2012 Ruling 2011-0410181R3 - Variation of trust indenture

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 variation of a trust indenture to create and issue a new class of preferred units of a mutual fund trust would result in (1) a disposition by the trust of its assets or in a resettlement of the trust, (2) a disposition by the existing unitholders of their units, (3) the application of 104(7.1), and (4) a negative impact with respect to the definition of "real estate investment trust" in subsection 122.1

Position: (1) no (2) no (3) no (4) no negative impact on whether the trust meets the definition of "REIT"

Reasons: (1) The changes are not so extensive so as to result in a resettlement of the trust and it is submitted that there will be no resettlement as a matter of provincial law. (2) No cash consideration or other proceeds of disposition will be received by the unitholders in respect of the diminishment of their rights as a consequence of the amendments. Moreover, the changes to the trust deed in this case, as a whole are not viewed as sufficiently material to take the position that the amended units would be proceeds of disposition. (3) Consistent with previous rulings on this similar issue. (4) The proposed transactions, in and of themselves, will not negatively impact on whether Trust meets the definition of a REIT, for purposes of the Act.

XXXXXXXXXX
2011-041018

XXXXXXXXXX, 2012

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX, requesting an advance income tax ruling on behalf of the above-named taxpayer. We also acknowledge the information provided during our telephone conversations (XXXXXXXXXX) and your subsequent submissions dated XXXXXXXXXX.

We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in the ruling request is:

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

(ii) being considered by a tax services office or a tax centre in connection with a tax return already filed by the taxpayer or a related person;

(iii) under objection by the taxpayer or a related person;

(iv) before the courts; or

(v) the subject of a ruling previously issued by the Directorate to the taxpayer or a related person.

This document is based solely on the facts and proposed transactions described below. The documentation submitted with your request does not form part of the facts and proposed transactions except as expressly referred to herein, and any references thereto are otherwise provided solely for the convenience of the reader.

Definitions

Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definitions unless otherwise indicated.

The following terms and taxpayers referred to throughout this document will have the following meaning:

"AB Trust" means XXXXXXXXXX, a trust formed under the laws of the Province of XXXXXXXXXX;

"AB Trustee" means XXXXXXXXXX, a corporation incorporated under the laws of the Province of XXXXXXXXXX;

"AB Trust Loans" means the unsecured loans made by Trust to AB Trust and described in 15 herein;

"AB Trust Notes" means the promissory notes to be issued by AB Trust and described in 16 herein;

"AB LP" means XXXXXXXXXX, a limited partnership to be formed under the laws of the Province of XXXXXXXXXX between Trust as limited partner and AB Trust as general partner, which will acquire and own an income-producing real property located in XXXXXXXXXX;

"AB LP Promissory Notes" means the notes to be issued by AB LP to Trust as described in 20 herein;

"AB Property" means the land and building located in XXXXXXXXXX that is XXXXXXXXXX owned by AB Trust, as described in 14 herein;

"AB Transactions" means only those Proposed Transactions described in 19 to 22 herein;

"Affiliate" of Trust means each entity that is affiliated with Trust within the meaning of section 251.1 XXXXXXXXXX;

"arm's length" has the meaning assigned by subsection 251(1);

"closed-end unit trust" means a trust that qualifies as a unit trust under paragraph 108(2)(b);

"Conversion Date" means the earlier of the date as fixed by the Trustees and the date upon which Trust first issues any Preferred Units;

"CRA" means the Canada Revenue Agency;

"December 16 Amendments" means the Department of Finance News Release 2010-125, dated December 16, 2010, XXXXXXXXXX and the draft legislation to amend certain provisions of the Act related to REITs;

"Declaration of Trust" means the amended and restated declaration of trust dated as of XXXXXXXXXX in respect of Trust;

"Equity Interests" means the Units and/or the Preferred Units;

"FE Trust" means XXXXXXXXXX, a trust established under the laws of the Province of XXXXXXXXXX;

"FE Trust Declaration of Trust" means the amended and restated declaration of trust dated as of XXXXXXXXXX in respect of FE Trust;

"FE Trust Trustees" means the individuals who act as trustees of FE Trust in accordance with and subject to the provisions of the FE Trust Declaration of Trust, and which as of the date hereof consist of XXXXXXXXXX individuals each of whom is a resident of Canada;

"FE Trust Unit" means a unit of FE Trust, each such unit representing an equal undivided beneficial interest in FE Trust;

"GP Unit" means a unit representing an equity interest of the general partner in AB LP;

"Grid Note #1" and "Grid Note #2" means the interest-bearing grid note and non-interest bearing grid note respectively, to be issued by AB Trust and described in 16 herein;

"LP Unit" means a unit representing an equity interest of the limited partner in AB LP;

"mutual fund trust" has the meaning assigned by subsection 132(6);

"open-end unit trust" means a trust that qualifies as a unit trust under paragraph 108(2)(a);

"Permitted Investment" means any property described in clauses 108(2)(b)(iii)(A) to (G);

"Preferred Unit" means a preferred equity interest of any series in Trust as more particularly described in 25c herein, with such designation, rights, privileges, restrictions and conditions attached thereto as determined by the Trustees and which are issued from time to time in accordance with the provisions of the Declaration of Trust, as amended as described in 25 herein;

"Preferred Unitholder" means a holder of Preferred Units;

"Proposed Transactions" means the transactions contemplated by 19 to 29 herein;

"real estate investment trust" has the meaning assigned in subsection 122.1(1);

"REIT" means a real estate investment trust;

"Series A Preferred Units" means the first series of Preferred Units to be issued by Trust as described in 27 and 28 herein. The Trustees will determine the number to be issued, the subscription price thereof, and the specific rights, privileges, restrictions and conditions attaching to each Preferred Unit within this series;

"Stapled Unit" means one Unit and one FE Trust Unit which trade together on the XXXXXXXXXX as described in 3 and 8 herein;

"taxation year" has the meaning assigned by subsection 249(1);

"TenantCo" means XXXXXXXXXX;

"Trust" means XXXXXXXXXX, a trust established under the laws of the Province of XXXXXXXXXX;

"Trust Amendments" means only those proposed modifications to the Declaration of Trust as described in 25 herein and, for greater certainty, includes the terms set out in the "Certificate of Preferred Unit Terms", described in 27 herein;

"Trustees" means the individuals that act as trustees of Trust in accordance with and subject to the provisions of the Declaration of Trust, and which as of the date hereof consist of XXXXXXXXXX individuals each of whom is a resident of Canada;

XXXXXXXXXX;

"Uncoupling Event" means an event more fully described in 6 herein, whereby Units and FE Trust Units do not trade together on the XXXXXXXXXX;

"Unit" means a unit of interest in Trust issued from time to time, as more particularly described in 4 herein (and, for greater certainty, does not include a Preferred Unit);

"unit trust" means a trust that is a unit trust pursuant to subsection 108(2);

"Unitholder" means a holder of Units; and

"US Holdco" means XXXXXXXXXX, a corporation formed in the state of XXXXXXXXXX and all the issued shares of which are owned by Trust.

The relevant Taxation Services Office for both Trust and FE Trust is the XXXXXXXXXX Tax Services Office and the relevant Taxation Centre is the XXXXXXXXXX Tax Centre.

Our understanding of the facts, the Proposed Transactions, and the purpose of the Proposed Transactions is as follows:

FACTS

1. Trust is an open-end unit trust that qualifies as a mutual fund trust. Pursuant to Article XXXXXXXXXX of the Declaration of Trust, the beneficial interests in Trust are currently represented and constituted by a single class of Units.

2. FE Trust is an open-end unit trust that qualifies as a mutual fund trust. Beneficial interests in FE Trust are also represented by a single class of units, FE Trust Units.

3. The Declaration of Trust and the FE Trust Declaration of Trust contain provisions that result in the Units and the FE Trust Units being stapled on a one-for-one basis so that they trade together on the XXXXXXXXXX under one symbol; however, Trust and FE Trust are separate trusts such that each Unit and FE Trust Unit is a separate property, separately listed (but not posted for trading) on the XXXXXXXXXX.

