2007 Ruling 2007-0237482R3 - Supplemental Ruling

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: Additional facts and proposed transactions brought to our attention.

Position: Confirmation that, subject to the conditions, limitations, qualifications, and comments set out therein, the original Ruling no. E 2007-0237481R3 and rulings B and D of Ruling no. E 2006 0182431R3 will continue to be binding on the CRA.

Reasons: In compliance with the law.

XXXXXXXXXX 						2007-023748

XXXXXXXXXX , 2007

Dear Sir:

Re: XXXXXXXXXX Advance Income Tax Ruling E 2007-0237481R3

This is in reply to your letter of XXXXXXXXXX in which you advised us of additional facts and proposed transactions relating to the advance income tax ruling no. 2007-023748 dated XXXXXXXXXX, 2007, and requested a confirmation that these additional facts and proposed transactions will not affect the advance income tax rulings given in Ruling no. 2007-023748 and the advance income tax rulings B and D given in Ruling no. 2006-018243.

Capitalized terms not defined herein are as defined in Ruling no. 2007-023748.

Unless otherwise indicated, all references to monetary amounts are in Canadian dollars.

1) Incorporation of Newco

You advised us that Newco was incorporated on XXXXXXXXXX.

2) Repayment of Target's outstanding bank debt as of XXXXXXXXXX

You advised us that prior to the amalgamation of Target and Newco as described in Paragraph 43 of Ruling no. 2007-023748, the following transactions had occurred or will be completed:

(i) On XXXXXXXXXX, XXXXXXXXXX ("Finance III"), a corporation related to Newco, loaned approximately $XXXXXXXXXX to Bidco, on an interest-bearing basis.

(ii) In turn, on XXXXXXXXXX, Bidco made a non-interest bearing loan of approximately $XXXXXXXXXX to Target.

(iii) On XXXXXXXXXX, Target will then use the money borrowed from Bidco to repay its outstanding bank indebtedness due to an arm's length financial institution. We understand that this financial institution is not a person described in clause 88(1)(c)(vi)(B) of the Income Tax Act.

3) Additional borrowing of Bidco in order to pay a portion of the accrued interest on the loan granted by Finance I

You advised us that the terms and conditions of the loan granted by Finance I to Bidco, as described in Paragraph 18 of Ruling no. 2007-023748, provide that the accrued interest and commitment fees must be paid at the same time than the principal amount of the loan is repaid. We understand that Bidco currently does not have the required cash flow to comply with this requirement. Consequently, you advised us that, at the same time the proposed transaction described in Paragraph 39 of Ruling no. 2007-023748 is completed, the following proposed transactions will be completed:

(i) Finance III will loan up to approximately $XXXXXXXXXX to Bidco, on an interest-bearing basis to service the payment of a portion of the accrued interest and commitment fees totalling approximately $XXXXXXXXXX million.

(ii) Bidco will use the money borrowed from Finance III to repay a portion of the interest accrued and commitment fees on the loan granted by Finance I to Bidco as described in Paragraph 18 of Ruling no. 2007-023748.

Considering the above, we hereby confirm that, subject to the conditions, limitations, qualifications and comments set out in Ruling no. 2007-023748 and Ruling no. 2006-018243, as amended by this letter, the advance income tax rulings given in Ruling no. 2007-023748 and the advance income tax rulings B and D given in Ruling no. 2006-018243 will continue to be binding on the Canada Revenue Agency.

An invoice for our fees in connection with this file will be forwarded to you under separate cover.

Yours truly,

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