2015 Ruling 2015-0588551R3 - Post-Mortem Planning

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: Post-Mortem Pipeline Planning.

Position: Favourable rulings provided.

Reasons: In accordance with the provisions of the Act and our previous positions.

XXXXXXXXXX
2015-058855

XXXXXXXXXX, 2015

Dear Sirs,

Re: Advance Income Tax Ruling
Estate of XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the Estate of XXXXXXXXXX. We also acknowledge the information provided in your numerous emails and during our various telephone conversations (XXXXXXXXXX).

We understand that to the best of your knowledge and that of the taxpayers on whose behalf this ruling was requested, none of the issues described herein:

(i) is in an earlier return of the taxpayer referred to above or a related person;

(ii) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer referred to above or a related person;

(iii) is under objection by the taxpayer referred to above or a related person;

(iv) is before the courts or, if a judgement has been issued, the time limit for the appeal to a higher court has expired; and

(v) is the subject of a ruling previously considered by the Income Tax Rulings Directorate.

Unless otherwise noted, all references herein to sections or components thereof are references to the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), as amended (hereinafter the “Act”), or the Income Tax Regulations, C.R.C., c. 945, as appropriate, and all references to monetary amounts are in Canadian dollars.

Throughout this letter, except in Paragraph 71, the entities mentioned in this letter will be referred to as follows:

“A” refers to XXXXXXXXXX, who passed away on XXXXXXXXXX;

“B” refers to XXXXXXXXXX, son of A;

“C” refers to XXXXXXXXXX, daughter of A;

“D” refers to XXXXXXXXXX, daughter of A;

“E” XXXXXXXXXX, granddaughter of A;

“F” XXXXXXXXXX, granddaughter of A;

“G” refers to XXXXXXXXXX, granddaughter of A;

“H” refers to XXXXXXXXXX;

“HOLDCO 1” refers to XXXXXXXXXX;

“HOLDCO 2” refers to XXXXXXXXXX;

“HOLDCO 3” refers to XXXXXXXXXX;

“HOLDCO 4” refers to XXXXXXXXXX;

“HOLDCO 5” refers to XXXXXXXXXX, a corporation controlled by B;

“HOLDCO 6” refers to XXXXXXXXXX, a corporation wholly-owned by D;

“NEWCO” refers to a new corporation to be incorporated under the XXXXXXXXXX;

“SUBCO 1” refers to XXXXXXXXXX;

“SUBCO 2” refers to XXXXXXXXXX, a non-resident US corporation;

“SUBCO 3” refers to XXXXXXXXXX, a non-resident US corporation;

“SUBCO 4” refers to XXXXXXXXXX;

“SUBCO 5” refers to XXXXXXXXXX;

“SUBCO 6” refers to XXXXXXXXXX, a non-resident US corporation;

“SUBCO 5-SUB” refers to XXXXXXXXXX;

“TRUST” refers to the Estate of XXXXXXXXXX

DEFINITIONS

Unless otherwise noted, the following terms have the meanings ascribed to them below:

(a) XXXXXXXXXX;

(b) “Adjusted cost base”or “ACB” has the meaning assigned to that term in section 54;

(c) “Agreed amount” means the amount agreed on by the transferor and transferee in respect of the transfer of an eligible property in a joint election filed pursuant to subsection 85(1);

(d) “Canadian-controlled private corporation” or “CCPC” has the meaning assigned to that term in subsection 125(7);

(e) “Capital property” has the meaning assigned to that term in section 54;

(f) “connected” has the meaning assigned to that term in subsection 186(4);

(g) “CRA” means the Canada Revenue Agency;

(h) “Fair market value” or “FMV” means the highest price expressed in terms of money or money’s worth, obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties acting at arm’s length, neither party being under any compulsion to transact;

(i) “General rate income pool” or “GRIP” has the meaning assigned to that term in subsection 89(1);

(j) “HOLDCO 1 DEBT” means the XXXXXXXXXX% interest-bearing debt with no set terms of repayment of HOLDCO 1 to A;

(k) “HOLDCO 2 DEBT” means the non-interest-bearing debt with no set terms of repayment of HOLDCO 2 to A;

(l) “HOLDCO 4 DEBT” means the non-interest-bearing debt with no set terms of repayment of HOLDCO 4 to A;

(m) “NEWCO-HOLDCO 1 NOTE 1” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 55;

(n) “NEWCO-HOLDCO 1 NOTE 2” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 56;

(o) “NEWCO-HOLDCO 1 NOTE 3” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 57;

(p) “NEWCO-HOLDCO 2 NOTE 1” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 58;

(q) “NEWCO-HOLDCO 2 NOTE 2” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 59;

(r) “NEWCO-HOLDCO 3 NOTE 1” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 60;

(s) “NEWCO-HOLDCO 3 NOTE 2” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 61;

(t) “NEWCO-HOLDCO 4 NOTE” means the non-interest-bearing and no set terms of repayment promissory note of NEWCO to TRUST as described in Paragraph 62;

(u) “Paid-up capital” or “PUC” has the meaning assigned to that term in subsection 89(1);

(v) “Paragraph” refers to a numbered paragraph in this advance income tax ruling;

(w) “Qualified small business corporation shares” or “QSBC” has the meaning assigned to that term in subsection 110.6(1);

(x) “Refundable dividend tax on hand” or “RDTOH” has the meaning assigned to that term in subsection 129(3);

(y) “Taxable Canadian corporation” or “TCC” has the meaning assigned to that term in subsection 89(1).

FACTS

HOLDCO 1

1. HOLDCO 1 was incorporated on XXXXXXXXXX under the XXXXXXXXXX and was at all relevant times and for all purposes of the Act a TCC and a CCPC. HOLDCO 1 has a XXXXXXXXXX year-end.

2. HOLDCO 1 owns revenue-producing properties and real estate inventory. It is actively engaged in the development of further projects.

3. As at XXXXXXXXXX, HOLDCO 1’s assets consist of cash, segregated cash, accrued interest receivable, accounts receivable, due from affiliated companies, prepaid expenses, other assets, revenue-producing properties, inventory, XXXXXXXXXX% of the capital stock of SUBCO 1, SUBCO 2, and SUBCO 3, XXXXXXXXXX% of the capital stock of SUBCO 4 and various real estate joint venture interests (not exceeding a XXXXXXXXXX% interest individually).

As at XXXXXXXXXX, HOLDCO 1’s liabilities consist of accounts payable, tenant deposits & accrued charges, due to a non-affiliated company, the HOLDCO 1 DEBT and due to affiliated companies.

Moreover, there will not be any material change in the composition of HOLDCO 1’s assets or liabilities from the date of your letter of XXXXXXXXXX until the date the proposed transactions described herein are completed.

4. Immediately before A’s death, the principal amount of the HOLDCO 1 DEBT is $XXXXXXXXXX.

5. HOLDCO 1 has the following amounts in its tax accounts (estimated as of XXXXXXXXXX):

RDTOH - XXXXXXXXXX;
GRIP - XXXXXXXXXX.

6. The authorized share capital of HOLDCO 1 consists of an unlimited number of Class “A” Common shares, Class “B” Common shares, Class “C” Common Shares, Class “D” Common shares, Class “E” Preferred shares, Class “F” Preferred shares, Class “G” Preferred shares, Class “H” Preferred shares and Class “I” Preferred shares.

7. The rights, privileges, restrictions or conditions attached to the issued and outstanding shares of the capital stock of HOLDCO 1 are as follows:

The Class “A” Common shares are voting (one vote per share) and participating.

The Class “B” Common shares are voting (one vote per share) and participating.

The Class “E” Preferred shares are non-voting, non-participating, entitling the holder to a discretionary fixed and non-cumulative dividend at a rate not exceeding XXXXXXXXXX% per year of the redemption amount and redeemable and retractable at an amount equal to the excess of the FMV of the consideration received for their issuance less the FMV of any non-share consideration received in partial consideration therefor plus the amount of any dividends declared thereon but unpaid.

8. Immediately before his death, A held all of the issued and outstanding shares of the capital stock of HOLDCO 1 being XXXXXXXXXX Class “A” Common shares, XXXXXXXXXX Class “B” Common shares and XXXXXXXXXX Class “E” Preferred share. A held de jure control of HOLDCO 1 prior to his death.

The PUC of the XXXXXXXXXX Class “A” Common shares was $XXXXXXXXXX and their FMV was $XXXXXXXXXX and their ACB for A was $XXXXXXXXXX.

The PUC of the XXXXXXXXXX Class “B” Common shares was $XXXXXXXXXX and their FMV was $XXXXXXXXXX and their ACB for A was $XXXXXXXXXX.

The PUC and FMV of the Class “E” Preferred share was $XXXXXXXXXX and its ACB for A was $XXXXXXXXXX.

HOLDCO 2

9. HOLDCO 2 was incorporated on XXXXXXXXXX under the XXXXXXXXXX and was at all relevant times and for all purposes of the Act a TCC and a CCPC. HOLDCO 2 has a XXXXXXXXXX year-end.

10. HOLDCO 2 is a holding corporation whose only activity is to hold shares of the capital stock of its wholly-owned subsidiaries.

11. As at XXXXXXXXXX, HOLDCO 2’s assets consist of cash, due from SUBCO 5 and HOLDCO 1, XXXXXXXXXX% of the capital stock of SUBCO 5 (which in turn owns XXXXXXXXXX% of the capital stock of SUBCO 5-SUB) and SUBCO 6.

As at XXXXXXXXXX, HOLDCO 2’s liabilities consist of the HOLDCO 2 DEBT.

Moreover, there will not be any material change in the composition of HOLDCO 2’s assets or liabilities from the date of your letter of XXXXXXXXXX until the date the proposed transactions described herein are completed.

12. Immediately before A’s death, the principal amount of the HOLDCO 2 DEBT is $XXXXXXXXXX.

13. HOLDCO 2 has the following amounts in its tax accounts (estimated as of XXXXXXXXXX):

Non-capital losses carryover: $XXXXXXXXXX;
RDTOH – XXXXXXXXXX (dividend refund of $XXXXXXXXXX claimed for the taxation year XXXXXXXXXX);
GRIP - XXXXXXXXXX.

14. The authorized share capital of HOLDCO 2 consists of an unlimited number of Class “A” Common shares, Class “B” Common shares, Class “C” Common shares, Class “D” Preferred shares, Class “E” Preferred shares, Class “F” Preferred shares, Class “G” Preferred shares and Class “H” Preferred shares.

15. The rights, privileges, restrictions or conditions attached to the issued and outstanding shares of the capital stock of HOLDCO 2 are as follows:

The Class “A” Common shares are voting (one vote per share) and participating.

The Class “B” Common shares are non-voting and participating.

The Class “C” Common shares are non-voting and participating.

The Class “D” Preferred shares are non-voting, non-participating, entitling the holder to a fixed and non-cumulative dividend of XXXXXXXXXX% per year of the redemption amount, redeemable and retractable for an amount of $XXXXXXXXXX per share.

The Class “E” Preferred shares are non-voting, non-participating, entitling the holder to a fixed and non-cumulative dividend of XXXXXXXXXX% per year of the redemption amount, redeemable and retractable for an amount of $XXXXXXXXXX per share.

The Class “F” Preferred shares are voting (one vote per share) and non-participating. In the event of the disposition of a Class “F” Preferred share by the original holder thereof, and whether such disposition is the result of an inter vivos agreement, a testamentary disposition, the operation of any rule of law or any other means whatsoever, then and in such event, unless the Class “F” Preferred share shall, as a result of such disposition, become vested in the spouse of the original holder thereof, the right to one vote at meetings of shareholders of HOLDCO 2 attaching to the Class “F” Preferred share disposed of shall be deemed to have terminated immediately prior to any such disposition and the subsequent holder of the Class “F” Preferred share, other than the spouse of the original holder, shall not be entitled, as such, to notice of or to attend any meeting of the shareholders, and shall not be entitled to vote at any such meeting by virtue of or in respect of his holding of Class “F” Preferred shares.

The Class “H” Preferred shares are non-voting, non-participating, entitling the holder to a fixed and non-cumulative dividend of a rate not exceeding XXXXXXXXXX% per year of the redemption amount, redeemable and retractable for an amount of $XXXXXXXXXX per share.

16. Immediately before his death, A held XXXXXXXXXX Class “D” Preferred shares and XXXXXXXXXX Class “F” Preferred shares of the capital stock of HOLDCO 2. A held de jure control of HOLDCO 2 prior to his death.

The PUC of the XXXXXXXXXX Class “D” Preferred shares was $XXXXXXXXXX and their FMV was $XXXXXXXXXX and their ACB for A was $XXXXXXXXXX.

The PUC and FMV of the XXXXXXXXXX Class “F” Preferred shares was $XXXXXXXXXX and its ACB for A was $XXXXXXXXXX.

HOLDCO 3

17. HOLDCO 3 was incorporated on XXXXXXXXXX under the XXXXXXXXXX and was at all relevant times and for all purposes of the Act a TCC and a CCPC. HOLDCO 3 has a XXXXXXXXXX year-end.

18. HOLDCO 3 owns revenue-producing residential and commercial rental property.

19. As at XXXXXXXXXX, HOLDCO 3’s assets consist of cash, accounts receivable, deposits & prepaid expenses, mortgage assumption fees and revenue-producing property.

As at XXXXXXXXXX, HOLDCO 3’s liabilities consist of accounts payable & accrued charges, tenant security deposits, current portion of long-term debt and long-term debt.

Moreover, there will not be any material change in the composition of HOLDCO 3’s assets or liabilities from the date of your letter of XXXXXXXXXX until the date the proposed transactions described herein are completed.

20. HOLDCO 3 has the following amounts in its tax accounts (estimated as of XXXXXXXXXX):

RDTOH - XXXXXXXXXX;
GRIP - XXXXXXXXXX.

21. The authorized share capital of HOLDCO 3 consists of an unlimited number of Class “A” Common shares, Class “B” Common shares and Class “A” Preferred shares.

22. The rights, privileges, restrictions or conditions attached to the issued and outstanding shares of the capital stock of HOLDCO 3 are as follows:

The Class “A” Common shares are voting (one vote per share) and participating.

The Class “B” Common shares are non-voting and participating.

23. Immediately before his death, A held XXXXXXXXXX Class “A” Common shares and XXXXXXXXXX Class “B” Common shares of the capital stock of HOLDCO 3. A held de jure control of HOLDCO 3 prior to his death.

The PUC of the XXXXXXXXXX Class “A” Common shares was $XXXXXXXXXX and their FMV was $XXXXXXXXXX and their ACB for A was $XXXXXXXXXX.

The PUC of the XXXXXXXXXX Class “B” Common shares was $XXXXXXXXXX and their FMV was $XXXXXXXXXX and their ACB for A was $XXXXXXXXXX.

HOLDCO 4

24. HOLDCO 4 was incorporated on XXXXXXXXXX under the XXXXXXXXXX and was at all relevant times and for all purposes of the Act a TCC and a CCPC. HOLDCO 4 has a XXXXXXXXXX year-end.

25. HOLDCO 4 owns revenue-producing properties.

26. As at XXXXXXXXXX, HOLDCO 4’s assets consist of cash, account receivable, prepaid expenses, GST input tax credit, mortgage finance cost, land and building.

As at XXXXXXXXXX, HOLDCO 4’s liabilities consist of accounts payable and tenant deposits, current portion of long-term debt, accrued liabilities, due to affiliated companies, the HOLDCO 4 DEBT and long-term debt.

Moreover, there will not be any material change in the composition of HOLDCO 4’s assets or liabilities from the date of your letter of XXXXXXXXXX until the date the proposed transactions described herein are completed.

27. Immediately before A’s death, the principal amount of the HOLDCO 4 DEBT is $XXXXXXXXXX.

28. HOLDCO 4 has the following amounts in its tax accounts (estimated as of XXXXXXXXXX):

RDTOH - XXXXXXXXXX;
GRIP – XXXXXXXXXX.

29. The authorized share capital of HOLDCO 4 consists of an unlimited number of Class “A” Common shares, Class “B” Common shares, Class “C” Common shares, Class “D” Common shares, Class “E” Preferred shares, Class “F” Preferred shares, Class “G” Preferred shares, Class “H” Preferred shares and Class “I” Preferred shares.

30. Immediately before his death, A held XXXXXXXXXX Class “A” Common shares of the capital stock of HOLDCO 4 which are voting (one vote per share) and participating. A held de jure control of HOLDCO 4 prior to his death.

31. The PUC of the XXXXXXXXXX Class “A” Common shares was $XXXXXXXXXX and their FMV was $XXXXXXXXXX and their ACB for A was $XXXXXXXXXX.

A

32. A has been actively engaged with the operational and strategic decision making of the above-mentioned corporations since their formation, including the establishment of new entities in the group. A had sole decision making authority over all XXXXXXXXXX % owned corporation until the time of his death and was a director of the corporations. At the time of A’s passing or shortly thereafter, the shareholders of the corporations selected new directors.

33. The executors of TRUST are B and C.

34. Under the last will and testament of A executed on XXXXXXXXXX, as modified by the codicils dated XXXXXXXXXX, A bequeathed the following properties to the following persons:

(a) To B, his XXXXXXXXXX;

(b) To D, the sum of $XXXXXXXXXX;

(c) To H, the sum of $XXXXXXXXXX; and

(d) To B and C, in equal shares, all his interest in the XXXXXXXXXX-acre parcel of land at XXXXXXXXXX, excepting thereout all mines and minerals.

35. The residue of A’s estate (which included shares of the capital stock of HOLDCO 1, HOLDCO 2, HOLDCO 3, HOLDCO 4, the HOLDCO 1 DEBT, the HOLDCO 2 DEBT and the HOLDCO 4 DEBT referred to above) was to be divided, paid and distributed in equal shares to B and C.

The tax consequences resulting from A’s death

36. The shares of the capital stock of HOLDCO 1 held by A and the HOLDCO 1 Debt were Capital property to A immediately before his death.

37. In accordance with paragraph 70(5)(a), A was deemed to dispose, immediately before his death, of the shares of the capital stock of HOLDCO 1, being XXXXXXXXXX Class “A” Common shares, XXXXXXXXXX Class “B” Common shares and XXXXXXXXXX Class “E” Preferred share, and the HOLDCO 1 DEBT for proceeds equal to the FMV of the property at that time being $XXXXXXXXXX.

38. This deemed disposition resulted in a capital gain equal to $XXXXXXXXXX upon A’s death as a result of the deemed disposition by A of the Class “A” Common shares, and the Class “B” Common shares held in HOLDCO 1 for a total capital gain of $XXXXXXXXXX. The Class “A” Common shares and the Class “B” Common shares were not qualified small business corporation shares and, consequently, A was not eligible to claim the capital gains deduction under section 110.6 on the shares of the capital stock of HOLDCO 1. Nor did A, or any non-arm’s length person to A previously claimed any capital gains deduction in respect of these shares.

Since the FMV, immediately before A’s death, of the Class “E” Preferred share of the capital stock of HOLDCO 1 and the HOLDCO 1 DEBT were equal to their ACB to A, no capital gain or capital loss was realized on the deemed disposition by A pursuant to paragraph 70(5)(a).

39. TRUST was deemed to have acquired the Class “A” Common shares, the Class “B” Common shares, the Class “E” Preferred share of the capital stock of HOLDCO 1 and the HOLDCO 1 DEBT at a cost equal to their respective FMV, being $XXXXXXXXXX immediately before A’s death pursuant to paragraph 70(5)(b). These shares of the capital stock of HOLDCO 1 and the HOLDCO 1 DEBT are Capital property to TRUST.

40. The shares of the capital stock of HOLDCO 2 held by A and the HOLDCO 2 DEBT were Capital property to A immediately before his death.

41. In accordance with paragraph 70(5)(a), A was deemed to dispose, immediately before his death, of the shares of the capital stock of HOLDCO 2, being XXXXXXXXXX Class “D” Preferred shares and XXXXXXXXXX Class “F” Preferred shares, and the HOLDCO 2 DEBT for proceeds equal to the FMV of the property at that time being $XXXXXXXXXX.

42. This deemed disposition resulted in a capital gain equal to $XXXXXXXXXX upon A’s death as a result of the deemed disposition by A of the Class “D” Preferred shares. The Class “D” Preferred shares were qualified small business corporation shares and, consequently, A was eligible to claim the capital gains deduction under section 110.6 on the shares of the capital stock of HOLDCO 2. As such, A claimed the capital gains deduction under subsection 110.6(2.1) with respect to a gain of $XXXXXXXXXX in his final income tax return. However, neither A nor any non-arm’s length person to A previously claimed any capital gains deduction in respect of these shares.

Since the FMV, immediately before A’s death, of the Class “F” Preferred share of the capital stock of HOLDCO 2 and the HOLDCO 2 DEBT were equal to their ACB to A, no capital gain or capital loss was realized on the deemed disposition by A pursuant to paragraph 70(5)(a).

43. TRUST was deemed to have acquired the Class “D” Preferred shares, the Class “F” Preferred shares of the capital stock of HOLDCO 2 and the HOLDCO 2 DEBT at a cost equal to their respective FMV, being $XXXXXXXXXX immediately before A’s death pursuant to paragraph 70(5)(b). These shares of the capital stock of HOLDCO 2 and the HOLDCO 2 DEBT are Capital property to TRUST.

44. The shares of the capital stock of HOLDCO 3 held by A were Capital property to A immediately before his death.

45. In accordance with paragraph 70(5)(a), A was deemed to dispose, immediately before his death, of the shares of the capital stock of HOLDCO 3 being, XXXXXXXXXX Class “A” Common shares and XXXXXXXXXX Class “B” Common shares, for proceeds equal to the FMV of the property at that time being $XXXXXXXXXX.

46. This deemed disposition resulted in a capital gain equal to $XXXXXXXXXX upon A’s death as a result of the deemed disposition by A of the Class “A” Common shares, and the Class “B” Common shares held in HOLDCO 3 for a total capital gain of $XXXXXXXXXX. The Class “A” Common shares and the Class “B” Common shares were not qualified small business corporation shares and, consequently, A was not eligible to claim the capital gains deduction under section 110.6 on the shares of the capital stock of HOLDCO 3. Nor did A, or any non-arm’s length person to A previously claimed any capital gains deduction in respect of these shares.

47. TRUST was deemed to have acquired the Class “A” Common shares and the Class “B” Common shares at a cost equal to their respective FMV, being $XXXXXXXXXX immediately before A’s death pursuant to paragraph 70(5)(b). These shares of the capital stock of HOLDCO 3 are Capital property to TRUST.

48. The shares of the capital stock of HOLDCO 4 held by A and the HOLDCO 4 DEBT were Capital property to A immediately before his death.

49. In accordance with paragraph 70(5)(a), A was deemed to dispose, immediately before his death, of the shares of the capital stock of HOLDCO 4, being XXXXXXXXXX Class “A” Common shares, and the HOLDCO 4 DEBT for proceeds equal to the FMV of the property at that time being $XXXXXXXXXX.

50. This deemed disposition resulted in a capital gain equal to $XXXXXXXXXX upon A’s death as a result of the deemed disposition by A of the Class “A” Common shares in HOLDCO 4. The Class “A” Common shares were not qualified small business corporation shares and, consequently, A was not eligible to claim the capital gains deduction under section 110.6 on the shares of the capital stock of HOLDCO 4. Nor did A, or any non-arm’s length person to A previously claimed any capital gains deduction in respect of these shares.

Since the FMV, immediately before A’s death, of the HOLDCO 4 DEBT was equal to its ACB to A, no capital gain or capital loss was realized on the deemed disposition by A pursuant to paragraph 70(5)(a).

51. TRUST was deemed to have acquired the Class “A” Common shares and the HOLDCO 4 DEBT at a cost equal to their respective FMV, being $XXXXXXXXXX immediately before A’s death pursuant to paragraph 70(5)(b). These shares of the capital stock of HOLDCO 4 and the HOLDCO 4 DEBT are Capital property to TRUST.

PROPOSED TRANSACTIONS

Incorporation of NEWCO

52. TRUST will incorporate NEWCO. NEWCO will be at all relevant times and for all purposes of the Act a TCC and a CCPC. NEWCO will have a XXXXXXXXXX year-end.

53. NEWCO’s authorized share capital will include Class “A” Common Shares (voting and participating) and Preferred shares (non-voting and non-participating).

Subscription to shares of the capital stock of NEWCO

54. TRUST will subscribe for XXXXXXXXXX Class “A” Common shares of the capital stock of NEWCO for a consideration of $XXXXXXXXXX.

Transfer by TRUST of the shares of the capital stock of HOLDCO 1

55. TRUST will transfer the Class “A” Common shares of the capital stock of HOLDCO 1 to NEWCO. TRUST will receive as consideration:

(a) the NEWCO-HOLDCO 1 NOTE 1 issued by NEWCO for an amount equal to the FMV of the Class “A” Common shares of the capital stock of HOLDCO 1 as at the date of A’s death ($XXXXXXXXXX), and

(b) Preferred shares of the capital stock of NEWCO with a FMV and a redemption amount equal to the excess, if any, between the FMV of the Class “A” Common shares of the capital stock of HOLDCO 1 as at the date of transfer and the FMV of the Class “A” Common shares of the capital stock of HOLDCO 1 as at the date of A’s death, being the principal amount of the NEWCO-HOLDCO 1 NOTE 1.

TRUST and NEWCO will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Class “A” Common shares of the capital stock of HOLDCO 1 held by TRUST to NEWCO. The Agreed amount in respect of the transfer will be equal to the ACB of the Class “A” Common shares of the capital stock of HOLDCO 1 to TRUST as at the date of transfer ($XXXXXXXXXX). For greater certainty, the Agreed amount will not be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) (the FMV of the Class “A” Common shares of the capital stock of HOLDCO 1 as at the date of transfer) and (ii) ($XXXXXXXXXX). Also, the Agreed amount will not be less than the amount described in paragraph 85(1)(b) ($XXXXXXXXXX).

NEWCO will add a nominal amount to the stated capital of its Preferred shares which, for greater certainty, will not exceed the maximum amount that could be added to the PUC of such shares, having regard to paragraph 84.1(1)(a).

Immediately after the transfer of the Class “A” Common shares of the capital stock of HOLDCO 1 to NEWCO, HOLDCO 1 will be connected with NEWCO.

56. TRUST will transfer the Class “B” Common shares of the capital stock of HOLDCO 1 to NEWCO. TRUST will receive as consideration:

(a) the NEWCO-HOLDCO 1 NOTE 2 issued by NEWCO for an amount equal to the FMV of the Class “B” Common shares of the capital stock of HOLDCO 1 as at the date of A’s death ($XXXXXXXXXX), and

(b) Preferred shares of the capital stock of NEWCO with a FMV and a redemption amount equal to the excess, if any, between the FMV of the Class “B” Common shares of the capital stock of HOLDCO 1 as at the date of transfer and the FMV of the Class “B” Common shares of the capital stock of HOLDCO 1 as at the date of A’s death, being the principal amount of the NEWCO-HOLDCO 1 NOTE 2.

TRUST and NEWCO will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Class “B” Common shares of the capital stock of HOLDCO 1 held by TRUST to NEWCO. The Agreed amount in respect of the transfer will be equal to the ACB of the Class “B” Common shares of the capital stock of HOLDCO 1 to TRUST as at the date of transfer ($XXXXXXXXXX). For greater certainty, the Agreed amount will not be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) (the FMV of the Class “B” Common shares of the capital stock of HOLDCO 1 as at the date of transfer) and (ii) ($XXXXXXXXXX). Also, the Agreed amount will not be less than the amount described in paragraph 85(1)(b) ($XXXXXXXXXX).

NEWCO will add a nominal amount to the stated capital of its Preferred shares which, for greater certainty, will not exceed the maximum amount that could be added to the PUC of such shares, having regard to paragraph 84.1(1)(a).

57. TRUST will transfer the Class “E” Preferred share of the capital stock of HOLDCO 1 to NEWCO. TRUST will receive as consideration the NEWCO-HOLDCO 1 NOTE 3 issued by NEWCO for an amount equal to the FMV of the Class “E” Preferred share of the capital stock of HOLDCO 1 as at the date of A’s death ($XXXXXXXXXX).

Transfer by TRUST of the shares of the capital stock of HOLDCO 2

58. TRUST will transfer the Class “D” Preferred shares of the capital stock of HOLDCO 2 to NEWCO. TRUST will receive as consideration:

(a) the NEWCO-HOLDCO 2 NOTE 1 issued by NEWCO for an amount equal to the FMV of the Class “D” Preferred shares of the capital stock of HOLDCO 2 as at the date of A’s death ($XXXXXXXXXX) less the amount in respect of which the capital gains deduction under subsection 110.6(2.1) was claimed by A ($XXXXXXXXXX), and

(b) Preferred shares of the capital stock of NEWCO with a FMV and a redemption amount equal to the excess, if any, between the FMV of the Class “D” Common shares of the capital stock of HOLDCO 2 as at the date of transfer ($XXXXXXXXXX) and the principal amount of the NEWCO-HOLDCO 2 NOTE 1.

TRUST and NEWCO will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Class “D” Preferred shares of the capital stock of HOLDCO 2 held by TRUST to NEWCO. The Agreed amount in respect of the transfer will be equal to the ACB of the Class “D” Preferred shares of the capital stock of HOLDCO 2 to TRUST as at the date of transfer ($XXXXXXXXXX). For greater certainty, the Agreed amount will not be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) ($XXXXXXXXXX) and (ii) ($XXXXXXXXXX). Also, the Agreed amount will not be less than the amount described in paragraph 85(1)(b) ($XXXXXXXXXX).

NEWCO will add a nominal amount to the stated capital of its Preferred shares which, for greater certainty, will not exceed the maximum amount that could be added to the PUC of such shares, having regard to paragraph 84.1(1)(a).

Immediately after the transfer of the Class “D” Preferred shares of the capital stock of HOLDCO 2 to NEWCO, HOLDCO 2 will be connected with NEWCO.

59. TRUST will transfer the Class “F” Preferred shares of the capital stock of HOLDCO 2 to NEWCO. TRUST will receive as consideration the NEWCO-HOLDCO 2 NOTE 2 issued by NEWCO for an amount equal to the FMV of the Class “F” Preferred shares of the capital stock of HOLDCO 2 as at the date of A’s death ($XXXXXXXXXX).

Transfer by TRUST of the shares of the capital stock of HOLDCO 3

60. TRUST will transfer the Class “A” Common shares of the capital stock of HOLDCO 3 to NEWCO. TRUST will receive as consideration:

(a) the NEWCO-HOLDCO 3 NOTE 1 issued by NEWCO for an amount equal to the FMV of the Class “A” Common shares of the capital stock of HOLDCO 3 as at the date of A’s death ($XXXXXXXXXX), and

(b) Preferred shares of the capital stock of NEWCO with a FMV and a redemption amount equal to the excess, if any, between the FMV of the Class “A” Common shares of the capital stock of HOLDCO 3 as at the date of transfer and the FMV of the Class “A” Common shares of the capital stock of HOLDCO 3 as at the date of A’s death, being the principal amount of the NEWCO-HOLDCO 3 NOTE 1.

TRUST and NEWCO will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Class “A” Common shares of the capital stock of HOLDCO 3 held by TRUST to NEWCO. The Agreed amount in respect of the transfer will be equal to the ACB of the Class “A” Common shares of the capital stock of HOLDCO 3 to TRUST as at the date of transfer ($XXXXXXXXXX). For greater certainty, the Agreed amount will not be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) (the FMV of the Class “A” Common shares of the capital stock of HOLDCO 3 as at the date of transfer) and (ii) ($XXXXXXXXXX). Also, the Agreed amount will not be less than the amount described in paragraph 85(1)(b) ($XXXXXXXXXX).

NEWCO will add a nominal amount to the stated capital of its Preferred shares which, for greater certainty, will not exceed the maximum amount that could be added to the PUC of such shares, having regard to paragraph 84.1(1)(a).

Immediately after the transfer of the Class “A” Common shares of the capital stock of HOLDCO 3 to NEWCO, HOLDCO 3 will be connected with NEWCO.

61. TRUST will transfer the Class “B” Common shares of the capital stock of HOLDCO 3 to NEWCO. TRUST will receive as consideration:

(a) the NEWCO-HOLDCO 3 NOTE 2 issued by NEWCO for an amount equal to the FMV of the Class “B” Common shares of the capital stock of HOLDCO 3 as at the date of A’s death ($XXXXXXXXXX), and

(b) Preferred shares of the capital stock of NEWCO with a FMV and a redemption amount equal to the excess, if any, between the FMV of the Class “B” Common shares of the capital stock of HOLDCO 3 as at the date of transfer and the FMV of the Class “B” Common shares of the capital stock of HOLDCO 3 as at the date of A’s death, being the principal amount of the NEWCO-HOLDCO 3 NOTE 2.

TRUST and NEWCO will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Class “B” Common shares of the capital stock of HOLDCO 3 held by TRUST to NEWCO. The Agreed amount in respect of the transfer will be equal to the ACB of the Class “B” Common shares of the capital stock of HOLDCO 3 to TRUST as at the date of transfer ($XXXXXXXXXX). For greater certainty, the Agreed amount will not be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) (the FMV of the Class “B” Common shares of the capital stock of HOLDCO 3 as at the date of transfer) and (ii) ($XXXXXXXXXX). Also, the Agreed amount will not be less than the amount described in paragraph 85(1)(b) ($XXXXXXXXXX).

NEWCO will add a nominal amount to the stated capital of its Preferred shares which, for greater certainty, will not exceed the maximum amount that could be added to the PUC of such shares, having regard to paragraph 84.1(1)(a).

Transfer by TRUST of the shares of the capital stock of HOLDCO 4

62. TRUST will transfer the Class “A” Common shares of the capital stock of HOLDCO 4 to NEWCO. TRUST will receive as consideration:

(a) the NEWCO-HOLDCO 4 NOTE issued by NEWCO for an amount equal to the FMV of the Class “A” Common shares of the capital stock of HOLDCO 4 as at the date of A’s death ($XXXXXXXXXX), and

(b) Preferred shares of the capital stock of NEWCO with a FMV and a redemption amount equal to the excess, if any, between the FMV of the Class “A” Common shares of the capital stock of HOLDCO 4 as at the date of transfer and the FMV of the Class “A” Common shares of the capital stock of HOLDCO 4 as at the date of A’s death, being the principal amount of the NEWCO-HOLDCO 4 NOTE.

TRUST and NEWCO will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Class “A” Common shares of the capital stock of HOLDCO 4 held by TRUST to NEWCO. The Agreed amount in respect of the transfer will be equal to the ACB of the Class “A” Common shares of the capital stock of HOLDCO 4 to TRUST as at the date of transfer ($XXXXXXXXXX). For greater certainty, the Agreed amount will not be less than the least of the amounts specified in subparagraphs 85(1)(c.1)(i) (the FMV of the Class “A” Common shares of the capital stock of HOLDCO 4 as at the date of transfer) and (ii) ($XXXXXXXXXX). Also, the Agreed amount will not be less than the amount described in paragraph 85(1)(b) ($XXXXXXXXXX).

NEWCO will add a nominal amount to the stated capital of its Preferred shares which, for greater certainty, will not exceed the maximum amount that could be added to the PUC of such shares, having regard to paragraph 84.1(1)(a).

Immediately after the transfer of the Class “A” Common shares of the capital stock of HOLDCO 4 to NEWCO, HOLDCO 4 will be connected with NEWCO.

63. HOLDCO 1 will not be amalgamated with or wound-up into NEWCO for a period of at least one year following the transfer of the shares of the capital stock of HOLDCO 1 to NEWCO. During that year, HOLDCO 1’s operations and business activities will continue in the same manner as before the death of A.

64. HOLDCO 2 will not be amalgamated with or wound-up into NEWCO for a period of at least one year following the transfer of the shares of the capital stock of HOLDCO 2 to NEWCO. During that year, HOLDCO 2’s operations and business activities will continue in the same manner as before the death of A.

65. HOLDCO 3 will not be amalgamated with or wound-up into NEWCO for a period of at least one year following the transfer of the shares of the capital stock of HOLDCO 3 to NEWCO. During that year, HOLDCO 3’s operations and business activities will continue in the same manner as before the death of A.

66. HOLDCO 4 will not be amalgamated with or wound-up into NEWCO for a period of at least one year following the transfer of the shares of the capital stock of HOLDCO 4 to NEWCO. During that year, HOLDCO 4’s operations and business activities will continue in the same manner as before the death of A.

67. After at least one year has elapsed since the transfer of the shares of the capital stock of HOLDCO 1 to NEWCO, the NEWCO-HOLDCO 1 NOTE 1, NEWCO-HOLDCO 1 NOTE 2 and NEWCO-HOLDCO 1 NOTE 3 will be gradually repaid over a period of many years. However, the amount of the repayment, if any, in any given quarter of the first year, that is at least one year after the transfer of the shares of the capital stock of HOLDCO 1 to NEWCO, will not exceed XXXXXXXXXX% of the aggregate principal amount of the NEWCO-HOLDCO 1 NOTE 1, NEWCO-HOLDCO 1 NOTE 2 and NEWCO-HOLDCO 1 NOTE 3.

68. After at least one year has elapsed since the transfer of the shares of the capital stock of HOLDCO 2 to NEWCO, the NEWCO-HOLDCO 2 NOTE 1 and NEWCO-HOLDCO 2 NOTE 2 will be gradually repaid over a period of many years. However, the amount of the repayment, if any, in any given quarter of the first year, that is at least one year after the transfer of the shares of the capital stock of HOLDCO 2 to NEWCO, will not exceed XXXXXXXXXX% of the aggregate principal amount of the NEWCO-HOLDCO 2 NOTE 1 and NEWCO-HOLDCO 2 NOTE 2.

69. After at least one year has elapsed since the transfer of the shares of the capital stock of HOLDCO 3 to NEWCO, the NEWCO-HOLDCO 3 NOTE 1 and NEWCO-HOLDCO 3 NOTE 2 will be gradually repaid over a period of many years. However, the amount of the repayment, if any, in any given quarter of the first year, that is at least one year after the transfer of the shares of the capital stock of HOLDCO 3 to NEWCO, will not exceed XXXXXXXXXX% of the aggregate principal amount of the NEWCO-HOLDCO 3 NOTE 1 and NEWCO-HOLDCO 3 NOTE 2.

70. After at least one year has elapsed since the transfer of the shares of the capital stock of HOLDCO 4 to NEWCO, the NEWCO-HOLDCO 4 NOTE will be gradually repaid over a period of many years. However, the amount of the repayment, if any, in any given quarter of the first year, that is at least one year after the transfer of the shares of the capital stock of HOLDCO 4 to NEWCO, will not exceed XXXXXXXXXX% of the aggregate principal amount of the NEWCO-HOLDCO 4 NOTE.

ADDITIONAL INFORMATION

71. The federal business number of the parties referred to herein, the location of the tax services office and taxation centre where their returns are filed, and the address of their head office are as follows:

Estate of XXXXXXXXXX

Trust Account Number: not assigned
XXXXXXXXXX SIN: XXXXXXXXXX
Tax Services Office: XXXXXXXXXX
Tax Centre: XXXXXXXXXX
Address: XXXXXXXXXX

Business Number: XXXXXXXXXX
Tax Services Office: XXXXXXXXXX
Tax Centre: XXXXXXXXXX
Address: XXXXXXXXXX

PURPOSE OF THE PROPOSED TRANSACTIONS

72. The purpose of the proposed transactions is to return to TRUST, an amount equal to the value of the shares of the capital stock of HOLDCO 1, HOLDCO 2, HOLDCO 3 and HOLDCO 4 immediately before A’s death, while minimizing the inherent double tax exposure that can result from the application of paragraph 70(5)(a) which applied in these particular circumstances.

RULINGS GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, additional information and purpose of the proposed transactions and provided that the proposed transactions are completed in the manner described above, we confirm the following:

A. Section 84.1 will not apply, to reduce the PUC of the Preferred shares of the capital stock of NEWCO or to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “A” Common shares of the capital stock of HOLDCO 1 held by TRUST to NEWCO as described in Paragraph 55 provided that:

(a) the NEWCO-HOLDCO 1 Note 1 is issued for an amount not exceeding the FMV of the Class “A” Common shares of the capital stock of HOLDCO 1 as at the date of A’s death, and

(b) the PUC of the Preferred shares of the capital stock of NEWCO issued to TRUST on the transfer described in Paragraph 55 is a nominal amount, not exceeding the maximum amount that could be added to the PUC of such shares having regard to paragraph 84.1(1)(a).

B. Section 84.1 will not apply, to reduce the PUC of the Preferred shares of the capital stock of NEWCO or to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “B” Common shares of the capital stock of HOLDCO 1 held by TRUST to NEWCO as described in Paragraph 56 provided that:

(a) the NEWCO-HOLDCO 1 Note 2 is issued for an amount not exceeding the FMV of the Class “B” Common shares of the capital stock of HOLDCO 1 as at the date of A’s death, and

(b) the PUC of the Preferred shares of the capital stock of NEWCO issued to TRUST on the transfer described in Paragraph 56 is a nominal amount, not exceeding the maximum amount that could be added to the PUC of such shares having regard to paragraph 84.1(1)(a).

C. Section 84.1 will not apply to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “E” Preferred share of the capital stock of HOLDCO 1 held by TRUST to NEWCO as described in Paragraph 57 provided that the NEWCO-HOLDCO 1 NOTE 3 is issued for an amount not to exceed the FMV of the Class “E” Preferred shares as at the date of A’s death.

D. Section 84.1 will not apply, to reduce the PUC of the Preferred shares of the capital stock of NEWCO or to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “D” Preferred shares of the capital stock of HOLDCO 2 held by TRUST to NEWCO as described in Paragraph 58 provided that:

(a) the NEWCO-HOLDCO 2 Note 1 is issued for an amount not exceeding the FMV of the Class “D” Preferred shares of the capital stock of HOLDCO 2 as at the date of A’s death less the amount in respect of which the capital gains deduction under subsection 110.6(2.1) was claimed by A, and

(b) the PUC of the Preferred shares of the capital stock of NEWCO issued to TRUST on the transfer described in Paragraph 58 is a nominal amount, not exceeding the maximum amount that could be added to the PUC of such shares having regard to paragraph 84.1(1)(a).

E. Section 84.1 will not apply to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “F” Preferred shares of the capital stock of HOLDCO 2 held by TRUST to NEWCO as described in Paragraph 59 provided that the NEWCO-HOLDCO 2 NOTE 2 is issued for an amount not to exceed the FMV of the Class “F” Preferred shares as at the date of A’s death.

F. Section 84.1 will not apply, to reduce the PUC of the Preferred shares of the capital stock of NEWCO or to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “A” Common shares of the capital stock of HOLDCO 3 held by TRUST to NEWCO as described in Paragraph 60 provided that:

(a) the NEWCO-HOLDCO 3 Note 1 is issued for an amount not exceeding the FMV of the Class “A” Common shares of the capital stock of HOLDCO 3 as at the date of A’s death, and

(b) the PUC of the Preferred shares of the capital stock of NEWCO issued to TRUST on the transfer described in Paragraph 60 is a nominal amount, not exceeding the maximum amount that could be added to the PUC of such shares having regard to paragraph 84.1(1)(a).

G. Section 84.1 will not apply, to reduce the PUC of the Preferred shares of the capital stock of NEWCO or to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “B” Common shares of the capital stock of HOLDCO 3 held by TRUST to NEWCO as described in Paragraph 61 provided that:

(a) the NEWCO-HOLDCO 3 Note 2 is issued for an amount not exceeding the FMV of the Class “B” Common shares of the capital stock of HOLDCO 3 as at the date of A’s death, and

(b) the PUC of the Preferred shares of the capital stock of NEWCO issued to TRUST on the transfer described in Paragraph 61 is a nominal amount, not exceeding the maximum amount that could be added to the PUC of such shares having regard to paragraph 84.1(1)(a).

H. Section 84.1 will not apply, to reduce the PUC of the Preferred shares of the capital stock of NEWCO or to deem TRUST to have received a dividend from NEWCO, on the transfer of the Class “A” Common shares of the capital stock of HOLDCO 4 held by TRUST to NEWCO as described in Paragraph 62 provided that:

(a) the NEWCO-HOLDCO 4 Note is issued for an amount not exceeding the FMV of the Class “A” Common shares of the capital stock of HOLDCO 4 as at the date of A’s death, and

(b) the PUC of the Preferred shares of the capital stock of NEWCO issued to TRUST on the transfer described in Paragraph 62 is a nominal amount, not exceeding the maximum amount that could be added to the PUC of such shares having regard to paragraph 84.1(1)(a).

I. Subsection 84(2) will not apply as a result of the proposed transactions, in and by themselves, to deem HOLDCO 1 to have paid, and TRUST to have received, a dividend on the Class “A” Common, Class “B” Common and Class “E” Preferred shares held by TRUST.

J. Subsection 84(2) will not apply as a result of the proposed transactions, in and by themselves, to deem HOLDCO 2 to have paid, and TRUST to have received, a dividend on the Class “D” Preferred and Class “F” Preferred shares held by TRUST.

K. Subsection 84(2) will not apply as a result of the proposed transactions, in and by themselves, to deem HOLDCO 3 to have paid, and TRUST to have received, a dividend on the Class “A” Common and Class “B” Common shares held by TRUST.

L. Subsection 84(2) will not apply as a result of the proposed transactions, in and by themselves, to deem HOLDCO 4 to have paid, and TRUST to have received, a dividend on the Class “A” Common shares held by TRUST.

M. The provisions of subsection 245(2) will not apply as a result of the proposed transactions, in and by themselves, to re-determine the tax consequences stated in the rulings given above.

The above rulings are given subject to the limitations and qualifications set out in Circular 70-6R6 dated August 29, 2014 and are binding on the CRA provided that the proposed transactions are completed before 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.

COMMENTS

Unless otherwise confirmed, nothing in this letter should be construed as implying that CRA has confirmed, reviewed, made any determination, or accepted any method for the determination in respect of:

(a) the PUC of any share or the ACB or FMV of any property referred to herein;

(b) the balance of GRIP and RDTOH of any corporation; or

(c) any other tax consequence 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.

Nothing in this letter should be construed as confirmation, express or implied, that, for the purpose of any of the rulings given above, any adjustment to the FMV of the properties transferred or the redemption amount of the shares issued as consideration, whether pursuant to a price adjustment clause or otherwise, will be effective retroactively to the time of the transfer and issuance of shares. Furthermore, none of the rulings given in this letter are intended to apply to or in the event of the operation of a price adjustment clause, since such adjustment 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 Income Tax Folio S4-F3-C1, dated March 28, 2013.

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

Yours truly,

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