4. Currently, the Declaration of Trust provides that each Unit has the following rights:

a. the right to one vote;

such distribution as shall be determined by the Trustees in their discretion, provided that the amount necessary to ensure that Trust is not liable to pay tax under Part I of the Act is deemed to have been declared by the Trustees as a distribution before the end of each taxation year of Trust;

b. the right to require Trust to redeem such Unit at the price and in accordance with the conditions set forth in Article XXXXXXXXXX of the Declaration of Trust (including the condition described in 5 herein that the holder also redeem a corresponding number of FE Trust Units); and

c. the right, following the discharge of all liabilities, to participate pro rata in the proceeds from the liquidation of net assets of Trust upon the termination or winding-up thereof.

5. The Declaration of Trust further provides (a) that each Unit may be transferred only together with a FE Trust Unit to the same transferee and (b) that a holder of Units may require Trust to redeem such Units only if it also requires FE Trust to redeem a corresponding number of FE Trust Units at the same time. The FE Trust Declaration of Trust contains corresponding provisions.

6. The provisions described in 5 herein cease to apply on the occurrence of an Uncoupling Event. An Uncoupling Event occurs only: (i) if Unitholders vote in favour of the uncoupling of Units and FE Trust Units such that the two securities will trade separately; or (ii) at the sole discretion of the FE Trust Trustees, but only in the event of the bankruptcy, insolvency, winding-up or reorganization (under an applicable law relating to insolvency) of Trust or US Holdco or the taking of action by Trust or US Holdco in furtherance of any such action or the admitting in writing by Trust or US Holdco of its inability to pay its debts generally as they become due.

7. No Uncoupling Event is expected to occur at any time in the foreseeable future. However, in the event that the provisions described in 5 herein cease to apply, the Units and the FE Trust Units would no longer be stapled, the Trustees would be required to continue to use all reasonable efforts to obtain and maintain a listing for the Units, and it is expected that the FE Trust Units would then be delisted.

8. Stapled Units are widely held by the public, and to the knowledge of Trust and FE Trust, there is no direct or indirect beneficial owner of, nor any person who exercises control or direction over, Stapled Units carrying more than XXXXXXXXXX% of the votes and value of outstanding Stapled Units. As at XXXXXXXXXX, there were XXXXXXXXXX Stapled Units issued and outstanding.

9. Trust is governed by the Trustees who conduct and manage (or supervise the management of) the affairs of Trust in accordance with and subject to the terms of the Declaration of Trust.

10. FE Trust is governed by the FE Trust Trustees who conduct and manage (or supervise the management of) the affairs of FE Trust in accordance with and subject to the terms of the FE Trust Declaration of Trust.

11. Trust is XXXXXXXXXX. Trust, directly or indirectly, owned interests in approximately XXXXXXXXXX income-producing properties as at XXXXXXXXXX. It directly owned interests in XXXXXXXXXX income-producing real properties as at XXXXXXXXXX, all of which are located in Canada.

12. Nominee corporations hold legal title to real property situated in Canada which is beneficially owned by Trust or certain of its Affiliates resident in Canada.

13. AB Trustee and AB Trust were formed on XXXXXXXXXX, respectively, and are wholly owned by Trust. Trust owns all of the issued shares of AB Trustee and all of the issued units of AB Trust.

14. AB Trust acquired land in XXXXXXXXXX upon which a XXXXXXXXXX square foot head office complex for TenantCo is XXXXXXXXXX (the "AB Property"). XXXXXXXXXX. The AB Property is fully pre-leased to TenantCo for XXXXXXXXXX years. Trust and each of its Affiliates deal at arm's length with TenantCo.

15. Trust capitalized AB Trust by subscribing for units of AB Trust and also by making unsecured loans from time to time to AB Trust (the "AB Trust Loans"). Some of the AB Trust Loans are interest bearing and some of the AB Trust Loans are interest-free. As at XXXXXXXXXX, the aggregate principal in respect of the outstanding AB Trust Loans was approximately $XXXXXXXXXX. The fair market value of the AB Trust Loans is equal to their principal amount plus accrued interest (if any).

16. Prior to the implementation of the Proposed Transactions, AB Trust will execute two grid promissory notes (together, the "AB Trust Notes") to evidence and clarify the terms of its previously existing indebtedness in respect of the AB Trust Loans. The indebtedness of AB Trust in respect of the interest-bearing loans made by Trust to AB Trust will be evidenced by a grid note ("Grid Note #1") and the indebtedness of AB Trust in respect of the non-interest bearing loans made by Trust to AB Trust will be evidenced by a second grid note ("Grid Note #2"). The AB Trust Notes will be repayable upon demand by Trust.

