2007 Ruling 2006-0218911R3 - 132.2 reorganization with an internal butterfly

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: 1. Whether the transfer of all the assets of a second tier trust to an income trust using section 132.2 is problematic; 2. Whether having a corporation borrow funds and availing itself of the exception under 212(1)(b)(vii) where the funds are subsequently lent to an internal partnership is problematic; 3. Whether transforming a general partnership into a limited partnership results in the creation of a new partnership after October 2006.

Position: No on all counts.

Reasons: 1. The issuance of units of the second-tier trust to the unitholders of the income trust as a return of capital makes it a mutual fund trust and the other requirements for the application of section 132.2 are met; 2. In this case, subparagraph 212(1)(b)(vii) would apply because the borrower is a corporation; 3. In this case, subject to provincial partnership law, the amendments of the terms of the general partnership to make it a limited partnership do not result in the termination of the partnership.

XXXXXXXXXX 							2006-021891

XXXXXXXXXX , 2007

Dear XXXXXXXXXX ,

Re: XXXXXXXXXX (tax account number XXXXXXXXXX , XXXXXXXXXX TSO, XXXXXXXXXX Taxation Centre)

We are writing in response to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayer. We also acknowledge receipt of your emails as well as our telephone conversations. The documents submitted with your request are only part of this document to the extent described herein.

To the best of your knowledge and that of the above-referenced taxpayer, none of the issues involved in this ruling is:

(a) in an earlier return of the above-referenced taxpayer or a related person;

(b) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the above-referenced taxpayer or a related person;

(c) under objection by the above-referenced taxpayer or a related person;

(d) before the courts; or

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

The above-referenced taxpayer has confirmed that the proposed transactions described herein will not affect its ability to pay any of its outstanding tax liabilities.

All statutory references herein are to provisions or parts of the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.), c. 1, as amended to the date hereof (the "Act") and all references to monetary amounts are in Canadian dollars.

DEFINITIONS

In this letter, the following terms have the meanings specified:

"Administration Agreement" means the amended and restated administration agreement entered into by Opco, the Fund, the Trust and LP1 and dated XXXXXXXXXX;

"agreed amount" in respect of an asset means the amount that the transferor and the transferee of the asset agree upon in their election under subsection 85(1) or 97(2), as the case may be, in respect of that asset;

"Amalco" means the corporation resulting from the amalgamation of Opco #3 and MFC;

"arm's length" has the meaning assigned by section 251;

"Asset Transfer Time" in respect of Transfer #1 and Transfer #2 means the time at which Transfer #1 and Transfer #2 will respectively occur (which, for greater certainty, will be the "transfer time" referred to in the definition of "qualifying exchange" in subsection 132.2(2));

"Canadian partnership" has the meaning assigned by subsection 102(1);

"capital property" has the meaning assigned by section 54;

"Class A Share" means a Class A preferred share of MFC and, following the amalgamation of Opco #3 and MFC, a Class A preferred share of Amalco. The Class A Shares will, subject to the First Act:

(a) be non-voting;

(b) entitle the holder thereof to receive dividends to the exclusion of holders of Common Shares or Class B Shares if, as and when declared by the board of directors of MFC or Amalco;

(c) be redeemable for the Redemption Amount at the option of the issuing corporation without notice to the holders thereof;

(d) be redeemable for the Redemption Amount at the option of the holder upon not less than XXXXXXXXXX business days prior written notice to MFC or Amalco; and

(e) on the liquidation, dissolution or winding-up of MFC or Amalco, entitle the holder to receive the Redemption Amount before any amount will be paid or any assets of the issuing corporation will be distributed to the holders of Common Shares, or of any other shares ranking junior to the Class A Shares. The Class A Shares and the Class B Shares will rank equally with one another;

"Class B Shares" means the Class B preferred shares of MFC and, following the amalgamation of Opco #3 and MFC, the Class B preferred shares of Amalco. The Class B Shares will, subject to the First Act:

(a) be non-voting;

(b) entitle the holder thereof to receive dividends to the exclusion of holders of Common Shares or Class A Shares if, as and when declared by the board of directors of MFC or Amalco;

(c) be redeemable for the Redemption Amount at the option of MFC or Amalco without notice to the holders thereof;

(d) be redeemable for the aggregate Redemption Amount at the option of the holder upon not less than XXXXXXXXXX business days prior written notice to MFC or Amalco; and

(e) on the liquidation, dissolution or winding-up of MFC or Amalco, entitle the holder to receive the aggregate Redemption Amount before any amount will be paid or any assets of MFC or Amalco will be distributed to the holders of Common Shares, or any other shares ranking junior to the Class B Shares. The Class A Shares and the Class B Shares will rank equally with one another;

"Common Shares" means the common shares of MFC and, following the amalgamation of Opco #3 and MFC, the common shares of Amalco. The Common Shares will, subject to the First Act:

(a) entitle the holder thereof to one vote in respect of each Common Share on all matters to be voted on at all meetings of shareholders;

(b) entitle the holder thereof to receive dividends to the exclusion of holders of Class A Shares or Class B Shares if, as and when declared by the board of directors of MFC or Amalco; and

(c) on the liquidation, dissolution or winding-up of MFC or Amalco, subject to the rights of the holders of any other class of shares of MFC or Amalco entitled to receive assets of the issuing corporation upon such a distribution in priority to or rateably with the holders of the Common Shares, entitle the holder to share rateably in any remaining assets of the issuing corporation;

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

"CRA" means the Canada Revenue Agency;

"cumulative eligible capital" has the meaning assigned by subsection 248(1);

"Debentures" means convertible debentures issued by the Fund, which are listed and posted for trading on the Exchange under the symbol XXXXXXXXXX;

"depreciable property" has the meaning assigned by subsection 248(1);

"designated beneficiary" has the meaning assigned by section 210;

"eligible capital property" has the meaning assigned by subsection 248(1);

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

"Exchange" means the XXXXXXXXXX Stock Exchange;

"Finco" means a corporation incorporated under the First Act by Opco;

"First Act" means the Business Corporations Act (XXXXXXXXXX);

"foreign affiliate" has the meaning assigned by subsection 95(1);

"Fund" means XXXXXXXXXX, a trust formed under the laws of the Province of XXXXXXXXXX pursuant to a declaration of trust dated XXXXXXXXXX. The principal office of the Fund is located at XXXXXXXXXX;

"Fund Notes" means the unsecured, subordinated and interest-bearing notes issued by Opco to the Fund and having a principal of approximately $XXXXXXXXXX;

