and, unless otherwise expressly stated, every reference herein to a part, section or subsection, paragraph or subparagraph and clause or subclause is a reference to the relevant provision, and the Income Tax Regulations thereunder are referred to as the "Regulations";

(b) "adjusted cost base" ("ACB") has the meaning assigned by subsection 248(1);

(c) "agreed amount" in respect of an eligible property means the amount that the transferor and transferee of the property agree upon in their election under subsection 85(1) in respect of that property;

(d) "BCA1" means the Canada Business Corporations Act;

(e) "BCA2" means the XXXXXXXXXX;

(f) "BN" means the business number issued to the particular corporate entity by CRA;

(g) "Canadian-controlled private corporation" ("CCPC") has the meaning assigned by subsection 125(7);

(h) "capital dividend account" ("CDA") has the meaning assigned by subsection 89(1);

(i) "capital property" has the meaning assigned by section 54;

(j) "cost amount" has the meaning assigned by subsection 248(1);

(k) "CRA" means Canada Revenue Agency;

(l) "DC1" means XXXXXXXXXX., a corporation incorporated and subsisting under the BCA1 (BN# XXXXXXXXXX);

(m) "DC2" means XXXXXXXXXX., a corporation incorporated and subsisting under XXXXXXXXXX the BCA2 (BN# XXXXXXXXXX);

(n) "dividend refund" has the meaning assigned by subsection 129(1);

(o) "dividend rental arrangement" has the meaning assigned by subsection 248(1);

(p) "Effective Date" means XXXXXXXXXX;

(q) "eligible property" has the meaning assigned by subsection 85(1.1);

(r) "fair market value" ("FMV") means the highest price, expressed in terms of money or money's worth, obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties acting at arm's length, neither party being under any compulsion to transact;

(s) "financial intermediary corporation" has the meaning assigned by subsection 191(1);

(t) "guarantee agreement" has the meaning assigned by subsection 112(2.2);

(u) "paid-up capital" ("PUC") has the meaning assigned by subsection 89(1);

(v) "Paragraph" refers to a numbered paragraph in this advance income tax ruling;

(w) "pre-1972 capital surplus on hand" has the meaning assigned by subsection 88(2.1);

(x) "private corporation" has the meaning assigned by subsection 89(1);

(y) "proceeds of disposition" has the meaning assigned by section 54;

(z) "Proposed Transactions" means the transactions described in Paragraphs 7 to 22;

(aa) "refundable dividend tax on hand" ("RDTOH") has the meaning assigned by subsection 129(3);

(bb) "related persons" has the meaning assigned by section 251;

(cc) "restricted financial institution" has the meaning assigned by subsection 248(1);

(dd) "series of transactions or events" includes the transactions or events referred to in subsection 248(10);

(ee) "Sibling1" means XXXXXXXXXX

(ff) "Sibling2" means XXXXXXXXXX

(gg) "Sibling3" means XXXXXXXXXX

(hh) "significant influence" has the meaning described in section 3050 of the CICA Handbook;

(ii) "SIN" means social insurance number;

(jj) "specified financial institution" has the meaning assigned by subsection 248(1);

(kk) "specified investment business" ("SIB") has the meaning assigned by subsection 248(1);

(ll) "stated capital" has the meaning assigned by BCA1 and BCA2, as the case may be;

(mm) "taxable Canadian corporation" ("TCC") has the meaning assigned by subsection 89(1); and

(nn) "taxable dividend" has the meaning assigned by subsection 89(1).

FACTS

1. DC1 is a CCPC and a TCC that was incorporated on XXXXXXXXXX under the provisions of the BCA1. DC1 carries on a specified investment business. Its only assets consist of cash and a portfolio of marketable securities and its liabilities consist of trade payables and advances to related parties. DC1 does not own, nor will it own, any depreciable property or any property that would be an eligible capital property at the time of the proposed distribution described in Paragraph 15. DC1 does not have, nor will it have, significant influence over any corporation at the time of the proposed distribution described in Paragraph 15. DC1's fiscal year end is XXXXXXXXXX. Currently, DC1's RDTOH balance is approximately $XXXXXXXXXX and its CDA balance is approximately $XXXXXXXXXX. DC1 does not have any net capital losses or non-capital losses available for carryforward.

2. DC1's authorized share capital consists of an unlimited number of:

(a) voting, participating Class A common shares ("DC1 Class A Shares");

(b) non-voting, participating Class B common shares ("DC1 Class B Shares");

(c) voting, non participating Class C preference shares ("DC1 Class C Shares") redeemable at the option of the corporation for the fair market value of the consideration received by the corporation at the time of issuing the share, bearing a non-cumulative discretionary dividend from XXXXXXXXXX% to XXXXXXXXX% per annum; and

(d) non-voting, non participating Class D preference shares ("DC1 Class D Shares") redeemable at the option of the corporation for the fair market value of the consideration received by the corporation at the time of issuing the share, bearing a non-cumulative discretionary dividend from XXXXXXXXXX% to XXXXXXXXXX% per annum.

3. The issued and outstanding share capital of DC1 consists of:

(a) XXXXXXXXXX DC1 Class A Shares, having an aggregate stated capital and PUC of $XXXXXXXXXX;

(b) XXXXXXXXXX DC1 Class B Shares having an aggregate stated capital and PUC of $XXXXXXXXXX; and

(c) XXXXXXXXXX DC1 Class D Shares having an aggregate stated capital, PUC and redemption amount of $XXXXXXXXXX.

Each of Sibling1, Sibling2 and Sibling3 owns XXXXXXXXXX DC1 Class A Share, XXXXXXXXXX DC1 Class B Share and XXXXXXXXXX DC1 Class D Share. The shares of DC1 owned by Sibling1, Sibling2 and Sibling3 have an adjusted cost base of $XXXXXXXXXX per share each. Sibling1, Sibling2 and Sibling3 are individuals who are siblings and resident in Canada for the purposes of the Act. Sibling1, Sibling2 and Sibling3 are all over 18 years of age.

4. DC2 is a CCPC and a TCC that was incorporated on XXXXXXXXXX under XXXXXXXXXX the BCA2. DC2 carries on a specified investment business. DC2's only assets are cash and XXXXXXXXXX common shares of XXXXXXXXXX. ("Investco"). Investco is a CCPC and a TCC, which owns a rental property situated in XXXXXXXXXX, Canada. Investco carries on a specified investment business and does not have any property that would be classified as "business property" as that term is described in Paragraph 13. DC2 owns XXXXXXXXXX of the XXXXXXXXXX issued and outstanding shares of Investco and as such has, and will have, significant influence over Investco and any entity that Investco has significant influence over at the time of the proposed distribution described in Paragraph 17. DC2 does not own, nor will it own, any depreciable property or any property that would be an eligible capital property at the time of the proposed distribution described in Paragraph 17. DC2's liabilities consist of trade payables and advances to related parties. DC2's fiscal year end is XXXXXXXXXX. Currently, DC2's RDTOH balance is approximately $XXXXXXXXXX and it does not have a CDA balance. DC2 does not have any pre-1972 capital surplus on hand as it paid a dividend of its entire pre-1972 capital surplus on hand balance in XXXXXXXXXX. DC2 does not have any net capital losses or non-capital losses available for carryforward.

5. DC2's authorized capital consists of:

(a) XXXXXXXXXX common shares ("DC2 Common Shares") with a par value of $XXXXXXXXXX per share;

(b) XXXXXXXXXX per annum non-cumulative, voting, non participating, non redeemable Class A preferred shares ("DC2 Class A Shares") with a par value of $XXXXXXXXXX per share;

(c) XXXXXXXXXX per annum non-cumulative, non voting, non participating Class B preferred shares ("DC2 Class B Shares") redeemable at the option of the corporation at $XXXXXXXXXX per share with a par value of $XXXXXXXXXX per share.

6. The issued and outstanding share capital of DC2 consists of:

(a) XXXXXXXXXX DC2 Common Shares having an aggregate stated capital and PUC of $XXXXXXXXXX;

(b) XXXXXXXXXX DC2 Class A Shares having an aggregate stated capital and PUC of $XXXXXXXXXX.

Sibling1, Sibling2 and Sibling3 each own XXXXXXXXXX DC2 Common Shares and XXXXXXXXXX DC2 Class A Shares. The original cost in XXXXXXXXXX of the DC2 Common Shares held by each of Sibling1, Sibling2 and Sibling3 is $XXXXXXXXXX per share. For the purpose of the transfer of the DC2 Common Shares as described in Paragraphs 9, 10 and 11, the adjusted cost base of such shares will be determined in accordance with ITAR 26(3). The adjusted cost base of the DC2 Class A Shares held by each of Sibling1, Sibling2 and Sibling3, is $XXXXXXXXXX per share, respectively.

6.1 In the course of carrying out the Proposed Transactions, each of the Sibling Holdcos will receive property of DC1 and DC2, including cash and marketable securities. Each of the Sibling Holdcos will deal with the cash and marketable securities so received from DC1 and DC2, as the case may be, in the course of carrying on its normal investment activities in the same manner that DC1 or DC2, as the case may be, would have done had the Proposed Transactions not been executed.

PROPOSED TRANSACTIONS

7. Three new transferee corporations will be incorporated under the BCA such that each of Sibling1, Sibling2 and Sibling3 will have a separate transferee corporation. Specifically, Sibling1's transferee corporation will be referred to as "Sibling1 Holdco"; Sibling2's transferee corporation will be referred to as "Sibling2 Holdco"; and Sibling3's transferee corporation will be referred to as "Sibling3 Holdco". Collectively, the three transferee corporations will be referred to as the "Sibling Holdcos" and, where required, in the singular as a "Sibling Holdco". The authorized share capital of each of the Sibling Holdcos will include a class of voting common shares (collectively referred to as "Sibling Holdco Common Shares") and four classes of non-voting, non-participating preferred shares share (each class of shares collectively referred to as "Sibling Holdco Class A Shares", "Sibling Holdco Class B Shares", "Sibling Holdco Class C Shares " and "Sibling Holdco Class D Shares", respectively), bearing a discretionary non-cumulative dividend of up to XXXXXXXXXX% per month and redeemable at the option of the corporation or shareholder for an amount equal to the fair market value of the amount received by the corporation as consideration for the issuance of such particular shares.

8. On the incorporation of Sibling1 Holdco, Sibling1 will subscribe for XXXXXXXXXX common shares of Sibling1 Holdco ("Sibling1 Holdco Common Shares") for $XXXXXXXXXX per share. Similarly, on the incorporation of Sibling2 Holdco, Sibling2 will subscribe for XXXXXXXXXX common shares of Sibling2 Holdco ("Sibling2 Holdco Common Shares") for $XXXXXXXXXX per share and on the incorporation of Sibling3 Holdco, Sibling3 will subscribe for XXXXXXXXXX common shares of Sibling3 Holdco ("Sibling3 Holdco Common Shares") for $XXXXXXXXXX per share. In each case, the subscription price of the particular Sibling Holdco's Common Shares will be paid in cash.

9. Contemporaneously with the share transfers described in Paragraphs 10 and 11, Sibling1 will transfer, on a contemporaneous basis, the following shares of DC1 and DC2 to Sibling1 Holdco:

(a) XXXXXXXXXX DC1 Class A Share and XXXXXXXXXX DC1 Class B Share and, as consideration therefor, Sibling1 Holdco will issue XXXXXXXXXX Sibling1 Holdco Class A Shares to Sibling1 having a fair market value equal to the aggregate fair market value of the DC1 Class A Share and DC1 Class B Share so transferred;

(b) XXXXXXXXXX DC1 Class D Shares and, as consideration therefor, Sibling1 Holdco will issue XXXXXXXXXX Sibling1 Holdco Class B Shares to Sibling1 having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC1 Class D Shares so transferred;

(c) XXXXXXXXXX DC2 Common Shares and, as consideration therefor, Sibling1 Holdco will issue to Sibling1, XXXXXXXXXX Sibling1 Holdco Class C Shares having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC2 Common Shares so transferred; and

(d) XXXXXXXXXX DC2 Class B Shares and, as consideration therefor, Sibling1 Holdco will issue to Sibling1, XXXXXXXXXX Sibling1 Holdco Class B Shares having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC2 Class B Shares so transferred.

Sibling1 and Sibling1 Holdco will jointly elect in prescribed form, within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to such share transfers. The agreed amount for each particular share transferred by Sibling1 to Sibling1 Holdco, as described above, will be an amount equal to Sibling1's adjusted cost base of such particular share immediately before such transfer and for greater certainty, the agreed amount in each case will not exceed the lesser of the two amounts described in paragraph 85(1)(c.1).

For purposes of the BCA1 the amount to be added to the stated capital account maintained for the particular class of shares issued by Sibling1 Holdco as consideration for the particular shares of DC1 or DC2 transferred to it as described above, will not exceed the paid-up capital attributable to the shares of DC1 or DC2 for which such particular class of shares of Sibling1 Holdco were issued as consideration as described above.

10. Contemporaneously with the share transfers described in Paragraphs 9 and 11, Sibling2 will transfer, on a contemporaneous basis, the following shares of DC1 and DC2 to Sibling2 Holdco:

(a) XXXXXXXXXX DC1 Class A Share and XXXXXXXXXX DC1 Class B Share and, as consideration therefor, Sibling2 Holdco will issue XXXXXXXXXX Sibling2 Holdco Class A Shares to Sibling2 having a fair market value equal to the aggregate fair market value of the DC1 Class A Share and DC1 Class B Share so transferred;

(b) XXXXXXXXXX DC1 Class D Shares and, as consideration therefor, Sibling2 Holdco will issue XXXXXXXXXX Sibling2 Holdco Class B Shares to Sibling2 having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC1 Class D Shares so transferred;

(c) XXXXXXXXXX DC2 Common Shares and, as consideration therefor, Sibling2 Holdco will issue to Sibling2, XXXXXXXXXX Sibling2 Holdco Class C Shares having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC2 Common Shares so transferred; and

(d) XXXXXXXXXX DC2 Class B Shares and, as consideration therefor, Sibling2 Holdco will issue to Sibling2, XXXXXXXXXX Sibling2 Holdco Class B Shares having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC2 Class B Shares so transferred.

Sibling2 and Sibling2 Holdco will jointly elect in prescribed form, within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to such share transfers. The agreed amount for each particular share transferred by Sibling2 to Sibling2 Holdco, as described above, will be an amount equal to Sibling2's adjusted cost base of such particular share immediately before such transfer and for greater certainty, the agreed amount in each case will not exceed the lesser of the two amounts described in paragraph 85(1)(c.1).

For purposes of the BCA1 the amount to be added to the stated capital account maintained for the particular class of shares issued by Sibling2 Holdco as consideration for the particular shares of DC1 or DC2 transferred to it, as described above, will equal the paid-up capital attributable to the shares of DC1 or DC2 for which such particular class of shares of Sibling2 Holdco were issued as consideration as described above.

11. Contemporaneously with the share transfers described in Paragraphs 9 and 10, Sibling3 will transfer, on a contemporaneous basis, the following shares of DC1 and DC2 to Sibling3 Holdco:

(a) XXXXXXXXXX DC1 Class A Share and XXXXXXXXXX DC1 Class B Share and, as consideration therefor, Sibling3 Holdco will issue XXXXXXXXXX Sibling3 Holdco Class A Shares to Sibling3 having a fair market value equal to the aggregate fair market value of the DC1 Class A Share and DC1 Class B Share so transferred;

(b) XXXXXXXXXX DC1 Class D Shares and, as consideration therefor, Sibling3 Holdco will issue XXXXXXXXXX Sibling3 Holdco Class B Shares to Sibling3 having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC1 Class D Shares so transferred;

(c) XXXXXXXXXX DC2 Common Shares and, as consideration therefor, Sibling3 Holdco will issue to Sibling3, XXXXXXXXXX Sibling3 Holdco Class C Shares having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC2 Common Shares so transferred; and

(d) XXXXXXXXXX DC2 Class B Shares and, as consideration therefor, Sibling3 Holdco will issue to Sibling3, XXXXXXXXXX Sibling3 Holdco Class B Shares having an aggregate fair market value equal to the aggregate fair market value of the XXXXXXXXXX DC2 Class B Shares so transferred.

Sibling3 and Sibling3 Holdco will jointly elect in prescribed form, within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to such share transfers. The agreed amount for each particular share transferred by Sibling2 to Sibling2 Holdco, as described above, will be an amount equal to Sibling2's adjusted cost base of such particular share immediately before such transfer and for greater certainty, the agreed amount in each case will not exceed the lesser of the two amounts described in paragraph 85(1)(c.1).

For purposes of the BCA1 the amount to be added to the stated capital account maintained for the particular class of shares issued by Sibling3 Holdco as consideration for the particular shares of DC1 or DC2 transferred to it, as described above, will equal the paid-up capital attributable to the shares of DC1 or DC2 for which such particular class of shares of Sibling3 Holdco were issued as consideration as described above.

12. Immediately before the transfer of property described in Paragraph 15, the property owned by DC1 will be classified into the following three types of property on a gross fair market value asset basis for the purposes of the definition of "distribution" in subsection 55(1), as follows:

(a) cash or near-cash property, comprising all of the current assets of DC1, including cash, marketable securities, receivables, rights arising from prepaid expenses and related party advances without any specific terms of repayment;

(b) investment property, comprising all of the assets of DC1, other than any cash or near-cash property, any income from which would, for the purposes of the Act, be income from property or a specified investment business; and

(c) business property, comprising all of the assets of DC1, other than cash or near-cash property, any income from which would for the purposes of the Act, be income from a business (other than a specified investment business).

For greater certainty, DC1 will not have any property that is classified as investment property or business property for the purposes of the distribution described in Paragraph 15.

13. Immediately before the transfer of property described in Paragraph 17, the property owned by DC2 will be classified into the following three types of property on a gross fair market value asset basis for the purposes of the definition of "distribution" in subsection 55(1), as follows:

(a) cash or near-cash property, comprising all of the current assets of DC2, including cash, marketable securities, receivables, rights arising from prepaid expenses and related party advances without any specific terms of repayment;

(b) investment property, comprising all of the assets of DC2, other than any cash or near-cash property, any income from which would, for the purposes of the Act, be income from property or a specified investment business; and

(c) business property, comprising all of the assets of DC2, other than cash or near-cash property, any income from which would for the purposes of the Act, be income from a business (other than a specified investment business).

For greater certainty, DC2 will not directly have any property that is classified as business property for the purposes of the distribution described in Paragraph 17. As described in Paragraph 4, DC2 has significant influence over Investco, such that DC2 would be required to use the consolidated look-through method for determining the appropriate proportion of each of the three types of property that such shares of Investco would represent. Since each of the Sibling Holdcos will, as described in Paragraph 17, receive its pro-rata share (i.e. 1/3rd each) of the common shares of Investco so held by DC2, the consolidated look-through method will not actually be undertaken for the purposes of this distribution. In addition, as described in Paragraph 4, since Investco will not have any property that is classified as business property, for the purposes of this distribution DC2 will only be considered to have cash and near-cash property and the types of property represented by the common shares of Investco held by DC2 immediately before the proposed distribution, being cash and near cash property and investment property.

14. For purposes of determining each of the three types of property described in Paragraph 12 and Paragraph 13:

(a) any tax accounts such as the balance of any non-capital losses, RDTOH or CDA of DC1, DC2, as the case may be, if any, will not be considered property;

(b) no amount will be considered to be a liability unless it represents a true legal liability which is capable of quantification; and

(c) the amount of any deferred income tax will not be considered a liability.

15. On the Effective Date, DC1 will contemporaneously transfer to each of the Sibling Holdcos its pro-rata share (i.e. 1/3rd each) of each type of property described in Paragraph 12. For greater certainty, the transfers will take place in a manner such that each of the Sibling Holdcos will acquire its pro-rata share of each type of property held by DC1 on a gross fair market value basis. It is also expected that each of the Sibling Holdcos will receive its pro-rata share of each particular type of marketable security owned by DC1, where possible. For example, if DC1 owned 99 common shares of a particular corporation, each of the Sibling Holdcos would receive 33 common shares of that corporation.

It is possible that at the time the property of DC1 is transferred to each of the Sibling Holdcos as described herein, some of the marketable securities owned by DC1 may have a fair market value that is less than their adjusted cost base. While it is expected that DC1 will not have many properties with accrued but unrealized capital losses, if DC1 does have such properties at the time of the distribution, the property of DC1 will be divided into two blocks as follows:

(a) The first block of property will be comprised of marketable securities having unrealized capital losses ("DC1 Loss Properties").

(b) The second block will be comprised of the remaining property of DC1, including marketable securities having unrealized capital gains ("DC1 Gain Properties").

As consideration for any marketable securities that are described as DC1 Loss Properties that are to be transferred to each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will issue a non-interest bearing demand promissory note having a principal amount and fair market value equal to the aggregate fair market value of the particular DC1 Loss Properties received by that particular Sibling Holdco. For greater certainty, the amount of any non-share consideration to be issued by each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco as consideration for any DC1 Loss Properties received by the particular Sibling Holdco will not exceed the fair market value of such property so received.

As consideration for any properties that are described as DC1 Gain Properties that are to be transferred to each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will: (i) assume an appropriate amount of DC1's existing liabilities; (ii) issue a non-interest bearing demand promissory note having a principal amount and fair market value equal to the excess, if any, of the aggregate of the agreed amounts under section 85 elected in respect of the particular DC1 Gain Properties received by that particular Sibling Holdco over the aggregate amount of DC1's existing liabilities to be assumed by that particular Sibling Holdco as described in (i); and (iii) issue a number of Class D Shares having an aggregate fair market value equal to the excess of the fair market value of the particular DC1 Gain Properties received by that particular Sibling Holdco less the aggregate of the amount of DC1's existing liabilities to be assumed by that particular Sibling Holdco as described in (i) and the principal amount of the promissory note to be issued by that Sibling Holdco as described in (ii).

The promissory notes to be issued by Sibling1 Holdco to DC1 will be referred to as the "Sibling1 Holdco-DC1 Notes", the promissory notes to be issued by Sibling2 Holdco to DC1 will be referred to as the "Sibling2 Holdco-DC1 Notes" and the promissory notes to be issued by Sibling3 Holdco to DC1 will be referred to as the "Sibling3 Holdco-DC1 Notes".

DC1 and each of the Sibling Holdcos 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 each property included in the DC1 Gain Properties transferred to the particular Sibling Holdco such that each agreed amount will be an amount that is either equal to the ACB of the particular property or an amount between the ACB and the FMV of the particular property. It is intended that the aggregate of such agreed amounts will allow DC1 to realize sufficient capital gains to offset any capital losses that DC1 may realize on the transfer of the DC1 Loss Properties to the Sibling Holdcos, plus any other capital losses that DC1 may have already realized from other dispositions of capital property in that taxation year.

For greater certainty, the agreed amount for a particular property included in the subsection 85(1) elections referred to in this Paragraph will not be less than the amount of any non-share consideration paid by the particular Sibling Holdco for the particular transferred property nor will such agreed amount exceed the FMV of the particular property. The amount of any non-share consideration to be allocated to any property that is not the subject of an election under subsection 85(1) will not exceed the fair market value of such property.

Each of the Sibling Holdcos will add to the stated capital account maintained for its Class D Shares an amount equal to the amount by which the aggregate cost of the properties acquired by the particular Sibling Holdco (determined pursuant to subsection 85(1) if relevant) exceeds the aggregate of the amount of the liabilities assumed by the particular Sibling Holdco and the principal amount of the promissory notes issued by such Sibling Holdco to DC1 as consideration for such transferred property.

16. Immediately following the transfers of property described in Paragraph 15, the FMV of each type of property received by each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, will approximate the proportion determined by the formula:

A x B/C

where:

A is the FMV, immediately before the transfer, of all property of that type owned at that time by DC1,

B is the FMV, immediately before the transfer, of all of the shares of the capital stock of DC1 owned by the particular Sibling Holdco, and

C is the FMV, immediately before the transfer, of all the issued shares of the capital stock of DC1.

For the purposes of this Paragraph, the expression "approximates the proportion" means the discrepancy from that proportion, if any, that would exceed one percent (1%) determined as a percentage of the FMV of the property of that type that the particular Sibling Holdco has received compared to what it would have received had it received its appropriate pro-rata share of DC1's property of that type.

17. On the Effective Date, DC2 will contemporaneously transfer to each of the Sibling Holdcos its pro-rata share (i.e. 1/3rd each) of each type of property described in Paragraph 13. For greater certainty, the transfers will take place in a manner such that each of the Sibling Holdcos will acquire its pro-rata share of each type of property held by DC2 on a gross fair market value basis. It is also expected that each of the Sibling Holdcos will receive its pro-rata share of each particular type of marketable security owned by DC2, where possible, and in particular, the XXXXXXXXXX common shares of Investco will be transferred to each of the Sibling Holdcos in equal numbers (i.e. 166 2/3rd shares each). For example, if DC2 owned 99 common shares of a particular corporation, each of the Sibling Holdcos would receive 33 common shares of that corporation.

It is possible that at the time the property of DC2 is transferred to each of the Sibling Holdcos, some of the marketable securities owned by DC2 may have a fair market value that is less than their adjusted cost base. While it is not expected that DC2 will have any properties with accrued but unrealized capital losses, if DC2 does have such properties at the time of the distribution, the property of DC2 will be divided into two blocks as follows:

(c) The first block of property will be comprised of marketable securities having unrealized capital losses ("DC2 Loss Properties").

(d) The second block will be comprised of the remaining property of DC2, including marketable securities having unrealized capital gains ("DC2 Gain Properties").

As consideration for any marketable securities that are described as DC2 Loss Properties that are to be transferred to each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will issue a non-interest bearing demand promissory note having a principal amount and fair market value equal to the aggregate fair market value of the particular DC2 Loss Properties received by that particular Sibling Holdco. For greater certainty, the amount of any non-share consideration to be issued by each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco as consideration for any DC2 Loss Properties received by the particular Sibling Holdco will not exceed the fair market value of such property so received.

As consideration for any properties that are described as DC2 Gain Properties that are to be transferred to each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will: (i) assume an appropriate amount of DC2's existing liabilities; (ii) issue a non-interest bearing demand promissory note having a principal amount and fair market value equal to the excess, if any, of the aggregate of the agreed amounts under section 85 elected in respect of the particular DC2 Gain Properties received by that particular Sibling Holdco over the aggregate amount of DC2's existing liabilities to be assumed by that particular Sibling Holdco as described in (i); and (iii) issue a number of Class D Shares having an aggregate fair market value equal to the excess of the fair market value of the particular DC2 Gain Properties received by that particular Sibling Holdco less the aggregate of the amount of DC2's existing liabilities to be assumed by that particular Sibling Holdco as described in (i) and the principal amount of the promissory note to be issued by that Sibling Holdco as described in (ii).

The promissory notes issued by Sibling1 Holdco to DC2 will be referred to as the "Sibling1 Holdco-DC2 Notes", the promissory notes issued by Sibling2 Holdco to DC2 will be referred to as the "Sibling2 Holdco-DC2 Notes" and the promissory notes issued by Sibling3 Holdco to DC2 will be referred to as the "Sibling3 Holdco-DC2 Notes".

DC2 and each of the Sibling Holdcos 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 each property included in the DC2 Gain Properties transferred to the particular Sibling Holdco such that each agreed amount will be an amount that is either equal to the ACB of the particular property or an amount between the ACB and the FMV of the particular property. It is intended that the aggregate of such agreed amounts will allow DC2 to realize sufficient capital gains to offset any capital losses that DC2 may realize on the transfer of the DC2 Loss Properties to the Sibling Holdcos, plus any other capital losses that DC2 may have already realized from other dispositions of capital property in that taxation year.

For greater certainty, the agreed amount for a particular property included in the subsection 85(1) elections referred to in this Paragraph will not be less than the amount of any non-share consideration paid by the particular Sibling Holdco for the particular transferred property nor will such agreed amount exceed the FMV of the particular property. The amount of any non-share consideration to be allocated to any property that is not the subject of an election under subsection 85(1) will not exceed the fair market value of such property.

Each of the Sibling Holdcos will add to the stated capital account maintained for its Class D Shares an amount equal to the amount by which the aggregate cost of the properties acquired by the particular Sibling Holdco (determined pursuant to subsection 85(1) if relevant) exceeds the aggregate of the amount of the liabilities assumed by the particular Sibling Holdco and the principal amount of the promissory notes issued by such Sibling Holdco to DC2 as consideration for such transferred property.

18. Immediately following the transfers of property described in Paragraph 17, the FMV of each type of property received by each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, will approximate the proportion determined by the formula:

A x B/C

where:

A is the FMV, immediately before the transfer, of all property of that type owned at that time by DC2,

B is the FMV, immediately before the transfer, of all of the shares of the capital stock of DC2 owned by the particular Sibling Holdco, and

C is the FMV, immediately before the transfer, of all the issued shares of the capital stock of DC2.

For the purposes of this Paragraph, the expression "approximates the proportion" means the discrepancy from that proportion, if any, that would exceed one percent (1%) determined as a percentage of the FMV of the property of that type that the particular Sibling Holdco has received compared to what it would have received had it received its appropriate pro-rata share of DC2's property of that type.

19. On the Effective Date, and immediately following the transfers of property described in Paragraphs 15 and 17, on a contemporaneous basis, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will redeem its Class D Shares owned by DC1 and DC2, as the case may be, as follows:

(a) in respect of the redemption by Sibling1 Holdco of its Class D Shares owned by DC1, Sibling1 Holdco will issue a non-interest bearing demand promissory note ("Sibling1 Holdco-DC1 Redemption Note") having a principal amount and fair market value equal to the fair market value and redemption amount of the Class D Shares issued to DC1;

(b) in respect of the redemption by Sibling1 Holdco of its Class D Shares owned by DC2, Sibling1 Holdco will issue a non-interest bearing demand promissory note ("Sibling1 Holdco-DC2 Redemption Note") having a principal amount and fair market value equal to the fair market value and redemption amount of the Class D Shares issued to DC2;

(c) in respect of the redemption by Sibling2 Holdco of its Class D Shares owned by DC1, Sibling1 Holdco will issue a non-interest bearing demand promissory note ("Sibling2 Holdco-DC1 Redemption Note") having a principal amount and fair market value equal to the fair market value and redemption amount of the Class D Shares issued to DC1;

(d) in respect of the redemption by Sibling2 Holdco of its Class D Shares owned by DC2, Sibling2 Holdco will issue a non-interest bearing demand promissory note ("Sibling2 Holdco-DC2 Redemption Note") having a principal amount and fair market value equal to the fair market value and redemption amount of the Class D Shares issued to DC2;

(e) in respect of the redemption by Sibling3 Holdco of its Class D Shares owned by DC1, Sibling3 Holdco will issue a non-interest bearing demand promissory note ("Sibling3 Holdco-DC1 Redemption Note") having a principal amount and fair market value equal to the fair market value and redemption amount of the Class D Shares issued to DC1; and

(f) in respect of the redemption by Sibling3 Holdco of its Class D Shares owned by DC2, Sibling3 Holdco will issue a non-interest bearing demand promissory note ("Sibling3 Holdco-DC2 Redemption Note") having a principal amount and fair market value equal to the fair market value and redemption amount of the Class D Shares issued to DC2.

20. At the end of the day on which the share redemptions described in Paragraph 19 take place, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will cause its first taxation year to end.

21. On the first business day following each of the Sibling Holdcos' first taxation year, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will take steps to authorize and complete the dissolution of DC1 under the applicable provisions of the BCA1. During the course of the dissolution, DC1 will distribute: the Sibling1 Holdco-DC1 Notes and the Sibling1 Holdco DC1 Redemption Note to Sibling1 Holdco; the Sibling2 Holdco-DC1 Notes and Sibling2 Holdco-DC1 Redemption Note to Sibling2 Holdco; and the Sibling3 Holdco-DC1 Notes and the Sibling3-DC1 Redemption Note to Sibling3 Holdco. As a result of the assignment and distribution of the promissory notes and the redemption notes, the obligations under each such note will be cancelled.

For the purposes of the Act, in particular subsection 84(2), the FMV of the Sibling1 Holdco-DC1 Notes and the Sibling1 Holdco-DC1 Redemption Note received by Sibling1 Holdco, will be allocated among the classes of shares of DC1 held by Sibling1 Holdco based on the relative aggregate FMV of the shares of each class of DC1 held by Sibling1 Holdco. Similarly, the FMV of the Sibling2 Holdco-DC1 Notes and the Sibling2 Holdco-DC1 Redemption Note received by Sibling2 Holdco, will be allocated among the classes of shares of DC1 held by Sibling2 Holdco based on the relative aggregate FMV of the shares of each class of DC1 held by Sibling2 Holdco and the FMV of the Sibling3 Holdco-DC1 Notes and the Sibling3 Holdco-DC1 Redemption Note received by Sibling3 Holdco, will be allocated among the classes of shares of DC1 held by Sibling3 Holdco, based on the relative aggregate FMV of the shares of each class of DC1 held by Sibling3 Holdco.

Prior to the distribution of the promissory notes, as described in this Paragraph, DC1 will elect, pursuant to subsection 83(2), in prescribed manner and prescribed form, that the full amount of any resulting dividend referred to in subparagraph 88(2)(b)(i) be deemed to be a capital dividend. Upon receipt of the certificate of dissolution, which may not occur until after XXXXXXXXXX, DC1 will be formally dissolved.

22. On the first business day following the Sibling Holdcos' first taxation year, each of Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco will take steps to authorize and complete the dissolution of DC2 under the applicable provisions of the BCA2. In connection with the winding-up of DC2, DC2 will assign and distribute: the Sibling1 Holdco-DC2 Notes and the Sibling1 Holdco-DC2 Redemption Note to Sibling1 Holdco; the Sibling2 Holdco-DC2 Notes and the Sibling 2 Holdco-DC2 Redemption Note to Sibling2 Holdco; and the Sibling3 Holdco-DC2 Notes and the Sibling 3-DC2 Redemption Note to Sibling Holdco3. As a result of the assignment and distribution of the above-described notes, the obligations of each of the Sibling Holdcos under its particular notes will be cancelled.

For the purposes of the Act, in particular subsection 84(2), the FMV of the Sibling1 Holdco-DC2 Notes and the Sibling1 Holdco-DC2 Redemption Note received by Sibling1 Holdco, will be allocated among the classes of shares of DC2 held by Sibling1 Holdco based on the relative aggregate FMV of the shares of each class of DC2 held by Sibling1 Holdco. Similarly, the FMV of the Sibling2 Holdco-DC2 Notes and the Sibling2 Holdco-DC2 Redemption Note received by Sibling2 Holdco, will be allocated among the classes of shares of DC2 held by Sibling2 Holdco based on the relative aggregate FMV of the shares of each class of DC2 held by Sibling2 Holdco and the FMV of the Sibling3 Holdco-DC2 Notes and the Sibling3 Holdco-DC2 Redemption Note received by Sibling3 Holdco, will be allocated among the classes of shares of DC2 held by Sibling3 Holdco, based on the relative aggregate FMV of the shares of each class of DC2 held by Sibling3 Holdco.

Prior to the distribution of the promissory notes, as described in this Paragraph, DC2 will elect, pursuant to subsection 83(2), in prescribed manner and prescribed form, that the full amount of any resulting dividend referred to in subparagraph 88(2)(b)(i) be deemed to be a capital dividend. Upon receipt of the certificate of dissolution, which may not occur until after XXXXXXXXXX, DC2 will be formally dissolved.

ADDITIONAL INFORMATION

23. The Proposed Transactions will occur in the order presented unless otherwise indicated, with the exception of filing the applicable election forms described in Paragraphs 9 to 11, 15 and 17, which will be filed before the applicable due date following completion of the Proposed Transactions.

24. None of DC1, DC2, Sibling1 Holdco, Sibling2 Holdco or Sibling3 Holdco is, or will be, at any time during a series of transaction or events that includes the Proposed Transactions, a restricted financial institution or a specified financial institution.

25. No property has or will become property of DC1 or DC2, and no liabilities have been, or will be, incurred by DC1 or DC2 in contemplation of and before the Proposed Transactions otherwise than as described herein.

26. Except as specifically described herein, none of the shares of DC1, DC2, or any of the Sibling Holdcos will be disposed of or otherwise acquired by any person as part of a series of transactions or events the includes the Proposed Transactions.

27. Except as specifically described herein, there is no intention for DC1, DC2, or any of the Sibling Holdcos to dispose of any property to any person as part of a series of transactions or events that includes the Proposed Transactions, other than in the ordinary course of such corporation's business.

28. None of the shares of DC1, DC2 or any of the Sibling Holdcos have been, or will be, at any time during a series of transactions or events that includes the Proposed Transactions:

(a) the subject of a guarantee agreement;

(b) a share that is issued or acquired as part of a transaction, event or series of transactions or events of the type described in subsection 112(2.5); or

(c) the subject of a dividend rental arrangement.

PURPOSE OF PROPOSED TRANSACTIONS

29. Sibling1, Sibling2 and Sibling3 would like to proportionately divide DC1's and DC2's assets on a tax deferred basis, which will allow each of the Siblings to pursue independent investment strategies.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and the purpose of the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, our rulings are as set forth below.

A. Provided the appropriate joint elections are filed in the prescribed form and manner within the time limits specified in subsection 85(6) and provided that the particular property so transferred is an eligible property the provisions of subsection 85(1) will apply to:

(a) the transfers of the shares of DC1 and DC2 by Sibling1 to Sibling1 Holdco as described in Paragraph 9;

(b) the transfers of the shares of DC1 and DC2 by Sibling2 to Sibling2 Holdco as described in Paragraph 10;

(c) the transfers of the shares of DC1 and DC2 by Sibling3 to Sibling3 Holdco as described in Paragraph 11;

(d) the transfers of property by DC1 to Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, as described in Paragraph 15; and

(e) the transfers of property by DC2 to Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco, as the case may be, as described in Paragraph 17;

such that the agreed amount in respect of each such transfer shall be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a). For greater certainty, paragraph 85(1)(e.2) will not apply to the transfers referred to herein.

B. As a result of: the respective redemptions by each of the Sibling Holdcos of such corporation's Class D Shares held by DC1 and DC2 as described in Paragraph 19; the distributions by DC1 in the course of its winding-up as described in Paragraph 21; and the distributions by DC2 in the course of its winding-up as described in Paragraph 22:

(a) by virtue of paragraphs 84(3)(a) and 84(3)(b), each of the Sibling Holdcos will be deemed to have paid, and DC1 and DC2, as the case may be, will be deemed to have received, respectively, a taxable dividend on the Class D Shares of the particular Sibling Holdco so redeemed equal to the amount, if any, by which the aggregate amount paid on such redemption exceeds the aggregate PUC in respect of such Sibling Holdco's Class D Shares immediately before such redemption;

(b) by virtue of paragraph 88(2)(b) and subsection 84(2), but subject to (i) and (ii) below, DC1 will be deemed to have paid, and each of Sibling Holdcos will be deemed to have received, a dividend (the "winding-up dividend") on each class of shares of DC1 held by such Sibling Holdco equal to the proportion of the amount by which the aggregate FMV of the property of DC1 distributed to each of the Sibling Holdcos on the winding-up and allocated to a particular class of shares as described in Paragraph 21 exceeds the amount by which the PUC of such class of shares of DC1 is reduced on the distribution, that the number of shares of that class of DC1 held by such Sibling Holdco is of the number of all such shares of that class of DC1 outstanding immediately before that time; and

(i) pursuant to subparagraph 88(2)(b)(i), such portion of the winding-up dividend as does not exceed DC1's CDA determined immediately before the payment of the winding-up dividend will be deemed, for purposes of the subsection 83(2) election referred to in Paragraph 21, to be the full amount of a separate dividend; and

(ii) pursuant to subparagraph 88(2)(b)(iii), the winding-up dividend, to the extent that it exceeds the portion thereof referred to in (i) that is deemed to be a separate dividend will be deemed to be a separate dividend that is a taxable dividend;

(c) by virtue of paragraph 88(2)(b) and subsection 84(2), but subject to (i) and (ii) below, DC2 will be deemed to have paid, and each of Sibling Holdcos will be deemed to have received, a dividend (the "winding-up dividend") on each class of shares of DC2 held by such Sibling Holdco equal to the proportion of the amount by which the aggregate FMV of the property of DC2 distributed to each of the Sibling Holdcos on the winding-up and allocated to a particular class of shares as described in Paragraph 22 exceeds the amount by which the PUC of such class of shares of DC2 is reduced on the distribution, that the number of class of shares of DC2 held by such Sibling Holdco is of the number of all such shares of that class of DC2 outstanding immediately before that time; and

(i) pursuant to subparagraph 88(2)(b)(i), such portion of the winding-up dividend as does not exceed DC2's CDA determined immediately before the payment of the winding-up dividend will be deemed, for purposes of the subsection 83(2) election referred to in Paragraph 22, to be the full amount of a separate dividend; and

(ii) pursuant to subparagraph 88(2)(b)(iii), the winding-up dividend, to the extent that it exceeds the portion thereof referred to in (i) that is deemed to be a separate dividend will be deemed to be a separate dividend that is a taxable dividend;

(d) the taxable dividends described in (a), (b) and (c) above:

(i) will be included in computing the income, pursuant to subsection 82(1) and paragraph 12(1)(j), of the person deemed to have received such dividend;

(ii) will be deductible by the recipient pursuant to subsection 112(1) in computing its taxable income in the year in which such a dividend is deemed to have been received, and, for greater certainty, will not be prohibited by subsections 112(2.1), (2.2), (2.3) or (2.4);

(iii) will be excluded in determining the POD to the recipient of the shares so redeemed, purchased or cancelled pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54;

(iv) will, by virtue of subsection 112(3), reduce the loss, if any, in respect of the disposition of the shares on which the dividend is deemed to be received;

(v) will not be subject to tax under Part IV except to the extent that such payer corporation is entitled to a dividend refund for its taxation year in which it paid such dividend; and

(vi) will not be subject to tax under Part IV.1 or VI.1.

C. Subject to the application of subsection 112(3), the provisions of subsection 40(3.4) will not apply to deem any capital loss incurred on the disposition of: the DC1 Loss Properties by DC1 to Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco as described in Paragraph 15; or the DC2 Loss Properties by DC2 to Sibling1 Holdco, Sibling2 Holdco and Sibling3 Holdco as described in Paragraph 17; to be nil provided that at the end of the period referred to in subsection 40(3.3) the particular transferor or any person affiliated with the particular transferor does not own the particular property or a property that is identical to the particular property.

D. The assignment, distribution and cancellation of the Sibling1 Holdco-DC1 Notes and the Sibling1 Holdco DC1 Redemption Note to Sibling1 Holdco; the Sibling2 Holdco-DC1 Notes and Sibling2 Holdco-DC1 Redemption Note to Sibling2 Holdco; and the Sibling3 Holdco-DC1 Notes and the Sibling3-DC1 Redemption Note to Sibling3 Holdco, as described in Paragraph 21, will not give rise to a forgiven amount, and none of DC1, or the Sibling Holdcos, as the case may be, will realize any gain or incur any loss as a result of such assignment and cancellation.

E. The assignment, distribution and cancellation of the Sibling1 Holdco-DC2 Notes and the Sibling1 Holdco DC2 Redemption Note to Sibling1 Holdco; the Sibling2 Holdco-DC2 Notes and Sibling2 Holdco-DC2 Redemption Note to Sibling2 Holdco; and the Sibling3 Holdco-DC2 Notes and the Sibling3-DC2 Redemption Note to Sibling3 Holdco, as described in Paragraph 22, will not give rise to a forgiven amount, and none of DC2, or the Sibling Holdcos, as the case may be, will realize any gain or incur any loss as a result of such assignment and cancellation.

F. Provided that as part of the series of transactions or events that includes the Proposed Transactions, there is not:

(a) an acquisition of property in the circumstances described in paragraph 55(3.1)(a);

(b) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(c) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);

(d) an acquisition of shares in the circumstances described in subparagraph 55(3.1)(b)(iii); or

(e) an acquisition of property in the circumstances described in subparagraph 55(3.1)(c) or (d);

which has not been described herein, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in Ruling B and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

G. The provisions of subsections 15(1), 56(2) and 246(1) will not apply to the Proposed Transactions described herein, in and by themselves.

H. Subsection 245(2) will not apply to the Proposed Transactions, in and by themselves, to redetermine the tax consequences confirmed herein.

The above rulings are subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002 and are binding on CRA provided that the Proposed Transactions are completed by XXXXXXXXXX. The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and the Regulations which, if enacted into law, could have an effect on the rulings provided herein.

OTHER COMMENTS

Unless otherwise confirmed in the above rulings, nothing in this letter should be construed as implying that the CRA has confirmed, reviewed or has made any determination in respect of:

(a) the paid-up capital of any share or the adjusted cost base or fair market value of any property referred to herein;

(b) any other tax consequence relating to the facts, Proposed Transactions or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the rulings given above, including whether any of the Proposed Transactions would also be included in a series of transactions or events that include other transactions or events that are not described in this letter.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch