2007 Ruling 2007-0232261R3 - Post butterfly transaction

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 the proposed transactions will taint the butterfly rulings given in Ruling 2006-020398.

Position: No, based on the representation that the proposed transactions do not form part of the series of transactions or events that include the butterflies.

Reasons: Our rulings are based on the representations provided.

XXXXXXXXXX 									2007-023226

XXXXXXXXXX, 2007

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers. We acknowledge your various e-mails in respect of this ruling request.

You have advised that to the best of your knowledge and that of each of the taxpayers, none of the issues involved in this ruling request is:

1. in an earlier return of any of the taxpayers or a related person;

2. being considered by a tax services office or taxation centre in connection with a previously filed tax return of any of the taxpayers or a related person;

3. under objection by any of the taxpayers or a related person;

4. before the courts; or

5. the subject of a ruling previously issued by the Income Tax Rulings Directorate other than the advance income tax ruling issued on XXXXXXXXXX, 2006 (our reference 2006-020398).

DEFINITIONS

In this letter, all references to monetary amounts are in Canadian dollars and the following terms or expressions have the meaning specified:

• "A Co" means XXXXXXXXXX;
• "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 in the Act, and the Income Tax Regulations thereunder are referred to as the "Regulations";
• "adjusted cost base" ("ACB") has the meaning assigned by section 54;
• "agreed amount" means the amount agreed on in respect of a property in an election filed pursuant to subsection 85(1);
• "Amalco" means the corporation formed on the amalgamation of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco, as set out in Paragraph 26;
• "Amalco Class A Preference Shares" means the Class A Preference Shares of Amalco, as described in Paragraph 26(d);
• "Amalco Class B Preference Shares" means the Class B Preference Shares of Amalco, as described in Paragraph 26(e);
• "Amalco Common Shares" means the Common Shares of Amalco, as described in Paragraph 26(f);
• "B Co" means XXXXXXXXXX;
• "BCA" means the XXXXXXXXXX;
• "BN" means the tax identification number assigned by CRA to the particular entity;
• "Butterfly 1" means the distribution of all of the property of DC1 to A Co, B Co and C Co, which was undertaken pursuant to the transactions set out in paragraphs 80 to 90 of the Original Ruling, all of which have been completed, except for certain matters related to the dissolution of DC1 as set out in the proposed transaction described in paragraph 90 of the Original Ruling;
• "Butterfly 2" means the distribution of all of the property of DC2 to TC1-Sub, TC2-Sub, TC3-Sub, and TC4-Sub, which was undertaken pursuant to the transactions set out in paragraphs 93 to 109 of the Original Ruling, all of which have been completed, except for certain matters related to the dissolution of the Transferee2-Subs and DC1 as set out in the proposed transactions described in paragraphs 104, 107, 108 and 109 of the Original Ruling;
• "C Co" means XXXXXXXXXX;
• "Canadian-controlled private corporation" ("CCPC") has the meaning assigned by subsection 125(7);
• "XXXXXXXXXX Co" means XXXXXXXXXX;
• "capital property" has the meaning assigned by section 54;
• "XXXXXXXXXX Subco" means XXXXXXXXXX;
• "CRA" means the Canada Revenue Agency;
• "DC1" means XXXXXXXXXX;
• "DC2" means XXXXXXXXXX;
• "eligible property" has the meaning assigned by subsection 85(1.1);
• "fair market value" ("FMV") means the highest price available in an open and unrestricted market, between informed, prudent parties, acting at arm's length and with no compulsion to act, expressed in terms of cash;
• "Investco" means XXXXXXXXXX, which is a taxable Canadian corporation, whose issued and outstanding shares consist of approximately XXXXXXXXXX Shares which are listed on the XXXXXXXXXX Exchange;
• "Investco Shares" means the XXXXXXXXXX Shares of Investco;
• "Numberco" means XXXXXXXXXX, which is a taxable Canadian corporation and a CCPC;
• "Original Ruling" means advance tax ruling 2006-020398, which was issued to DC1 and DC2 on XXXXXXXXXX, 2006;
• "paid-up capital" ("PUC") has the meaning assigned by subsection 89(1);
• "Paragraph" refers to a numbered paragraph in this advance income tax ruling;
• "proceeds of disposition" has the meaning assigned by section 54;
• "Proposed Transactions" means the transactions described in Paragraphs 21 to 27;
• "Real Co" means XXXXXXXXXX;
• "related person" has the meaning assigned by section 251;
• "series of transactions or events" includes the transactions or events referred to in subsection 248(10);
• "stated capital" has the meaning assigned by the BCA;
• "taxable Canadian corporation" has the meaning assigned by subsection 89(1);
• "TC1" means XXXXXXXXXX ., which is a taxable Canadian corporation and a CCPC;
• "TC1-Sub" means XXXXXXXXXX ., which is a taxable Canadian corporation and a CCPC;
• "TC2" means XXXXXXXXXX ., which is a taxable Canadian corporation and a CCPC;
• "TC2-Sub" means XXXXXXXXXX ., which is a taxable Canadian corporation and a CCPC;
• "TC3" means XXXXXXXXXX ., which is a taxable Canadian corporation and a CCPC;
• "TC3-Sub" means XXXXXXXXXX ., which is a taxable Canadian corporation and a CCPC;
• "TC3 Subco" means the taxable Canadian corporation to be incorporated by TC3, as described in Paragraph 21;
• "TC3 Subco Common Shares" means the Common Shares of TC3 Subco, as described in Paragraph 22;
• "TC4" means XXXXXXXXXX , , which is a taxable Canadian corporation and a CCPC;
• "TC4-Sub" means XXXXXXXXXX ., which is a taxable Canadian corporation and a CCPC; and
• "Transferee2-Sub(s)" means TC1-Sub, TC2-Sub, TC3-Sub and TC4-Sub, either singularly or collectively.

Our understanding of the facts, Proposed Transactions, the purposes of the Proposed Transactions and the additional information is as follows:

FACTS

Facts Relating to XXXXXXXXXX Co

1. XXXXXXXXXX Co is a taxable Canadian corporation and a CCPC incorporated under the BCA.

2. XXXXXXXXXX Co's issued share capital is comprised of:

(a) XXXXXXXXXX Common Shares; and

(b) XXXXXXXXXX non-voting Class B Preference Share.

3. The shareholders of XXXXXXXXXX Co are:

(a) A Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by A Co represent XXXXXXXXXX % of the issued and outstanding Common Shares of XXXXXXXXXX Co.

(b) B Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by B Co represent XXXXXXXXXX % of the issued and outstanding Common Shares of XXXXXXXXXX Co.

(c) C Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by C Co represent XXXXXXXXXX % of the issued and outstanding Common Shares of XXXXXXXXXX Co.

(d) Real Co: XXXXXXXXXX Class B Preference Share having a redemption value of $XXXXXXXXXX, a PUC of $XXXXXXXXXX and an ACB of $XXXXXXXXXX. The Class B Preference Share held by Real Co represents the only issued and outstanding Class B Preference Share of XXXXXXXXXX Co.

Each of A Co, B Co and C Co acquired its Common Shares of XXXXXXXXXX Co on Butterfly1.

4. XXXXXXXXXX Co owns XXXXXXXXXX Investco Shares, representing approximately XXXXXXXXXX% of Investco's issued and outstanding share capital. The Investco Shares are capital property to XXXXXXXXXX Co. Neither XXXXXXXXXX Co nor any related person has the ability to exercise significant influence over Investco.

Facts Relating to XXXXXXXXXX Subco

5. XXXXXXXXXX Subco is a taxable Canadian corporation and a CCPC incorporated under the BCA.

6. XXXXXXXXXX Subco's issued share capital is comprised of XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX.

7. The sole shareholder of XXXXXXXXXX Subco is XXXXXXXXXX Co.

8. The shares of XXXXXXXXXX Subco are capital property to XXXXXXXXXX Co.

9. XXXXXXXXXX Subco owns XXXXXXXXXX Investco Shares, representing approximately XXXXXXXXXX% of Investco's issued and outstanding share capital. The Investco Shares are capital property to XXXXXXXXXX Subco. Neither XXXXXXXXXX Subco nor any related person has the ability to exercise significant influence over Investco.

10. XXXXXXXXXX Subco has several advances receivable from related corporations and several advances payable to other related corporations. The net intercompany balance is a receivable in the amount of $XXXXXXXXXX. XXXXXXXXXX Subco also has net current liabilities of approximately $XXXXXXXXXX.

Facts Relating to Real Co

11. Real Co is a taxable Canadian corporation and a CCPC incorporated under the BCA.

12. Real Co's issued share capital is comprised of:

(a) XXXXXXXXXX Common Shares;

(b) XXXXXXXXXX non-voting Class A Preference Shares; and

(c) XXXXXXXXXX non-voting Class B Preference Shares.

13. The shareholders of Real Co are:

(a) A Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by A Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of Real Co.

(b) B Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by B Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of Real Co.

(c) C Co: XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Common Shares held by C Co represent XXXXXXXXXX% of the issued and outstanding Common Shares of Real Co.

(d) Numberco: XXXXXXXXXX Class A Preference Shares having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Class A Preference Shares held by Numberco represents XXXXXXXXXX% of the issued and outstanding Class A Preference Shares of Real Co.

(e) C Co: XXXXXXXXXX Class B Preference Shares having an aggregate redemption value of $XXXXXXXXXX, a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX. The Class B Preference Shares held by C Co represents XXXXXXXXXX% of the issued and outstanding Class B Preference Shares of Real Co.

Each of A Co, B Co and C Co acquired its Common Shares of Real Co on Butterfly 1.

Facts Relating to TC3

14. TC3 is a taxable Canadian corporation and a CCPC incorporated under the BCA.

15. TC3's issued share capital is comprised of XXXXXXXXXX Common Shares having a total PUC of $XXXXXXXXXX and a total ACB of $XXXXXXXXXX.

16. The sole shareholder of TC3 is Real Co.

17. TC3 owns XXXXXXXXXX Investco Shares, representing XXXXXXXXXX% of Investco's issued and outstanding share capital. The Investco Shares are capital property to TC3. Neither TC3 nor any related person has the ability to exercise significant influence over Investco. TC3 acquired its shares of Investco on Butterfly 2.

18. [Reserved]

Additional Facts

19. Except for the purposes of section 55, A Co, B Co and C Co constitute a related group that controls each of XXXXXXXXXX Co, XXXXXXXXXX Subco, TC3 and Real Co. Immediately before the amalgamation described in Paragraph 26 below, each of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco will be related to each other (otherwise than because of a right referred to in paragraph 251(5)(b)). Immediately after the amalgamation described in Paragraph 26 below, A Co, B Co and C Co will constitute a related group that will control Amalco.

20. Each of the corporate taxpayers files its corporate income tax returns at the XXXXXXXXXX Taxation Centre and its tax affairs are administered by the XXXXXXXXXX Tax Services Office. The taxpayers' address is XXXXXXXXXX. The BN of each of the corporate taxpayers is as follows:

(a) A Co				XXXXXXXXXX;
(b) B Co				XXXXXXXXXX;
(c) C Co				XXXXXXXXXX;
(d) XXXXXXXXXX  Co 			XXXXXXXXXX;
(e) XXXXXXXXXX  Subco             	XXXXXXXXXX;
(f) DC1					XXXXXXXXXX;
(g) DC2					XXXXXXXXXX;
(h) Numberco				XXXXXXXXXX;
(i) Real Co				XXXXXXXXXX;
(j) TC1					XXXXXXXXXX;
(k) TC1-Sub				XXXXXXXXXX;
(l) TC2					XXXXXXXXXX;
(m) TC2-Sub				XXXXXXXXXX;
(n) TC3					XXXXXXXXXX;
(o) TC3-Sub				XXXXXXXXXX;
(p) TC4					XXXXXXXXXX;
(q) TC4-Sub 				XXXXXXXXXX.

PROPOSED TRANSACTIONS

Incorporation of TC3 Subco

21. A new corporation ("TC3 Subco") will be incorporated under the BCA. TC3 Subco will be a CCPC and a taxable Canadian corporation.

22. TC3 Subco will be authorized to issue an unlimited number of Common Shares (the "TC3 Subco Common Shares"). The TC3 Subco Common Shares will be entitled to one vote per share and will be fully participating.

On incorporation, TC3 will subscribe for at least one Common Share of TC3 Subco for nominal consideration.

Transfer of Investco Shares by TC3 to TC3 Subco.

23. TC3 will transfer all of its Investco Shares to TC3 Subco. As sole consideration for the transfer of the Investco Shares to TC3 Subco, TC3 Subco will issue XXXXXXXXXX Common Shares to TC3.

24. In respect of the transfer described in Paragraph 23, TC3 and TC3 Subco will jointly elect, in prescribed form and within the time determined under subsection 85(6), for the provisions of subsection 85(1) to apply to the transfer. The agreed amount in the joint election will be equal to the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) and (ii), since the Investco Shares are property described in paragraph 85(1)(c.1).

The agreed amount will not exceed the FMV of the transferred property and it will not be less than the amount permitted under paragraph 85(1)(b).

For the purposes of the BCA, TC3 Subco will add to the stated capital account maintained for its Common Shares an amount equal to the agreed amount. For greater certainty, the increase to the PUC of the Common Shares so issued by XXXXXXXXXX Subco will not exceed the maximum amount that could be added to the PUC of such share, having regard to subsection 85(2.1).

25. Following the Proposed Transactions described in Paragraph 23 above, TC3 Subco's only assets will be XXXXXXXXXX Investco Shares and the nominal consideration TC3 Subco received for issuing its Common Shares, as described in Paragraph 22 above, and TC3 Subco will have no liabilities.

Amalgamation of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco

26. Following the Proposed Transactions described in Paragraphs 21 to 25 above, XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco will be amalgamated under the provisions of the BCA to form "Amalco" in such a manner that:

(a) all of the property (except any amounts receivable from any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of Amalco by virtue of the amalgamation;

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

(c) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, will receive shares of the capital stock of Amalco because of the merger. In particular, each of the shareholders of XXXXXXXXXX Co and TC3 Subco will receive shares of the capital stock of Amalco on the amalgamation, based upon the relative fair market value of the shares of XXXXXXXXXX Subco and TC3 Subco, respectively, owned by each of them immediately before the amalgamation. Specifically:

(i) all of the Common Shares of XXXXXXXXXX Co owned by each of A Co, B Co and C Co immediately before the amalgamation will not be cancelled on the amalgamation and, because of the amalgamation, will become XXXXXXXXXX Common Shares of Amalco, having an aggregate FMV equal to the FMV immediately before the amalgamation of the Common Shares owned by such corporation in XXXXXXXXXX Co;

(ii) the non-voting Class B Preference Share of XXXXXXXXXX Co owned by Real Co immediately before the amalgamation will not be cancelled on the amalgamation and, because of the amalgamation, will become one non-voting Class B Preference Share of Amalco, having an FMV equal to the FMV immediately before the amalgamation of the Class B Preference Share owned by Real Co in XXXXXXXXXX Co;

(iii) all of the Common Shares of TC3 Subco owned by TC3 immediately before the amalgamation will not be cancelled on the amalgamation and, because of the amalgamation, will become XXXXXXXXXX non-voting Class A Preference Shares of Amalco, having an aggregate FMV equal to the FMV immediately before the amalgamation of the Common Shares owned by TC3 in TC3 Subco; and

(iv) all of the Common Shares of XXXXXXXXXX Subco owned by XXXXXXXXXX Co immediately before the amalgamation will be cancelled on the amalgamation without any payment to the holder thereof.

(d) The Class A Preference Shares of Amalco (the "Amalco Class A Preference Shares") created on the amalgamation will be:

(i) redeemable and retractable, subject to applicable law, at any time for an amount equal to the amount determined by dividing the aggregate FMV of the property received by Amalco on the issuance of the Class A Preference Shares less the aggregate FMV of any non-share consideration issued or liabilities assumed by Amalco, by the number of the Class A Preference Shares issued;

(ii) will entitle the holder thereof to a non-cumulative dividend, at a rate of up to XXXXXXXXXX% per quarter of the redemption amount of the share at that time, having priority to dividends on the Common Shares and Class B Preference Shares;

(iii) will be non-voting, except for matters involving a change to the rights, conditions, or limitations attaching to them, sufficient to protect the holder's rights; and

(iv) will have priority on liquidation/wind-up to Common Shares and Class B Preference Shares.

(e) All rights attaching to the Class B Preference Shares of Amalco (the "Amalco Class B Preference Shares") created on the amalgamation will be identical to the rights attaching to the Amalco Class A Preference Shares, except that Amalco Class A Preference Shares will rank in priority on dividends and on liquidation/wind-up to the Amalco Class B Preference Shares.

(f) The Common Shares of Amalco (the "Amalco Common Shares") created on the amalgamation will be entitled to one vote per share and will be fully participating.

(g) Amalco will make the following additions to the stated capital accounts maintained for the various classes of shares:

(i) for its voting Common Shares an amount equal to the aggregate PUC of the Common Shares of XXXXXXXXXX Co;

(ii) for its Class B Preference Share an amount equal to the PUC of the Class B Preference Share of XXXXXXXXXX Co; and

(iii) for its Class A Preference Shares an amount equal to the aggregate PUC of the Common Shares of TC3 Subco.

For greater certainty, the aggregate PUC of the Amalco Common Shares, Amalco Class A Preference Shares and Amalco Class B Preference Share, immediately after the amalgamation, will be equal to the aggregate PUC of the Common Shares and Class B Preference Share of XXXXXXXXXX Co and the Common Shares of TC3 Subco, immediately before the amalgamation.

(h) Other than the share consideration described above, no other consideration will be received by any shareholder of a predecessor corporation as a consequence of the amalgamation. The issued and outstanding share capital of Amalco will represent capital property to each of its shareholders.

27. Immediately after the amalgamation described in Paragraph 26 above, Amalco's assets will include all of the Investco Shares previously held by XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3.

ADDITIONAL INFORMATION

28. XXXXXXXXXX, the consolidation of the Investco shareholdings in a single entity as contemplated by the Proposed Transactions would have been undertaken prior to the anticipated payment of such dividends by Investco, regardless of whether Butterfly 1 and/or Butterfly 2 were undertaken. Furthermore, each of Butterfly 1 and Butterfly 2 was completed without regard to whether the Proposed Transactions will be undertaken. It is your view that the Proposed Transactions are not part of a series of transactions or events that includes either Butterfly 1 or Butterfly 2.

PURPOSE OF THE PROPOSED TRANSACTIONS

The purpose of the Proposed Transactions is to combine the Investco Shares owned by XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 in Amalco so that Investco will be connected with Amalco and in order to consolidate the Investco Shares into a separate legal entity for management and administrative purposes.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, Proposed Transactions, additional information and the purpose of the Proposed Transactions, our rulings are set forth below.

A. Subject to the application of subsection 69(11), provided that the appropriate joint elections are filed in the prescribed form and manner within the time specified in subsection 85(6), the provisions of subsection 85(1) will apply to the transfer of the Investco Common Shares by TC3 to TC3 Subco, as described in Paragraph 23, such that the agreed amount in respect of the transfer will be deemed to be the proceeds of disposition for the Investco Common Shares to TC3, and the cost thereof to TC3 Subco. For greater certainty, paragraph 85(1)(e.2) will not apply to the transfer described above.

B. The Proposed Transactions, in and of themselves, will not cause paragraph 55(3.1)(c) to apply to the taxable dividends described in Rulings C, C.1 and C.2 of the Original Ruling.

C. On the amalgamation of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco described in Paragraph 26:

(a) the provisions of subsection 87(1) will apply;

(b) provided the shares of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco were capital property to the holders thereof immediately before the amalgamation, the provisions of subsection 87(4) other than paragraphs (c), (d) and (e) thereof will apply, such that

i) each shareholder of XXXXXXXXXX Co will be deemed by paragraph 87(4)(a) to have disposed of its shares of XXXXXXXXXX Co for proceeds of disposition equal to the ACB to that shareholder of such shares immediately before the amalgamation and will be deemed by paragraph 87(4)(b) to have acquired its shares of the new corporation formed on the amalgamation at an aggregate cost equal to those proceeds of disposition; and

ii) TC3 will be deemed by paragraph 87(4)(a) to have disposed of its shares of TC3 Subco for proceeds of disposition equal to the ACB of such shares immediately before the amalgamation and will be deemed by paragraph 87(4)(b) to have acquired its shares of the new corporation formed on the amalgamation at an aggregate cost equal to those proceeds of disposition;

(c) the cancellation of the XXXXXXXXXX Subco shares held by XXXXXXXXXX Co by virtue of the amalgamation will not give rise to a gain or loss to XXXXXXXXXX Co;

(d) the provisions of subsection 87(2.1) will apply to the amalgamation of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco to deem Amalco to be the same corporation as, and a continuation of, each of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco, for the purposes, and subject to the restrictions, described in subsection 87(2.1); and

(e) the provisions of paragraph 87(2)(a) will apply to the amalgamation of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco to deem Amalco 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 amalgamation.

D. For the purposes of the provisions of the Act described in subsection 256(7):

(a) Control of TC3 Subco will not be considered to be acquired solely because of the issuance of the TC3 Subco Common Shares to TC3, as described in Paragraph 23;

(b) Control of each of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco will not be considered to have been acquired immediately before the amalgamation solely because of the amalgamation of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco as described in Paragraph 26; and

(c) Control of Amalco will not be considered to have been acquired solely because of the amalgamation of XXXXXXXXXX Co, XXXXXXXXXX Subco and TC3 Subco as described in Paragraph 26.

E. The Proposed Transactions, in and by themselves, will not result in a finding that the Investco Shares are not capital property to TC3 Subco or Amalco.

F. The provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and of themselves, to re-determine the tax consequences confirmed in the rulings given above.

The above rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R5 dated May 17, 2002, and are binding on the 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, could have an effect on the rulings provided herein.

Unless otherwise confirmed, 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 FMV of any property referred to herein; or

(b) any other tax consequences 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
Legislative Policy and Regulatory Affairs Branch