"Fund Special Unit" means a unit representing a beneficial interest in the Fund that is non-voting, redeemable by the Fund and retractable by the holder for $XXXXXXXXXX;

"GP Ltd." means XXXXXXXXXX;

"GP #1" means a corporation incorporated under the First Act;

"LP1" means XXXXXXXXXX , a partnership formed under the laws of XXXXXXXXXX;

"LP2" means XXXXXXXXXX, a partnership created on XXXXXXXXXX. Opco was the initial general partner of LP2 and held a XXXXXXXXXX% interest in LP2 and an individual held the remaining XXXXXXXXXX% interest in LP2 as initial limited partner. On XXXXXXXXXX, Opco transferred its XXXXXXXXXX% interest in LP2 to Subco #4 and the latter started acting as general partner as of that date. On XXXXXXXXXX, Subco #6, transferred all its assets and business operations to LP2 in exchange for limited partnership units of LP2 and the assumption by LP2 of certain indebtedness of Subco #6. Subco #6 was amalgamated with Subco #3 to form Subco #3A;

"MFC" means a corporation incorporated under the First Act;

"New Loans" means a loan of approximately $XXXXXXXXXX entered into by Subco #1 on XXXXXXXXXX and an additional loan of $XXXXXXXXXX that Subco #1 entered into on XXXXXXXXXX. Subco #1 applied a portion of the proceeds of the New Loans against the Subco #1 Bank Debt. It is the intention of the parties to the New Loans that the New Loans will meet the requirements of the subparagraph 212(1)(b)(vii) exception to the obligation to pay tax under subsection 212(1);

"New Preferred Shares" means a class of preferred shares of Opco issuable in three series referred to as New Preferred Shares Series 1, New Preferred Shares Series 2 and New Preferred Shares Series 3, as the case may be. The New Preferred Shares will:

(a) be non-voting;

(b) be redeemable by the corporation and retractable by the holder for the Redemption Amount;

(c) entitle the holder to receive a non-cumulative dividend of XXXXXXXXXX % of the Redemption Amount per annum, preferential to dividends on the common shares and any other class of preferred shares of Opco but pari passu with each other series of New Preferred shares; and

(d) on the liquidation, dissolution or winding-up of Opco, entitle the holder to receive the Redemption Amount before any amount will be paid or any assets of Opco will be distributed to the holders of common shares or any of the other classes of preferred shares of the corporation but ranking equally with the New Preferred Shares Series 1, New Preferred Shares Series 2 and New Preferred Shares Series 3;

"Opco" means XXXXXXXXXX. Opco's tax account number is XXXXXXXXXX;

"Opco Debt" means the amount of approximately $XXXXXXXXXX owing by Opco to Subco #1. The genesis of that debt can be summarized as follows: (i) in XXXXXXXXXX, Operating Partnership borrowed $XXXXXXXXXX and lent it to XXXXXXXXXX; (ii) XXXXXXXXXX acquired all the issued and outstanding shares of XXXXXXXXXX from an unrelated third party; (iii) XXXXXXXXXX amalgamated on XXXXXXXXXX to form New XXXXXXXXXX; (iv) New XXXXXXXXXX contributed its assets to Operating Partnership for a partnership interest; (v) Subco #1 issued $XXXXXXXXXX in notes to US residents. The intention of the parties was to have that indebtedness qualify for the exception in subparagraph 212(1)(b)(vii); (vi) Subco #1 lent $XXXXXXXXXX to New XXXXXXXXXX out of the proceeds of that note issuance; (vii) New XXXXXXXXXX repaid the $XXXXXXXXXX owed to Operating Partnership; (viii) Operating Partnership repaid its $XXXXXXXXXX loan; and (ix) New XXXXXXXXXX and XXXXXXXXXX. were amalgamated on XXXXXXXXXX to form Opco;

"Opco #3" means a taxable Canadian corporation incorporated by the Fund as described in Paragraph 31;

"Opco #3 Preferred Shares" means preferred shares of Opco #3. The Opco #3 Preferred Shares will:

(a) be non-voting;

(b) be redeemable by the corporation and retractable by the holder for the Redemption Amount;

(c) entitle the holder to receive a non-cumulative dividend of XXXXXXXXXX% per annum on the Redemption Amount, such dividend to be preferential to dividends on the common shares and any other class of preferred shares of Opco #3; and

(d) on the liquidation, dissolution or winding-up of the issuing corporation, entitle the holder to receive the Redemption Amount before any amount will be paid or any assets of Opco #3 will be distributed to the holders of common shares or any other classes of preferred shares of Opco #3;

"Operating Partnership" means XXXXXXXXXX, a general partnership formed under the Second Act;

"Operating Partnership Bank Debt" means the amount of approximately $XXXXXXXXXX that Operating Partnership (Operating Partnership LP) owes under the operating credit line that Subco #1 and Operating Partnership (Operating Partnership LP) have with a syndicate of Canadian chartered banks;

"Operating Partnership Business Assets" means XXXXXXXXXX;

"Operating Partnership LP" means Operating Partnership after its partnership agreement will be amended as indicated at Paragraphs 36 and 37;

"Operating Partnership LP Capital" means the capital contributed by the partners of Operating Partnership (Operating Partnership LP) to commence or further the carrying on of its business, plus any income less any losses computed as indicated under section 96, net of any previous distributions to its members;

"Operating Partnership LP Unit" means a unit representing a participating interest in Operating Partnership LP;

"Operating Partnership Third Party Debt" means the amount of approximately $XXXXXXXXXX of debt owing by Operating Partnership to third parties;

"Paid-up capital" has the meaning assigned by subsection 89(1);

"Paragraph" means a numbered paragraph of this letter;

"person" has the meaning assigned by subsection 248(1);

"Proposed Amendments" means Bill C-10, Income Tax Amendments Act, 2006;

"Proposed Transactions" means the transactions set forth in the Proposed Transactions section of this letter;

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

"Redemption Amount" means the aggregate value of the consideration paid to the issuer as consideration for the issuance of the shares in respect of which this definition is applicable (net of debts assumed by the issuer on that transfer) plus any declared but unpaid dividend on those shares. The Redemption Amount of shares in respect of which this definition is applicable (excluding Class A Shares and Class B Shares) may be increased or reduced by bona fide agreement between the corporation that redeems the shares, the holder of the shares and the CRA or by a court of competent jurisdiction, to reflect the fair market value of the consideration for which the shares were issued;

"Redemption Note" means a demand note without interest or fixed terms of repayment, having a principal amount and a fair market value equal to the Redemption Amount of the redeemed shares in respect of which the note is issued;

"Regulations" means the Income Tax Regulations;

"related person" has the meaning assigned by subsection 251(2);

"Second Act" means the Partnership Act (XXXXXXXXXX);

"Subco #1" means XXXXXXXXXX;

"Subco #1 Bank Debt" means the amount of less than $XXXXXXXXXX that Subco #1 owes under the operating credit line that Subco #1 and Operating Partnership have with a syndicate of Canadian chartered banks;

"Subco #1 Operating Assets" means the XXXXXXXXXX facilities directly owned by Subco #1;

"Subco #1 Third Party Debt" means the debt of approximately $XXXXXXXXXX owing by Subco #1 to arm's length persons;

"Subco #2" means XXXXXXXXXX;

"Subco #3" means XXXXXXXXXX, a corporation incorporated on XXXXXXXXXX under the First Act and wholly-owned by Subco #1;

"Subco #3A" means the corporation resulting from the amalgamation of Subco #3 and Subco #6 on XXXXXXXXXX. On the amalgamation, Subco #1 received all the issued and outstanding common shares of Subco #3A and other former shareholders of Subco #6 received preferred shares of Subco #3A, which were redeemed for cash on XXXXXXXXXX;

"Subco #4" means XXXXXXXXXX, a taxable Canadian corporation incorporated under the First Act;

"Subco #5" means XXXXXXXXXX, a corporation formed under the laws of XXXXXXXXXX that has business activities and resides in the United States and which is a wholly-owned subsidiary and a foreign affiliate of Subco #1;

"Subco #5 Debt" means a debt in the approximate amount of $XXXXXXXXXX owed by Subco #5 to Subco #1;

"Subco #6" means XXXXXXXXXX, a taxable Canadian corporation. Before XXXXXXXXXX, Subco #1 owned XXXXXXXXXX% of the issued and outstanding shares of Subco #6. Shareholders that were arm's length with Subco #1 owned the remaining XXXXXXXXXX% issued and outstanding shares. On XXXXXXXXXX, Subco #1 increased its shareholdings to XXXXXXXXXX% by acquiring additional interest in Subco #6 from XXXXXXXXXX for an amount of cash equal to their fair market value. Between XXXXXXXXXX and XXXXXXXXXX, Subco #1 transferred the shares of Subco #6 to Subco #3 (an election was filed under section 85 in respect of that transfer) and both companies were amalgamated to form Subco #3A;

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

"Temporary Borrowings" means the loan of an amount equal to the amount of the Opco Debt that will be made to the Fund as described in Paragraph 35;

"Transfer #1" means the transfer by the Trust of all its assets (including the Class B shares of Amalco but excluding $XXXXXXXXXX of cash) to the Fund, as described in Paragraph 54;

"Transfer #2" means the transfer by Amalco of all its assets to the Fund (except an amount of cash to cover any liabilities), as described in Paragraph 58;

"Trust" means XXXXXXXXXX, a trust formed under the laws of the Province of XXXXXXXXXX pursuant to a declaration of trust dated XXXXXXXXXX, as amended, supplemented or restated from time to time. The Trust's tax account number is XXXXXXXXXX;

"Trust Debt" means the total of all amounts owing by the Trust to the Fund, which is equal to $XXXXXXXXXX;

"Trust Ordinary Unit" means an ordinary unit representing a beneficial interest in the Trust;

"Trust Special Unit" means a special unit representing a beneficial interest in the Trust, which will be non-voting, redeemable by the Trust and retractable by the holder for $XXXXXXXXXX;

"Trust Unitholder" means a holder of a Trust Ordinary Unit or a Trust Special Unit;

"Trustee" means XXXXXXXXXX;

"undepreciated capital cost" has the meaning assigned by subsection 248(1);

"Unit" means a unit representing a beneficial interest in the Fund, other than a Fund Special Unit. The Units are listed and posted for trading on the Exchange under the symbol XXXXXXXXXX; and

"Unitholder" means a holder of a Unit.

FACTS

1. The Fund qualifies as a "unit trust" pursuant to paragraph 108(2)(a) and a "mutual fund trust" within the meaning of subsection 132(6).

2. The Fund declaration of trust provides for the issuance of Units, of Debentures and of special voting units. No special voting units are issued and outstanding.

3. In XXXXXXXXXX, the Unitholders approved amendments to the Fund declaration of trust. Those changes included replacing the requirement that there be a minimum of XXXXXXXXXX and a maximum of XXXXXXXXXX trustees who are individuals by the requirement that there be one trustee which is a licensed trust company. The changes also replaced the provision allowing Unitholders to elect trustees with a provision allowing Unitholders to elect the members of the board of directors.

4. Pursuant to the Fund declaration of trust, the trustee of the Fund is XXXXXXXXXX. Pursuant to the Fund declaration of trust and the Administration Agreement, Opco has been appointed as administrator of the Fund.

5. The material assets of the Fund are held as capital property and consist of:

(a) all of the issued and outstanding common shares of Opco, the Trustee and GP Ltd.;

(b) the Fund Notes;

(c) the Trust Debt; and

(d) all of the issued and outstanding Trust Ordinary Units.

6. The Trust qualifies as a "unit trust" pursuant to paragraph 108(2)(a).

7. The Trustee acts as trustee and Opco acts as administrator of the Trust.

8. The material assets of the Trust are held as capital property and consist of:

(a) all of the issued and outstanding preferred shares of Opco (the fair market value of those shares exceeds their paid-up capital); and

(b) XXXXXXXXXX% of the issued and outstanding units of LP1.

9. Opco is a taxable Canadian corporation incorporated under the First Act.

10. Opco liabilities include the Fund Notes and the Opco Debt.

11. The material assets of Opco are held as capital property and consist of:

(a) XXXXXXXXXX% of the issued and outstanding units of Operating Partnership; and

(b) all the issued and outstanding shares of Subco #4.

12. The Trustee is a taxable Canadian corporation incorporated under the First Act. It has no material assets and its only function is to act as trustee of the Trust.

13. GP Ltd. is a taxable Canadian corporation incorporated under the First Act. Its only asset is XXXXXXXXXX% of the issued and outstanding units of LP1.

14. LP1's only asset is XXXXXXXXXX% of the issued and outstanding units of Operating Partnership. LP1 holds those units on account of capital.

15. Opco manages Operating Partnership.

16. Operating Partnership uses the Operating Partnership LP Capital to earn income from a business or property. The material assets of Operating Partnership are held on account of capital and consist of:

(a) the Operating Partnership Business Assets;

(b) all of the issued and outstanding shares of Subco #1; and

(c) all of the issued and outstanding shares of Subco #2.

17. Subco #1 is a taxable Canadian corporation incorporated under the First Act.

18. The material assets of Subco #1 are held as capital property and consist of:

(a) the Subco #1 Operating Assets;

(b) the Opco Debt;

(c) all the issued and outstanding shares of Subco #3A;

(d) all the issued and outstanding shares of Subco #5 ; and

(e) the Subco #5 Debt.

19. Subco #1 liabilities include the Subco #1 Third Party Debt and the Subco #1 Bank Debt.

20. The liabilities of Operating Partnership include the Operating Partnership Third Party Debt and the Operating Partnership Bank Debt.

21. Subco #2 is a taxable Canadian corporation incorporated under the First Act, which holds title to various assets as agent and bare trustee for other related entities.

22. Subco #3A owns XXXXXXXXXX% of the issued and outstanding units of LP2 and acts as its limited partner. Subco #4 owns XXXXXXXXXX% of the issued and outstanding units of LP2 and acts as its general partner.

23. On XXXXXXXXXX, LP2 acquired from Subco #6 all its assets under subsection 97(2).

24. Subject to deemed year ends which will occur as a result of amalgamations, the taxation year of each of the Fund, the Trust, Opco, Trustee, GP Ltd., LP1, Operating Partnership, Operating Partnership LP, Finco, Subco #1, Subco #2, Subco #3A, Subco #4, Subco #5, Opco #3 and LP2 ends on XXXXXXXXXX of each year.

25. The guarantees provided by the parties involved in this letter include:

(a) The guarantee provided by Operating Partnership in respect of the obligations of Subco #1 under the Subco #1 Bank Debt and the Subco #1 Third Party Debt;

(b) The guarantee provided by Subco #1 in respect of the Operating Partnership Bank Debt and on the Operating Partnership Third Party Debt;

(c) The guarantee provided by the Fund in respect of:

(i) the debts described in (a) above; and

(ii) the debts described in (b) above;

(d) Each of the Fund, the Trust, Opco, LP1 and Subco #2 has provided subordinations in respect of such credit facilities.

26. At a meeting that was held on XXXXXXXXXX, the Unitholders approved the Proposed Transactions as disclosed in a management information circular that was prepared in contemplation of that meeting. That management information circular was filed with the XXXXXXXXXX and the Exchange.

27. The Fund incorporated MFC and subscribed for XXXXXXXXXX Common Share for a cash payment of $XXXXXXXXXX. MFC is a taxable Canadian corporation. The issued and outstanding capital of MFC consists of three classes of shares: Common Shares, Class A Shares and Class B Shares. At all times following the issuance of the Class A Shares, the fair market value of the shares issued by MFC that are retractable will represent at least 95% of the fair market value of all of the issued shares of MFC.

28. The charter documents of MFC stated that its only undertaking will be the activities described in subparagraphs (i), (ii) and (iii) of paragraph 131(8)(b).

29. Opco incorporated GP #1 and Finco. Both GP#1 and Finco are taxable Canadian corporations.

30. The articles of Opco were amended to create the New Preferred Shares.

31. The Fund incorporated Opco #3 under the First Act and subscribed for 1 common share for a cash payment of $XXXXXXXXXX. Opco #3 is a taxable Canadian corporation. Opco #3 is authorized to issue an unlimited number of common shares and Opco #3 Preferred Shares.

OTHER INFORMATION

32. Neither the Fund nor any of its subsidiaries, directly or indirectly, are the subject of a solicitation offer and neither the Fund nor any of the entities in which it owns an interest are seeking to dispose of any of the assets in which they own an interest to any person other than a related person.

PROPOSED TRANSACTIONS

Following the receipt of required regulatory approvals, the following transactions will be undertaken. All steps will occur in sequence and in such manner that, once the first step is taken, all other steps must also be completed.

33. The Fund declaration of trust will be amended to authorize the Fund: (i) to issue Fund Special Units; and (ii) to satisfy in specie redemption rights by issuing notes of the Fund rather than securities of the Trust.

34. The Trust declaration of trust will be amended to (i) designate the units of the Trust as Trust Ordinary Units; (ii) authorize the issuance of Trust Special Units and (iii) state that the only undertaking of the Trust will be the activities described in subparagraphs 132(6)(b)(i), (ii) and (iii).

35. The Fund will borrow the Temporary Borrowings and will subscribe for New Preferred Shares Series 1 of Opco for an amount equal to the proceeds of the Temporary Borrowings. Opco will use the issuance proceeds of the New Preferred Shares Series 1 to repay to Subco #1 the Opco Debt.

36. In their capacity as partners of Operating Partnership, LP1 and Opco will amend the partnership agreement of Operating Partnership such that it will become a limited partnership under the Second Act. A Certificate of Limited Partnership will be filed under the Second Act. GP #1 will subscribe for a XXXXXXXXXX% interest in Operating Partnership LP. GP #1 will be the general partner of Operating Partnership LP and LP1 and Opco will be limited partners. Operating Partnership will not be dissolved under the Second Act or any other relevant legislation as a consequence of becoming a limited partnership. There will be no significant change in the rights and obligations of the partners other than the change to limited liability status. Specifically there will be no change to contributed capital accounts of any partners. The business of the Operating Partnership will not change as a consequence of becoming a limited partnership. Furthermore the percentage interest of each partner in the profits will not change and the percentage liability for losses of each partner will not change as a consequence of becoming a limited partnership, save for the potential limit on liability of the limited partners.

37. The limited partnership agreement of Operating Partnership LP will indicate that no limited partner:

(a) has or can have a liability in respect of the debts, liabilities and obligations of Operating Partnership LP which is greater than the amount that such limited partner contributed to Operating Partnership LP plus any undistributed income. Should the limited partner's liability not be limited for any reason, the general partner will be required to indemnify the limited partner for such liability unless such liability arises out of any act or omission of the limited partner;

(b) can control or manage the business of Operating Partnership LP;

(c) can execute any document binding Operating Partnership LP or the general partner;

(d) can undertake any obligation or responsibility on behalf of Operating Partnership LP;

(e) can bring any action for partition or sale of property of Operating Partnership LP; or

(f) can take any action which jeopardizes the status of Operating Partnership LP as a limited partnership.

38. LP1 will be wound up and will transfer undivided interests in all of its property (namely, its interests in Operating LP) to GP Ltd. and the Trust so that immediately after such transfer, each of GP Ltd. and the Trust will have an undivided interest in each transferred property expressed as a percentage of all undivided interests in the property that is equal to its undivided interest in each other transferred property. GP Ltd. will jointly elect with the Trust pursuant to subsection 98(3) in the manner contemplated by that provision and within the time contemplated by subsection 96(4).

39. GP Ltd. and the Trust will transfer their undivided interests in Operating LP described in Paragraph 38 to Opco in consideration for New Preferred Shares Series 2 of Opco.

40. GP Ltd. and the Trust will jointly elect with Opco pursuant to subsection 85(2) in the manner and within the time contemplated by subsection 85(6) or 85(7). The agreed amount will be within the limits prescribed by paragraphs 85(1)(b) and (c) and will be equal to the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii).

41. The New Preferred Shares Series 2 of Opco held by GP Ltd. will be redeemed for an amount of cash equal to their Redemption Amount.

42. The Fund will exchange its common shares and its New Preferred Shares Series 1 of Opco for Preferred Shares Series 3 of Opco. The Fund will subscribe for XXXXXXXXXX common shares of Opco for a nominal amount. The Trust will exchange its preferred shares and its New Preferred Shares Series 2 of Opco for New Preferred Shares Series 3 of Opco. The amount allocated to the stated capital of the New Preferred Shares Series 3 of Opco will be $XXXXXXXXXX.

43. The Fund will convey its New Preferred Shares Series 3 of Opco to Opco #3 in exchange for additional common shares of Opco #3. The addition to the stated capital under the First Act of the common shares of Opco #3 issued by Opco #3 to the Fund as consideration for the New Preferred Shares Series 3 of Opco will not exceed the aggregate paid-up capital of the New Preferred Shares Series 3 transferred by the Fund. The Fund and Opco #3 will elect pursuant to the provisions of subsection 85(1) in the manner and within the time contemplated by subsection 85(6) or 85(7). The agreed amount will be within the limits prescribed by paragraphs 85(1)(b) and (c) and will be equal to the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii).

44. The Trust will convey its New Preferred Shares Series 3 of Opco to Opco #3 in consideration for common shares of Opco #3. The addition to the stated capital under the First Act of the common shares of Opco #3 issued by Opco #3 to the Trust as consideration for the New Preferred Shares Series 3 of Opco will not exceed the aggregate paid-up capital of the New Preferred Shares Series 3 transferred by the Trust. The Trust and Opco #3 will elect pursuant to the provisions of subsection 85(1) in the manner and within the time contemplated by subsection 85(6) or 85(7). The agreed amount for each property transferred will be equal to the adjusted cost base of the New Preferred Shares Series 3 of Opco conveyed and will be equal to the lesser of the amounts specified in paragraphs 85(1)(b), (c) and (c.1).

45. Opco will sell all of its assets (other than the cash described below) to Opco #3. In consideration, Opco #3 will assume the Fund Notes and will issue Opco #3 Preferred Shares. Opco will retain cash equal to the liabilities which are not assumed by Opco #3. Opco and Opco #3 will jointly elect pursuant to the provisions of subsection 85(1) with respect to such transfer within the time and in the manner contemplated by subsection 85(6) or 85(7). The agreed amount for each property transferred will be equal to the cost amount of all eligible properties subject to the transfer and will be within the limits prescribed by paragraphs 85(1)(b), (c) and (c.1). The amount allocated to the stated capital of the Opco #3 Preferred Shares will be $XXXXXXXXXX.

46. Opco #3 will redeem its Opco #3 Preferred Shares and will deliver a promissory note to Opco as payment of the Redemption Amount. Opco will redeem the New Preferred Shares Series 3 held by Opco #3 and will deliver a promissory note to Opco #3 as payment of the Redemption Amount. The fair market value of the Opco #3 Preferred Shares and of the New Preferred Shares Series 3 will exceed their respective paid-up capital. The promissory notes will have an equal fair market value and will be cancelled by set-off.

47. The Fund will subscribe for a number of Class A Shares of MFC equal to the number of issued and outstanding Units plus the number of Units held by designated beneficiaries in consideration for a cash payment of $XXXXXXXXXX per Class A Share.

48. The Fund will distribute to each Unitholder one Class A Share for each Unit held by that Unitholder plus, where the Unitholder is a designated beneficiary, an additional Class A Share for each Unit held by that Unitholder. That distribution will be made as a return of capital. As a result of that distribution and by virtue of the provisions of Regulations 4803(3) and (4), MFC will have at least XXXXXXXXXX shareholders holding Class A Shares with a fair market value of at least $XXXXXXXXXX and insiders of the corporation will not hold more than 80% of the Class A shares as required by Regulation 4800(1)(i). The distribution of the Class A Shares to the Unitholders will comply with provincial securities legislation and regulations. MFC will elect to be a public corporation as contemplated by subsection 89(1) in the manner specified in Regulation 4800(4). The Fund will remit to the Receiver General, on behalf of each Unitholder that is a non-resident, an amount per Unit equal to the amount required by the Act to be withheld on behalf of the Unitholder in respect of the distribution of XXXXXXXXXX Class A Shares for every Unit. The Fund will distribute to each Unitholder that is not a non-resident a cash amount per Unit equal to the amount per Unit remitted to the Receiver General on behalf of each Unitholder that is a non-resident.

49. The Fund will transfer to MFC its Opco #3 common shares and its Fund Notes and MFC will issue Class B Shares having a fair market value equal to the fair market value of the transferred property. The Fund and MFC will jointly elect under subsection 85(1), in prescribed form and within the time determined under subsection 85(6) or 85(7) with respect to such transfer. The agreed amount for each eligible property transferred will be equal to the cost amount of the eligible property and will be within the limits prescribed by paragraphs 85(1)(b), (c) and (c.1).

50. The Trust and MFC will enter into an agreement of purchase and sale under which the Trust will transfer the Opco #3 common shares held by the Trust to MFC for an aggregate purchase price equal to the fair market value of such property so transferred. MFC will satisfy the purchase price by issuing Class B Shares to the Trust. The Trust and MFC will jointly elect under subsection 85(1), in prescribed form and within the time determined under subsection 85(6) or 85(7), with respect to such transfer. The agreed amount for each eligible property transferred will be equal to the cost amount of the eligible property and will be within the limits prescribed by paragraphs 85(1)(b), (c) and (c.1).

51. Opco #3 and MFC will amalgamate to form Amalco such that:

(a) all of the property of each predecessor corporation immediately before the amalgamation (except amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) will become property of Amalco by virtue of the amalgamation;

(b) all of the liabilities of each predecessor corporation immediately before the amalgamation (except amounts payable to any predecessor corporation) will become liabilities of Amalco by virtue of the amalgamation;

(c) the authorized capital of Amalco will be the same as the authorized capital of MFC;

(d) the shares of Opco #3 held by MFC will be cancelled without payment;

(e) the holders of the common shares of MFC will receive one common share of Amalco for each common share of MFC held;

(f) the holders of the Class A Shares of MFC will receive one Class A share of Amalco for each Class A share of MFC held;

(g) the holders of the Class B Shares of MFC will receive one Class B share of Amalco for each Class B share of MFC held;

(h) the articles of Amalco will state that its only undertaking will be the activities described in subparagraphs (i), (ii) and (iii) of paragraph 131(8)(b); and

(i) as a result of the amalgamation, the Fund Notes will be extinguished.

52. At all times following the issuance of the Class A Shares of Amalco, the fair market value of the issued shares of Amalco that are retractable will be at least 95% of the fair market value of all of the issued shares of the Amalco.

53. The Fund will subscribe for a number of Trust Special Units equal to the number of issued and outstanding Units held by Unitholders who are not designated beneficiaries in consideration for a cash payment of $XXXXXXXXXX per Trust Special Unit. The Fund will distribute the Trust Special Units to its Unitholders who are not designated beneficiaries as a return of capital. By virtue of the provisions of Regulations 4803(3) and (4), the Trust will have at least 150 unitholders holding Trust Special Units with a fair market value of at least $500. The distribution of the Trust Special Units will comply with provincial securities legislation and regulations.

54. The Trust will complete Transfer #1 as consideration for: (i) the settlement of the Trust Debt; (ii) the issuance of a number of Fund Special Units equal to the number of issued and outstanding Trust Special Units and having an aggregate fair market value equal to aggregate fair market value of the issued and outstanding Trust Special Units; (iii) the issuance of a number of Units having an aggregate fair market value equal to the aggregate fair market value of the assets transferred by the Trust on Transfer #1 less the aggregate of the amount of the Trust Debt settled as described in (i) and the fair market value of the Fund Special Units described in (ii). Within 6 months of Transfer #1, the Trust and the Fund will jointly file an election in prescribed form in respect of the transfer pursuant to paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2).

55. Within 60 days after Transfer #1, the Trust will redeem all of the outstanding Trust Special Units in exchange for Fund Special Units.

56. Within 60 days after Transfer #1, the Trust will redeem all of the outstanding Trust Ordinary Units (save for one Trust Ordinary Unit held by the Fund) in exchange for Units.

57. The Units transferred on the redemption of the Trust Ordinary Units held by the Fund will be automatically cancelled.

58. Amalco will complete Transfer #2 as consideration for: (i) the assumption by the Fund of any liabilities of Amalco, except tax liabilities; (ii) a number of Fund Special Units equal to the number of issued and outstanding Class A shares; and (iii) a number of Units having a fair market value equal to the aggregate Redemption Amount of the issued and outstanding Class B shares of Amalco less the aggregate of the amount of the debt assumed in (i) and the fair market value of the Fund Special Units described in (ii).

The Fund and Amalco will jointly file an election in prescribed form and within the prescribed time in respect of the transfer pursuant to paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2).

59. Amalco will redeem each outstanding Class A Share in exchange for a Fund Special Unit. The fair market value of each Class A Share will be equal to the fair market value of each Fund Special Unit. Amalco will redeem each outstanding Class B Share in exchange for Units having an equivalent fair market value.

60. Unitholders will receive no consideration other than Fund Special Units on the redemption of the Class A Shares and the Fund will receive no consideration other than Units on the redemption of the Class B Shares.

61. The Units transferred on the redemption of the Class B Shares will be automatically cancelled.

62. Amalco and the Trust will not be dissolved but will continue to exist until the last day on which the elections contemplated by the Proposed Transactions can be filed.

63. Each Fund Special Unit will be converted into a fraction of a Unit the numerator of which is XXXXXXXXXX and the denominator of which is the fair market value of a Unit. The number of outstanding Units will be consolidated on a basis such that the number of Units outstanding immediately after such consolidation will be equal to the number of Units that were outstanding immediately before the Proposed Transactions were undertaken.

64. Opco will continue to act as administrator of the Fund and provide administrative and management services to various entities in which the Fund holds an interest subsequent to the Proposed Transactions.

65. Subco #1 will lend to Finco the proceeds from the repayment of the Opco Debt (Paragraph 35). Finco will lend the borrowed money to Operating Partnership LP. The amount of interest receivable by Subco #1 on its loan to Finco will be equal to or greater than the amount of interest payable by Subco #1 on its obligations to third party lenders. The amount of interest receivable by Finco on its loan to Operating Partnership LP will exceed the amount of interest payable by Finco to Subco #1.

66. Operating Partnership LP will distribute to the Fund an amount equal to the Temporary Borrowings and the Fund will repay the Temporary Borrowings. The Operating Partnership LP Capital immediately before that return of capital will be equal to or greater than the amount of the Temporary Borrowings and it will be reduced by the amount of the Temporary Borrowings.

67. Subco #1 will lend the portion of the New Loans that was not applied against the Subco #1 Bank Dept to Finco, which will lend the loan proceeds to Operating Partnership LP which will use the loan proceeds to repay the Operating Partnership Bank Debt. Operating Partnership LP and the Fund will guarantee the New Loans. GP Ltd. and Trustee Ltd. will be wound-up.

ADDITIONAL INFORMATION

68. During the period over which the Proposed Transactions will be implemented, neither Opco nor Opco #3 will be at any time a specified financial institution or a restricted financial institution.

69. During the period over which the Proposed Transactions will be implemented, none of the shares of Opco or Opco #3 described herein will be, at any time:

(a) the subject of any undertaking or agreement that is referred to in subsection 112(2.2) as 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);

(c) the subject of a dividend rental arrangement referred to in subsection 112(2.3) as that term is defined in subsection 248(1);

(d) the subject of any secured undertaking of the type described in paragraph 112(2.4)(a); or

(e) issued for consideration that is or includes:

i) an obligation of the type described in subparagraph 112(2.4)(b)(i); or

ii) any right of the type described in subparagraph 112(2.4)(b)(ii).

PURPOSE OF THE PROPOSED TRANSACTIONS

The objectives of the Proposed Transactions are:

(a) to simplify the organizational structure of the Fund and of the entities in which it holds substantial interests;

(b) to reduce complexity and burden of accounting, legal, reporting and income tax compliance required by the existing structure;

(c) to have an organizational structure which will be substantially similar to many other business trusts and therefore more acceptable to a wider public;

(d) to have an organizational structure which is familiar to the Unitholders and analysts who follow the trading of the Units;

(e) to have an organizational structure which will be of assistance in maintaining the Fund's public profile; and

(f) to preserve the $XXXXXXXXXX loan made to Subco #1 by non-residents as described in the definition of Opco Debt and the related receivable that Subco #1 has for an amount equivalent to the amount of the Opco Debt while transferring the obligation to repay the amount of the Opco Debt from Opco to Operating Partnership LP through Finco in order to avoid the application of subsection 15(2) by virtue of subsection 15(2.3).

RULINGS

Provided the above statements of facts, Proposed Transactions, purpose thereof and additional information are accurate and constitute complete disclosure of all relevant facts and proposed transactions, our rulings are as follows:

A. As a result of the redemption by Opco of the Opco New Preferred Shares Series 3 and of the redemption by Opco #3 of the Opco #3 Preferred Shares described in Paragraph 46, by virtue of subsection 84(3);

(a) Opco will be deemed to have paid and Opco #3 will be deemed to have received a taxable dividend equal to the amount by which the amount paid by Opco in respect of its redemption of the Opco New Preferred Shares Series 3 owned by Opco #3 exceeds the paid-up capital attributable to such shares immediately before the redemption;

(b) Opco #3 will be deemed to have paid and Opco will be deemed to have received a taxable dividend equal to the amount by which the amount paid by Opco #3 in respect of the repurchase of the Opco #3 Preferred Shares owned by Opco exceeds the paid-up capital attributable to such shares immediately before the purchase for cancellation; and

(c) the taxable dividends described in described in (a) and (b) 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, such deduction will not be prohibited by subsections 112(2.1), (2.2), (2.3) or (2.4);

(iii) will be excluded in determining the proceeds of disposition 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 the 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.

B. By virtue of paragraph 55(3)(a), the provisions of subsection 55(2) will not apply to any of the taxable dividends referred to in Ruling A, provided that there is no disposition or increase in interest described in any of subparagraphs 55(3)(a)(i) to (v) as part of a series of transactions as part of which those dividends were deemed to have been paid and received. For greater certainty, the Proposed Transactions, in and by themselves, will not be considered to result in a disposition or increase in interest described in subparagraphs 55(3)(a)(i) to (v) with respect to the dividends deemed to be received by Opco or Opco #3, as described in Ruling A.

C. The Proposed Transactions will not, in and by themselves, adversely affect the qualification of MFC and Amalco as a "mutual fund corporation" within the meaning of subsection 131(8) or the qualification of the Trust and the Fund as a "mutual fund trust" within the meaning of subsection 132(6).

D. Provided that:

(a) each of the Trust and the Fund is a mutual fund trust within the meaning of subsection 132(6) at the Transfer Time;

(b) the property transferred by the Trust to the Fund has an aggregate fair market value equal to at least 90% of the fair market value of all property owned by the Trust at the Transfer Time; and

(c) the Trust and the Fund jointly elect, in prescribed form within the prescribed time in paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2),

Transfer #1 will constitute a "qualifying exchange" within the meaning of subsection 132.2(1), such that the rules in subsection 132.2(1) will apply to Transfer #1 and to the transactions described in Paragraphs 54 to 57. For greater certainty:

(d) in respect of each of the properties so disposed of, the Trust's proceeds of disposition of the particular property and the Fund's cost in respect of the property will be determined under paragraph 132.2(1)(c) to be the lesser of:

(i) the fair market value of the property; and

(ii) the greatest of:

(A) the cost amount to the Trust of the property;

(B) the amount the parties have agreed upon in respect of the property in their election in respect of the qualifying exchange; and

(C) the fair market value of the consideration received by the Trust (other than Fund Special Units and Units);

(e) except as provided in paragraph 132.2(1)(p), the Trust's aggregate cost of the Fund Special Units and Units received by it from the Fund as consideration for the disposition of the property so transferred to the Fund will be deemed to be nil, pursuant to subparagraph 132.2(1)(h)(i);

(f) the Trust's aggregate proceeds of disposition of the Fund Special Units and Units distributed to Unitholders and to the Fund pursuant to the redemptions described in Paragraphs 55 and 56 will be deemed to be nil, pursuant to paragraph 132.2(1)(i);

(g) the proceeds of disposition to a Unitholder of a Trust Special Unit redeemed by the Trust as described in Paragraphs 56 and 57, and the cost to the Unitholder of Fund Special Units received as consideration for the redemption, will be deemed, pursuant to paragraph 132.2(1)(j), to be equal to the cost amount to the Unitholder of the Trust Special Unit immediately before the Asset Transfer Time; and

(h) the proceeds of disposition to the Fund of the Trust Ordinary Units redeemed by the Trust as described in Paragraph 56, and the cost to the Fund of the Units received as consideration for the redemption, will be deemed, pursuant to paragraph 132.2(1)(j), to be equal to the cost amount to the Fund of the Trust Ordinary Units immediately before the Asset Transfer Time.

Any losses that may be incurred by a taxpayer as a result of the application of section 132.2, including losses that may result from the cost of a property that is set by that section, will be denied if the taxpayer is subject to the application of subparagraph 132.2(3)(g)(iv) as proposed to be amended by subsection 130(1) of the Proposed Amendments.

E. Provided that:

a) at the Asset Transfer Time, Amalco is a mutual fund corporation within the meaning of subsection 131(8) and the Fund is a mutual fund trust within the meaning of subsection 132(6);

b) the property transferred by Amalco to the Fund has an aggregate fair market value equal to at least 90% of the fair market value of all property owned by Amalco at the Transfer Time; and

c) Amalco and the Fund jointly elect, in prescribed form within the prescribed time in paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2),

Transfer #2 will constitute a "qualifying exchange" within the meaning of subsection 132.2(1), such that the rules in subsection 132.2(1) will apply to Transfer #2 and to the transactions described in Paragraphs 58 to 61. For greater certainty:

(a) in respect of each of the properties so disposed of, Amalco's proceeds of disposition of the particular property and the Fund's cost in respect of the property will be determined under paragraph 132.2(1)(c) to be the lesser of:

(i) the fair market value of the property; and

(ii) the greatest of:

(A) the cost amount to Amalco of the property;

(B) the amount the parties have agreed upon in respect of the property in their election in respect of the qualifying exchange; and

(C) the fair market value of the consideration received by Amalco (other than Fund Special Units and Units);

(b) except as provided in paragraph 132.2(1)(p), Amalco's aggregate cost of the Fund Special Units and Units received by it from the Fund as consideration for the disposition of the property so transferred to the Fund will be deemed to be nil, pursuant to subparagraph 132.2(1)(h)(i);

(c) Amalco's aggregate proceeds of disposition of the Fund Special Units and Units distributed to Unitholders and to the Fund pursuant to the redemptions described in Paragraph 59 will be deemed to be nil, pursuant to paragraph 132.2(1)(i);

(d) the proceeds of disposition to a Unitholder of a Class A Share redeemed by Amalco as described in Paragraph 59, and the cost to the Unitholder of Fund Special Units received as consideration for the redemption, will be deemed, pursuant to paragraph 132.2(1)(j), to be equal to the cost amount to the Unitholder of the Class A Share immediately before the Asset Transfer Time;

(e) the proceeds of disposition to the Fund of the Class B Shares redeemed by Amalco as described in Paragraph 59 will be deemed, pursuant to paragraph 132.2(1)(j), to be equal to the cost amount to the Fund of the Class B Shares immediately before the Asset Transfer Time; and

(f) pursuant to subsection 131(4) and subparagraph 132.2(1)(o)(i), section 84 will not apply to deem a dividend to be paid by Amalco nor to deem a dividend to be received by any shareholders of Amalco as a result of the redemptions described in Paragraph 59.

Any losses that may be incurred by a taxpayer as a result of the application of section 132.2, including losses that may result from the cost of a property that is set by that section, will be denied if the taxpayer is subject to the application of sub-paragraph 132.2(3)(g)(iv) as proposed to be amended by subsection 130(1) of the Proposed Amendments.

F. The consolidation of Units and fractions of Units described in Paragraph 63 will not result in a disposition by the Unitholders of the Units and fractions of Units so consolidated.

G. Subsection 245(2) will not be applied as a result of the Proposed Transactions, in and of themselves, to redetermine any of the tax consequences confirmed in the rulings granted herein.

H. The provisions of subsection 15(1), 56(2) and 246(1) will not be applied as a result of the transactions described in Paragraphs 43 to 46, in and by themselves.

I. Section 253.1 will apply to the ownership of Operating Partnership LP Units by the Fund such that the Fund will not be considered to carry on any business or other activity of Operating Partnership LP for the purposes of paragraph 132(6)(b), solely because of its acquisition and holding of the Operating Partnership LP Units.

J. The amendments to the trust indenture of the Fund described in Paragraph 33 and the amendments to the trust indenture of Trust described in Paragraph 34 will not result in a disposition of the assets of the Fund or Trust, nor in the creation of a new trust nor in a disposition of the Units or units of the Trust.

K. Provided there is no dissolution of Operating Partnership pursuant to the Second Act, the conversion of Operating Partnership from a general partnership to a limited partnership as described in Paragraph 36 will not result in a disposition of the assets of Operating Partnership and the members of Operating Partnership will not be deemed to have disposed of their partnership interests.

L. Subsection 15(2.3) will apply to the loan that Finco will make to Operating Partnership LP as described in Paragraph 65 and to the New Loans, such that subsection 15(2) will not apply to such loans.

M. Provided that Operating Partnership LP has a legal obligation to pay interest on the loan from Finco described in Paragraph 65, Operating Partnership LP will be entitled to deduct, in computing its income for a taxation year, the lesser of the interest paid or payable (depending on the method regularly followed by Operating Partnership LP in computing its income for purposes of the Act) in respect of that year on that loan, or a reasonable amount in respect thereof.

The above rulings are based on the Act in its present form and do not take into account any proposed amendments, subject to the caveat in the post amble of Rulings D and E above.

These rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R5 issued on May 17, 2002, and are binding on the Canada Revenue Agency provided that the Proposed Transactions are completed within six months of the date of this letter.

COMMENTS

Nothing in this letter should be construed as implying that the CRA has agreed to or reviewed:

(a) the determination of the fair market value of property, including the determination of the fair market value of the Units, the Class B Shares or the Redemption Amount;

(b) whether any adjustment to the Redemption Amount will be effective retroactively or the operation of a price adjustment clause, since its coming into effect will be due to circumstances that do not constitute proposed transactions that are seriously contemplated (the general position of the CRA with respect to price adjustment clauses is stated in Interpretation Bulletin IT-169);

(c) the effect of the replacement of the trustees of the Fund on the control of one of the entities in which the Fund owns an interest;

(d) the application of subparagraph 212(1)(b)(vii) to any of the debts described in this letter;

(e) the application of section 245 to loans made by Finco if the terms of the loans described in Ruling L are changed;

(f) whether Amalco qualifies as a mutual fund corporation within the meaning of subsection 131(8) and whether the Trust and the Fund qualify as mutual fund trusts within the meaning of subsection 132(6) at any particular time; and

(g) the existence or potential dissolution of any partnership or trust.

Nothing in this ruling should be construed as implying that the Canada Revenue Agency has agreed to or reviewed any tax consequences relating to the facts and Proposed Transactions described herein other than those described in the rulings given. In particular, we express no opinion in ruling C or the other rulings with respect to whether the Fund qualifies as a mutual fund trust within the meaning of subsection 132(6) or whether MFC or Amalco qualifies as a mutual fund corporation within the meaning of subsection 131(8).

Paragraph 107(1)(e) and subsection 107(1.2) as proposed by subsections 96(1) and 96(2) of the Proposed Amendments, if enacted, will apply to Unitholders who hold Fund Units on account of inventory.

On June 22, 2007, legislation pertaining to specified investment flow-through entities ("SIFTs") received Royal Assent. As you are aware the CRA is considering the issue of whether the subsidiary entities of, for example, an income trust, could be SIFTs, but has not yet reached a conclusion. Consequently, nothing in this ruling should be viewed as providing any assurance that LP is not currently a SIFT or will not become a SIFT by virtue of the proposed transactions;

Yours truly,

for the Director
Reorganizations & Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch