7 July 2005 Income Tax Severed Letter 2005-0163141R3 - Amendment to proposed transactions for 2005-013289

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.

SUMMARY: Amendment to proposed transactions for 2005-013289—ITA-87(2.1)—Advance income tax ruling—Amendments to advance income tax rulingissued in 2005.

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: whether revisions to proposed transactions would have any impact on rulings given

POSITION: no

REASONS: revisions are inconsequential

XXXXXXXXXX 2005-016314

XXXXXXXXXX, 2005

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

Advance Income Tax Ruling No. 2005-013289 []

This is in reply to your letter of XXXXXXXXXX wherein you advised of us certain amendments to the proposed transactions described in advance income tax ruling 2005-013289 [2005-0132891R3] (the “Ruling Letter”) that was issued on XXXXXXXXXX, 2005. We also acknowledge the information provided during our subsequent telephone conversation (XXXXXXXXXX) in connection with your request.

Terms defined in the Ruling Letter have the same meaning when used in this letter.
A) You have advised us that the following changes should be made to the proposed transactions described in the Ruling Letter:
• 1. Paragraph 29 of the Ruling Letter is deleted and replaced by:

  29. A Co will acquire all of the shares of Newlossco1 and the Newlossco1 Note A from Parentco 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.

  C Co will acquire all of the shares of each of Newlossco2 and Newlossco3, as well as the Newlossco2 Note A and the Newlossco3 Note A, from Parentco 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 Newlossco3, as the case may be, and other considerations.

• 2. Paragraphs 32 and 33 are deleted and replaced by:
  33. Following the acquisition by C Co of all the shares of Newlossco2 and Newlossco3, C Co, Newlossco2 and Newlossco3 will be amalgamated pursuant to the provisions of XXXXXXXXXX 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 Newlossco2 Note A, the Newlossco3 Note A, the shares of Newlossco2 and 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 Newlossco2 Note A and 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 C Co) will be cancelled on the merger. The shares of C Co owned by its shareholders immediately before the merger will become shares of Newsubco C to those shareholders immediately after the merger.
B) As a result of the changes to the proposed transactions described above, the Rulings Requested and Given in the Ruling Letter are revised as follows:
• 1) Parts (b) and (c) of Ruling E are deleted and replaced by:

  c) C Co, Newlossco2 and Newlossco3 described in Paragraph 33;

• 2) Part 3 of Ruling E is deleted;
• 3) Part 7 of Ruling E is deleted and replaced by:
  7. the provisions of subsection 87(2.1) will apply to the amalgamations referred to in (a) and (c) above to deem
  • (i) Newsubco A to be the same corporation as, and a continuation of, each of Newlossco1 and A Co,
  • (ii) Newsubco C to be the same corporation as, and a continuation of each of Newlossco2, Newlossco3 and C Co,

  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 will be available to be utilized by Newsubco A and the non-capital losses of Newlossco2 and Newlossco3 will be available to be utilized by Newsubco C;

• 4) Part 9 of Ruling E is deleted and replaced by:

  9. the provisions of paragraph 87(2)(a) will apply to the amalgamations referred to in (a) and (c) above to deem each of Newsubco A and Newsubco C 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

• 5) Part 2 of Ruling J is deleted and replaced by:

  2. sale by Parentco of the Newlossco2 Note A to C Co described in Paragraph 29;

• 6) Part 2 of Ruling K is deleted and replaced by:

  2. C Co's ACB in respect of Newlossco2 Note A will include the amount of any capital loss that would otherwise have been realized by Parentco on the sale of the Newlossco2 Note A to C Co;

• 7) Parts 2 and 3 of Ruling L are deleted and replaced by:

  3. settlement of the Newlossco2 Note A and the Newlossco3 Note A on the amalgamation of Newlossco2, Newlossco3 and C Co described in Paragraph 33;

Notwithstanding the changes to the proposed transactions set out above, we confirm that the rulings given in the Ruling Letter, as herein amended, will continue to be binding on the CRA, subject to the conditions, limitations and qualifications set out in the Ruling Letter provided that the proposed transactions are completed before XXXXXXXXXX.

Yours truly,

for Director

Reorganizations and Resources Division

Income Tax Rulings Directorate

Policy and Planning Branch