17. The only undertaking of Trust is and will remain (a) the investing of its funds in property (other than real property), (b) the acquiring, holding, maintaining, improving, leasing or managing of real property or an interest in real property, that is capital property to Trust or (c) any combination of such activities. Trust will not carry on any other activities.

18. Pursuant to current section XXXXXXXXXX of the Declaration of Trust, the Trustees are permitted to create and issue rights, warrants or options to subscribe for fully paid Units which rights, warrants or options may be exercisable, as the case may be, into Units at such prices and at such time or times as the Trustees may determine.

PROPOSED TRANSACTIONS

19. Trust and AB Trust will form AB LP. Trust will subscribe for LP Units for a nominal amount of cash. These LP Units will represent over XXXXXXXXXX% of the total equity interests of all partners in AB LP. AB Trust will subscribe for GP Units for a nominal amount of cash.

20. AB Trust will transfer all of its ownership interest in the AB Property to AB LP for an aggregate purchase price equal to the fair market value of the property so transferred. Such purchase price will be satisfied (i) by the assumption by AB LP of all of AB Trust's indebtedness and other liabilities in respect of the AB Property including the indebtedness evidenced by the AB Trust Notes, and (ii) as to the balance, by the issuance of GP Units to AB Trust. In order to evidence AB LP's indebtedness to Trust arising as a consequence of its assumption of the AB Trust Notes, AB LP will issue two promissory notes, one of which shall be interest bearing and the other of which shall be interest-free (together, the "AB LP Promissory Notes"). Grid Note #1 and Grid Note #2 will be cancelled.

21. Trust will subscribe for additional LP Units for a total subscription price equal to the total outstanding principal amount plus accrued interest on the AB LP Promissory Notes. Payment of such subscription price will be satisfied by way of set-off against the indebtedness of AB LP evidenced by the AB LP Promissory Notes, which notes shall thereby be fully satisfied and extinguished. Following the issuance of such LP Units, it is expected that the LP Units owned by Trust will continue to represent over XXXXXXXXXX% of the total equity interests of all partners in AB LP.

22. The members of AB LP will jointly elect to have the provisions of subsection 97(2) apply to the transfer of the AB Property by AB Trust to AB LP as described in 20.

23. The AB Transactions will be completed before the Conversion Date.

24. The Declaration of Trust will be amended in the manner described in 25 herein. The Trust Amendments will not result in a resettlement of Trust or the creation of a new trust under the laws of the Province of XXXXXXXXXX.

25. The Declaration of Trust will be amended as follows:

a. Article XXXXXXXXXX of the Declaration of Trust will be amended to create a new class of units described and designated as Preferred Units. Specifically, section XXXXXXXXXX of the Declaration of Trust will be amended to describe the beneficial interests in Trust as two classes of units, described and designated as Units and Preferred Units, which shall be entitled to the rights and subject to the limitations, restrictions and conditions set out in the Declaration of Trust and the interest of each Unitholder and Preferred Unitholder shall be determined by the number of Equity Interests registered in the name of the Unitholder and Preferred Unitholder, respectively. The number of Preferred Units which Trust may issue will be limited to XXXXXXXXXX.

b. Section XXXXXXXXXX of the Declaration of Trust which describes the general ranking of an Equity Interest in Trust, will be amended to provide that the right of Unitholders to participate in distributions made by Trust and, in the event of the termination of Trust, to participate in the net assets of Trust, will in both instances be subject to the prior rights of holders of Preferred Units.

c. Section XXXXXXXXXX will be added to the Declaration of Trust to describe the attributes of the Preferred Units as follows:

i. the Preferred Units may, from time to time, be issued in one or more series, and the Trustees may fix from time to time before such issue the number of Preferred Units which is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series of Preferred Units including, without limiting the generality of the foregoing, any voting rights, the rate or amount of distributions (which may be cumulative or non-cumulative and variable or fixed) or the method of calculating distributions, the dates of payment thereof, the terms and conditions of redemption, purchase and conversion, if any, any rights on the liquidation, dissolution or winding-up of Trust, and any sinking fund or other provisions;

ii. the Preferred Units of each series shall, with respect to the payment of distributions (other than distributions paid solely through the issuance of additional Units) and the distribution of assets of Trust or return of capital in the event of liquidation, dissolution or winding-up of Trust, whether voluntary or involuntary, or any other return of capital or distribution of assets of Trust among its Unitholders for the purpose of winding-up its affairs, be entitled to preference over the Units, and over any other Equity Interests of Trust ranking by their terms junior to the Preferred Units. The Preferred Units of any series may also be given such other preferences, not inconsistent with the Declaration of Trust, over the Units, and any other Equity Interests of Trust ranking by their terms junior to the Preferred Units, as may be fixed in accordance with (i) above; and

iii. if any cumulative distributions or amounts payable on the return of capital in respect of a series of Preferred Units are not paid in full, all series of Preferred Units of equal ranking shall participate rateably in respect of accumulated distributions and return of capital based on the accumulated distributions and return of capital of a series of Preferred Units as a proportion of the accumulated distributions and return of capital of all series of Preferred Units of equal ranking.

d. Section XXXXXXXXXX of the Declaration of Trust will also provide that the terms of a particular series of Preferred Units as fixed by the Trustees in accordance with the provisions set out in (c)(i) above shall be set out in a certificate ("Certificate of Preferred Unit Terms") which shall be approved by the Trustees prior to the issue of such Preferred Units and, upon such approval, the Certificate of Preferred Unit Terms shall become a part of the Declaration of Trust.

e. Section XXXXXXXXXX of the Declaration of Trust will also provide that neither the Units nor any series of Preferred Units shall have or be deemed to have any term, condition, right or other attribute which would provide any holder of either Units or Preferred Units of any series with an interest in the income of Trust as a percentage of any distribution received by that holder that is greater or lesser than the interest in the income of Trust as a percentage of any distribution received by the holder of any other Units or Preferred Units of any series.

f. Section XXXXXXXXXX of the Declaration of Trust will be amended to provide that Trust shall pay or declare payable to holders of Preferred Units of each series as may from time to time be issued and outstanding, and the holders of such Preferred Units will have a right to receive, such portion of the income of Trust as the Trustees have determined to distribute to such holders of Preferred Units as prescribed by the rights, privileges, restrictions and conditions established by the Trustees on the creation of such series of Preferred Units. For so long as any Preferred Units remain issued and outstanding, Trust shall not pay or declare payable any amount to holders of Units (other than amounts that are paid solely through the issuance of additional Units) unless and until the distribution entitlements of the Preferred Units have been paid in full.

g. Section XXXXXXXXXX of the Declaration of Trust will be amended to provide that, except as otherwise provided in the terms of a particular series of Preferred Units as fixed by the Trustees, income and net taxable capital gains for purposes of the Act will be allocated to Unitholders and Preferred Unitholders in the same proportions as the distributions received by such holders.

h. Section XXXXXXXXXX of the Declaration of Trust will be amended to provide that, in the event of the termination of Trust, the net assets of Trust (after the liabilities of the Trust have been discharged) shall be liquidated and the proceeds distributed to Preferred Unitholders in accordance with the rights, privileges, restrictions and conditions attached to the Preferred Units, with the remaining balance of the proceeds distributed proportionately to the Unitholders.

i. As a consequence of and in connection with the creation of the Preferred Units and the above noted amendments to the Declaration of Trust described in 25(a) to (h) above, further consequential amendments will be made to the Declaration of Trust as follows:

i. The description of each of the following defined terms in section XXXXXXXXXX of the Declaration of Trust will be amended for clarification given the issuance of the Preferred Units: "Conversion Date", "Equity Interests", "Preferred Unit", "Unit", and "Unitholder";

ii. The description of the "Nature of Trust" as described in section XXXXXXXXXX of the Declaration of Trust will be amended to include a reference to the Preferred Units, and to delete the description of Trust as an open-end unit trust;

iii. A new paragraph XXXXXXXXXX will be added to section XXXXXXXXXX of the Declaration of Trust to set out the scope of the Trustees' specific powers and authority with respect to the Preferred Units;

iv. Modifications to sections XXXXXXXXXX to clarify the voting entitlements associated with the Units and Preferred Units, as well as certain other voting matters related thereto;

v. Paragraph XXXXXXXXXX of the Declaration of Trust will be added to provide that, from and after the Conversion Date, Trust shall not acquire or continue to hold any investment if Trust would thereby hold more than XXXXXXXXXX% of its property in bonds, securities or shares in the capital stock of any one corporation or debtor;

vi. Paragraph XXXXXXXXXX of the Declaration of Trust will be added to provide that at no time may non-residents of Canada and/or partnerships that are not Canadian partnerships within the meaning of that term in the Act, be the beneficial owners of XXXXXXXXXX% or more of the outstanding Preferred Units and the Trustees shall inform the transfer agent of such restriction;

vii. Section XXXXXXXXXX of the Declaration of Trust will be amended to apply mutatis mutandis to any series of Preferred Units that is subject to a take-over bid;

viii. Article XXXXXXXXXX of the Declaration of Trust will be amended to provide that the currently existing redemption rights under section XXXXXXXXXX shall apply at all times before the Conversion Date. In addition, section XXXXXXXXXX will be added to provide for a conditional redemption right applicable on and at all times after the Conversion Date, pursuant to which if (a) no Uncoupling Event has occurred and (b) a particular Unitholder has exercised its right to require the redemption of all or any part of its FE Trust Units in accordance with the provisions of the FE Trust Declaration of Trust, such Unitholder shall be entitled to require Trust to redeem at the demand of the Unitholder a corresponding number of Units at the prices determined and payable as provided in Article XXXXXXXXXX. For greater certainty however, at any time on or after the Conversion Date and following an Uncoupling Event, no Unitholder shall have any right of entitlement to require the Trust to redeem any Units (new section XXXXXXXXXX shall not apply in respect of any Preferred Unit);

ix. Throughout the Declaration of Trust, where appropriate, references to "Units" will be changed to "Equity Interests" and references to "Unitholders" will be changed to "holders of Units"; and

x. Paragraph XXXXXXXXXX of the Declaration of Trust will be amended to provide the Trustee with the authority to amend the Declaration of Trust without Unitholder consent in order to obtain a favourable advance income tax ruling from the CRA (or to otherwise achieve favourable tax consequences for the Trust) with respect to the inclusion of provisions in the Declaration of Trust providing for the issuance of Preferred Units, the subsequent issuance of Preferred Units or any related matters.

26. The Trust Amendments have been authorized and approved by special resolution at a meeting of Unitholders held on XXXXXXXXXX. Following the receipt of this advance income tax ruling, the Trustees will execute or cause to be executed on behalf of Trust, an amended and restated Declaration of Trust implementing the Trust Amendments.

27. Following implementation of the Trust Amendments, the Trustees will authorize the issuance of Series A Preferred Units. The rights, privileges, restrictions and conditions attaching to the Series A Preferred Units will be determined by the Trustees based on current market conditions at the time of the offering and will be set out in a Certificate of Preferred Unit Terms as referred to in 25d herein.

28. The Series A Preferred Units will be qualified for listing on the XXXXXXXXXX, and will be sold through a public offering to third party purchasers. There is no anticipated minimum dollar investment required on the initial or subsequent offerings of the Preferred Units, except as may be required by securities law.

29. It is anticipated that the proceeds from the offering of the Series A Preferred Units will be used for general trust purposes. It is possible that all or a portion of such proceeds will be used to repay existing debt of Trust, including debt related to the AB Property.

PURPOSE OF THE PROPOSED TRANSACTIONS

30. Trust is currently an open-end unit trust. Once Trust issues its Preferred Units, however, it will not be able to continue to qualify as an open-end unit trust because the Preferred Units will not be redeemable at the option of the holder. As currently structured, Trust would not qualify as a closed-end unit trust as AB Trust Loans would account for more than XXXXXXXXXX% of the property of the Trust; as such the AB Transactions are designed to enable Trust to qualify as a closed-end unit trust from and after the Conversion Date.

31. Trust proposes to create Preferred Units in order to enhance its flexibility in raising capital. The Trustees believe that the Preferred Units will attract potential investors in Trust who are seeking to reduce risk. Securities such as the Preferred Units, which bear a priority return, have emerged as a type of investment that is attractive to certain investors in the current economic climate.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions and the purpose of the proposed transactions, the Proposed Transactions are completed in the manner described above, and there are no other transactions that may be relevant to the rulings given, our rulings are as follows:

A. Neither the Trust Amendments nor the Unitholders' consent to the Trust Amendments will, in and by themselves, result in a disposition by any Unitholder of all or part of his, her or its beneficial interest in Trust.

B. The issuance of the initial series of Preferred Units designated as Series A Preferred Units will not result in a disposition by any Unitholder of all or part of his, her or its beneficial interest in Trust, provided the rights, privileges, restrictions and conditions attaching to the Series A Preferred Units are based on current market conditions at the time of the offering, as described in 27 above.

C. The Trust Amendments will not, in and by themselves, result in a disposition by Trust of its property or in a resettlement of Trust for purposes of the Act.

D. The implementation of the Proposed Transactions will not, in and by themselves, cause subsection 104(7.1) to deny the deduction by Trust of any amount it is otherwise entitled to deduct under paragraph 104(6)(b) in respect of amounts paid or payable to its Unitholders or Preferred Unitholders.

E. The implementation of the Proposed Transactions will not, in and by itself, cause Trust to fail to qualify as a REIT.

Opinions

Provided that our understanding of the facts and Proposed Transactions described herein is correct, it is also our opinion that, for the purpose of determining whether Trust meets the requirements in subparagraphs 108(2)(b)(iii), (iv) and (v) following the Proposed Transactions:

1. for the purpose of determining whether the requirement in subparagraph 108(2)(b)(iii) is met in respect of Trust throughout the relevant periods (as defined in subparagraph 108(2)(b)(ii)), Trust's pro rata share of each property held by AB LP shall be treated as held by Trust; and the limited partnership interest in AB LP held by Trust shall be disregarded;

2. for the purpose of determining whether the requirement in subparagraph 108(2)(b)(iv) is met in respect of Trust for a particular year, or for a relevant period, Trust's income from its interest in AB LP shall be treated as though derived from, or from the disposition of, the partnership property treated as held by Trust by virtue of the preceding paragraph; and

3. for the purpose of determining whether the requirement in subparagraph 108(2)(b)(v) is met in respect of Trust throughout a relevant period, Trust's pro rata share of each property held by AB LP shall be treated as held by Trust; and the limited partnership interest in AB LP held by Trust, shall be disregarded.

Given the opinions in immediately preceding paragraphs 1, 2 and 3, it is our view that none of the information included in the facts and Proposed Transactions as provided above would lead to a conclusion that Trust did not meet the requirements to be a closed-end unit trust following the implementation of the Proposed Transactions.

It is also our opinion, subject to the caveats noted below, that the implementation of the Proposed Transactions would not, in and by itself, cause Trust to fail to qualify as a REIT if the December 16, 2010 Amendments were enacted substantially as proposed.

In accordance with paragraph 22 of Information Circular 70-6R5 the above opinions should not be construed as an advance income tax ruling nor are they binding on the CRA.

Caveats

Except as expressly stated, this advance income tax ruling does not imply acceptance, approval or confirmation of any other income tax implications of the facts or proposed transactions described herein. For greater certainty, the CRA has not considered, confirmed or made any determination in respect of:

(a) whether the Trust Amendments will result in the creation of a new trust under the laws of a province;

(b) whether Trust, or any other entity, is, at any particular time, a mutual fund trust within the meaning of subsection 132(6) or a REIT within the meaning of subsection 122.1(1);

(c) whether or not property held by Trust, at any time, would be considered Permitted Investments for purposes of clause 108(2)(b)(iii)(A) to (G);

(d) whether the transfer of properties described in 20 herein, will meet the requirements under subsection 97(2) of the Act; and

(e) whether the attributes relating to the Series A Preferred Units represent current market conditions.

In addition, nothing in this letter should be construed as implying that the CRA has agreed to or reviewed:

(f) the determination of the fair market value of any property referred to herein;

(g) whether or not any persons referred to in this ruling deal at arm's length;

(h) any potential tax consequences as a result of the proposed amendments dealing with stapled securities as announced by the Department of Finance on July 20, 2011; and

(i) any tax consequences relating to the facts and Proposed Transactions described herein other than those described in the rulings given above.

The above advance income tax rulings, which are based on the Act and Income Tax Regulations to the Act in their present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and are binding on the CRA provided that the proposed transactions are completed within six months of the date of this letter.

Yours truly,

XXXXXXXXXX
for Division Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch