2016 Ruling 2015-0612931R3 - 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 units in one or more classes and the re-designation of the existing units into units of a given class would result in (1) a disposition by the trust of its property or in the creation of a new trust for purposes of the Act, (2) a disposition by the existing unitholders of their existing units, and/or (3) the application of subsection 104(7.1).

Position: (1) No. (2) No. (3) No.

Reasons: (1) The changes are not considered sufficiently material or significant to result in the creation of a new trust for purposes of the Act and it is submitted that a new trust will not be created under the applicable provincial law. (2) No cash consideration or other proceeds of disposition will be received by the existing unitholders in respect of the re-designation and the attributes of the existing units and the new class F units will be substantially the same. Furthermore, the changes to the trust indenture in the given instance, when viewed as a whole, do not support the conclusion that there would be a disposition. (3) Consistent with previous rulings.

XXXXXXXXXX						2015-061293

XXXXXXXXXX, 2016

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling Request
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX in which you requested advance income tax rulings on behalf of the above-referenced taxpayer. We also acknowledge the additional information provided to us in your emails dated XXXXXXXXXX and during our various telephone conversations (XXXXXXXXXX).

We understand that, to the best of your knowledge and that of the above-referenced taxpayer, none of the issues raised in this letter is:

(i) in a previously filed 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 previously filed tax return of the taxpayer or a related person;

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

(iv) the subject of a current or completed court process involving the taxpayer or a related person; or

(v) the subject of a ruling previously considered by the Directorate.

Unless otherwise stated, all references to a statute are to the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1, as amended to the date of this letter (the “Act”).

DEFINED TERMS, ABBREVIATIONS AND NAMES OF TAXPAYERS

The following terms, abbreviations and names of taxpayers referred to throughout this document will have the following meaning:

“Active Co.” means XXXXXXXXXX, a corporation formed pursuant to and governed by the laws of XXXXXXXXXX;

“Additional Management Fee” means an annual fee equal to XXXXXXXXXX (XXXXXXXXXX%) of the NAV attributable to Class A Units payable monthly by Operating LP to Operating GP during the Term of the Services Agreement, in an amount equal to XXXXXXXXXX% of such NAV as at the beginning of the month;

“Amended Declaration of Trust” means the Declaration of Trust, as amended in accordance with the Proposed Transactions described in Paragraphs 24 to 40 below;

“Amended Services Agreement” means the Services Agreement, as amended in accordance with the Proposed Transactions described in Paragraphs 42 to 44 below;

“Article” means any article of the Declaration of Trust or the Amended Declaration of Trust, as the case may be;

“Business Day” means a day, other than a Saturday, Sunday or statutory holiday in the City of XXXXXXXXXX;

“Cash Flow” means, for any Distribution Period,

(i) the sum of all cash amounts received by the Trust for or in respect of such Distribution Period, including the amounts received as a limited partner holding Investment LP units pursuant to the terms of the Investment LP Agreement and all other income, interest, distributions, dividends, proceeds from the investment in the Investment LP units (other than by way of security interest), returns of capital and repayments of indebtedness, as well as all amounts received by the Trust in any prior Distribution Period to the extent not previously distributed; less

(ii) all costs and expenses of the Trust that, in the opinion of the Trustee, may reasonably be considered to have accrued and become owing in respect of, or which relate to, such Distribution Period or a prior Distribution Period if not accrued in such prior period; and less

(iii) all amounts payable in cash that relate to the redemption or repurchase of Units and that have become payable by the Trust in such Distribution Period or prior Distribution Period,

provided that any funds borrowed by the Trust or the proceeds of the issuance of Units or other securities of the Trust and related transactions in connection therewith will not be included in the calculations of Cash Flow in respect of any Distribution Period;

“Class” means any one or more classes of Units;

“Class A Unit” means one Unit of class A that represents a beneficial interest in the Trust, as more particularly described in Paragraphs 32 and 33 below, which will be issued from time to time in accordance with the provisions of the Amended Declaration of Trust;

“Class A Unitholder” means a holder of record of any Class A Unit;

“Class F Unit” means one Unit of class F that represents a beneficial interest in the Trust, as more particularly described in Paragraphs 32 and 33 below, which will be issued from time to time in accordance with the provisions of the Amended Declaration of Trust;

“Class F Unitholder” means a holder of record of any Class F Unit;

“Class Specific Expenses” means any expenses (net of income tax effect, if any, associated with such expenses), including any Management Fee and Additional Management Fee payable to Operating GP, allocated to a particular Class of Units as determined by the Trustee, acting reasonably, as set out in a Supplemental Indenture hereto, from time to time, and as stated in the Disclosure Documents, other than Grandfathered Trailer Fees;

“CRA” means the Canada Revenue Agency;

“Declaration of Trust” means the declaration of trust dated XXXXXXXXXX, pursuant to which the Trust was formed under the laws of XXXXXXXXXX, as amended and restated XXXXXXXXXX;

“Disclosure Documents” means any term sheet, offering memorandum, prospectus or similar document as may be used or required by the applicable securities legislation in connection with the distribution of Units;

“Distributable Cash Flow” means the Cash Flow for a Distribution Period less any amount that the Trustee may reasonably consider to be necessary to provide for the payment of any costs or expenses, including any tax liability of the Trust, that have been or are reasonably expected to be incurred in the activities and operations of the Trust (to the extent that such costs or expenses have not otherwise been taken into account in the calculation of the Cash Flow of the Trust) and less such reserves or amounts as are, in the opinion of the Trustee, necessary or desirable;

“Distribution Period” means XXXXXXXXXX, being any of the periods ending on XXXXXXXXXX;

“Distribution Record Date” in respect of any Distribution Period, means the last Business Day of such Distribution Period;

“Existing Unit” means the issued and outstanding Units as of the date of the Amended Declaration of Trust;

“Existing Unitholder” means a holder of record of any Existing Unit;

“Grandfathered Trailer Fee” means, where Securities Dealers are involved in the sale of Units prior to the date of the Amended Declaration of Trust, fee equal to XXXXXXXXXX percent (XXXXXXXXXX%) per annum on subscription proceeds of the Units. Such fee is paid by Investment LP to Securities Dealers;

“Grossed-Up Distributable Cash Flow” means an amount equal to the Distributable Cash Flow plus any Class Specific Expenses;

“Holding Co.” means XXXXXXXXXX, a corporation formed pursuant to and governed by the laws of XXXXXXXXXX;

“Initial Contribution” means the amount of $XXXXXXXXXX paid by the Settlor to the Trustee for the purpose of settling the Trust;

“Investment Co” means XXXXXXXXXX, a corporation formed pursuant to and governed by the laws of XXXXXXXXXX;

“Investment GP” means XXXXXXXXXX, a corporation formed pursuant to and governed by the laws of XXXXXXXXXX;

“Investment LP” means XXXXXXXXXX, a limited partnership established under and governed by the laws of XXXXXXXXXX;

“Investment LP Agreement” means the agreement between the Trust and Investment GP establishing Investment LP, dated XXXXXXXXXX;

“Management Fee” means an annual fee equal to XXXXXXXXXX percent (XXXXXXXXXX%) of the NAV, in the case of the Existing Units, or XXXXXXXXXX percent (XXXXXXXXXX%) of the NAV attributable to the Class A Units, the Class F Units or the interest of Investment GP in Investment LP, as the case may be, payable monthly by Operating LP to Operating GP during the Term of the Services Agreement, in an amount equal to XXXXXXXXXX% of such NAV as at the beginning of the month;

“Mutual Fund Trust” has the meaning assigned by subsection 132(6);

“NAV” means the net asset value of Investment LP, calculated in accordance with the provisions of the Investment LP Agreement;

“Net Realized Capital Gains” means the amount, if any, as determined by the Trustee, by which the aggregate of the capital gains of the Trust realized in such year exceeds the aggregate of the capital losses of the Trust realized in such year and each amount determined by the Trustee in respect of any net capital loss for a prior taxation year that the Trust is permitted by the Act to deduct in computing the taxable income of the Trust for such year multiplied by the reciprocal of the fraction applicable in determining the proportion of a capital gain for such prior taxation year that is a taxable capital gain;

“Non-Residents” means non-residents of Canada within the meaning of the Act and includes partnerships that are not “Canadian partnerships” within the meaning of the Act;

“Operating GP” means XXXXXXXXXX, a corporation formed pursuant to and governed by the laws of XXXXXXXXXX;

“Operating LP” means XXXXXXXXXX, a limited partnership established pursuant to and governed by the laws of XXXXXXXXXX;

“Paragraph” means a numbered paragraph in this letter;

“Person” means a natural person, partnership, limited partnership, limited liability partnership, corporation, joint stock company, trust, unincorporated association, limited liability company, joint venture or other entity or governmental or regulatory authority or entity, and pronouns have a similarly extended meaning;

“Properties” means a diversified portfolio of income-producing real estate properties located in XXXXXXXXXX;

“Properties GP Holdings Co.” means XXXXXXXXXX, a corporation formed pursuant to and governed by the laws of XXXXXXXXXX;

“Proposed Transactions” means the proposed transactions under the heading Proposed Transactions below;

“Registered Investment” means a registered investment as defined in section 204.4;

“REIT” means a real estate investment trust as defined in subsection 122.1(1);

“Section” means any section of the Declaration of Trust or the Amended Declaration of Trust, as the case may be;

“Securities Dealers” means registered securities dealers or exempt market dealers;

“Services Agreement” means the services agreement dated XXXXXXXXXX between Operating LP and Operating GP;

“Settlor” means XXXXXXXXXX;

“SIFT Trust” means a specified investment flow-through trust as defined in subsection 122.1(1);

“Special Resolution” means a resolution approved by not less than XXXXXXXXXX% of the votes cast by those Unitholders who vote in person or by proxy at a duly convened meeting of Unitholders, or in a written resolution signed by Unitholders entitled, in the aggregate, to not less than XXXXXXXXXX% of the aggregate number of votes of the Unitholders;

“Subsection” means any subsection of the Declaration of Trust or the Amended Declaration of Trust, as the case may be;

“Subparagraph” means a numbered subparagraph in this letter;

“Supplemental Indenture”, except in respect of Class A and Class F Units, means an indenture creating a Class of Units and establishing the terms thereof and confirming that the Unitholders who hold Units issued as part of such Class of Units are entitled to the benefits of the Trust in respect of such Class;

“Term” means the term during which the Services Agreement will continue in full force and effect, i.e. until the earlier of the sale of the last of the Properties to be sold, XXXXXXXXXX or the date in which the Trust is terminated;

“Trailer Fee” means, where Securities Dealers are involved in the sale of Units after the date of the Amended Declaration of Trust, fee equal to XXXXXXXXXX percent (XXXXXXXXXX%) per annum on subscription proceeds paid by Operating GP to such Securities Dealers;

“Trust” means XXXXXXXXXX;

“Trust Amendments” means the amendments to the Declaration of Trust described in Paragraphs 25 to 40 below;

“Trustee” means XXXXXXXXXX, a private, closely-held XXXXXXXXXX corporation, or any successor Trustee appointed pursuant to the Declaration of Trust;

“Trust Income” means the amount, as determined by the Trustee, by which the income of the Trust for such year computed in accordance with the provisions of the Act, other than paragraph 82(l)(b) and subsection 104(6) thereof, and taking into account such other amounts and adjustments as are determined in the discretion of the Trustee regarding the calculation of income for the purposes of determining the “taxable income” of the Trust, exceeds each amount determined by the Trustee in respect of any non-capital loss for a prior taxation year that the Trust is permitted by the Act to deduct in computing the taxable income of the Trust for such year; provided, however, that capital gains and capital losses will be excluded from the computation of the Trust Income and, if an amount has been designated by the Trust under subsection 104(19) of the Act, such designation shall be disregarded;

“Trust Property” means the properties and assets held from time to time by the Trust or by the Trustee on behalf of the Trust, including:

(i) the Initial Contribution;

(ii) all funds or property derived from the issuance or sale of Units, notes or other funds or property received by the Trust;

(iii) any Investment LP units or other securities of Investment LP or of any other Person held from time to time by or on behalf of the Trust;

(iv) any proceeds of disposition of any of the foregoing property or in respect of the investment or substitution of the properties and assets of the Trust; and

(v) all proceeds, income, dividends, interest, profit, return of capital, gains and accretions and all substituted assets, rights and benefits of any kind or nature whatsoever arising directly or indirectly from or in connection with or accruing to such foregoing property or such proceeds of disposition;

“Unit” means a beneficial interest in the Trust;

“Unitholder” means a holder of record of any Unit;

“Unit Trust” means a unit trust as defined in paragraph 108(2)(a).

FACTS

1. The Trust has been established under and is governed by the Declaration of Trust and the laws of XXXXXXXXXX. The Trust resides in Canada.

2. The head office of the Trust and the Trustee is located at XXXXXXXXXX.

3. The Trust files its income tax returns with the XXXXXXXXXX Tax Centre and deals with the XXXXXXXXXX Tax Services Office.

4. The Trust is a Registered Investment and its identification number is XXXXXXXXXX.

5. The fiscal year-end of the Trust is XXXXXXXXXX.

6. The Trust is a limited purpose, unincorporated open-ended investment trust that qualifies as a Unit Trust and a Mutual Fund Trust. It is intended that the Trust maintains, at all relevant times, its Mutual Fund Trust status, as stated in Section XXXXXXXXXX of the Declaration of Trust.

7. The Trustee named in the Declaration of Trust has no material assets or liabilities. It carries on no business activities other than acting as Trustee of the Trust.

8. The Trust is neither a REIT nor a SIFT Trust. It is intended that the Trust maintains, at all relevant times, its non-SIFT Trust status, as mentioned in Section XXXXXXXXXX of the Declaration of Trust.

9. The Trust was not established and is not maintained primarily for the benefit of Non-Residents. According to Section XXXXXXXXXX of the Declaration of Trust, it is intended that, at no time, shall Non-Residents hold or beneficially own, directly or indirectly, Units or any other rights or options to acquire Units that would result in more than XXXXXXXXXX% of the Units, at any time, being held or beneficially owned, directly or indirectly, by Non-Residents.

10. The Trust was established, among other things, to acquire all limited partnership units of Investment LP and make other investments as contemplated by the Declaration of Trust. The Trust currently owns all the limited units of Investment LP and, through its ownership of the limited partnership units of Investment LP, the Trust indirectly holds the Properties.

11. Investment LP was established, among other things, to acquire all common shares of Investment Co. and to temporarily hold cash and investments for the purposes of paying its expenses and liabilities and making distributions to its unitholders. Currently, Investment LP owns all the common shares of Investment Co.

12. The general partner of Investment LP is Investment GP, a wholly-owned subsidiary of the Trustee named in the Declaration of Trust. The issued shares of Investment GP are owned by the Trustee on its own account and not as a trustee of the Trust.

13. Investment Co. was established, among other things, to acquire common shares of Active Co. and currently owns all of such shares.

14. Active Co. was established, among other things, to acquire all common shares of Holding Co., which it currently owns, and serves to qualify the Units as a non-passive foreign investment for XXXXXXXXXX taxpayers.

15. Holding Co. was established, among other things, to acquire limited partnership units of Operating LP and currently owns all of such units. One of the purposes of Holding Co., together with Investment Co., is to satisfy a portion of the cross-border tax filing and payment requirements.

16. The principal business of Operating LP is to XXXXXXXXXX. Operating LP may also XXXXXXXXXX. The general partner of Operating LP is Operating GP.

17. Operating GP is a wholly-owned subsidiary of Properties GP Holdings Co., which is controlled by the Trustee. It is engaged in XXXXXXXXXX.

18. In order to accommodate the expected requirements of lenders and to segregate any risks of ownership between Properties, each of the Properties is owned by a separate underlying limited partnership, of which Operating LP is the limited partner.

19. The salient features of the Declaration of Trust are as follows:

a) Pursuant to Subsection XXXXXXXXXX, the beneficial interests in the Trust are divided into Units, which have the rights and are subject to the limitations, restrictions and conditions set out in the Declaration of Trust. Each Unit vests indefeasibly in the holder thereof and the beneficial interest in the Trust of each Unitholder is determined by the number of Units registered in its name.

b) Subsection XXXXXXXXXX and Section XXXXXXXXXX provide that each Unit entitles the Unitholder to the following:

(i) an equal undivided beneficial interest or share in any distribution from the Trust (whether of Distributable Cash Flow, Trust Income, Net Realized Capital Gains or other amounts) and in the Trust Property in the event of the termination or winding-up of the Trust;

(ii) one vote at all meetings of Unitholders;

(iii) the right to rank equally and rateably without discrimination, preference or priority with other Units; and

(iv) the right to require the Trust to redeem such Unit in accordance with the terms set forth in Article XXXXXXXXXX.

c) According to Section XXXXXXXXXX, the Trustee declares payable to the Unitholders all or any part of the Distributable Cash Flow for each Distribution Period in which such amounts are realized. Any such distribution is payable to each Unitholder pro rata in proportion to the number of Units held as of record by such Unitholder on such Distribution Record Date.

d) Subsection XXXXXXXXXX provides that the Trustee may allocate, declare payable and/or make distributions, from time to time, out of the Trust Income, the Net Realized Capital Gains, the capital of the Trust or otherwise, in any year, in such amount or amounts, and on such dates and to any Unitholder of record on such dates, as the Trustee may determine pro rata in proportion to the number of Units held by such Unitholder, on such applicable date.

e) Except as provided in the Declaration of Trust, Section XXXXXXXXXX states that the amendment of the Declaration of Trust is only exercisable by Special Resolution passed by the Unitholders.

f) Pursuant to Section XXXXXXXXXX, any provision of the Declaration of Trust may be amended, deleted, expanded or varied by the Trustee without Special Resolution as required by Section XXXXXXXXXX, if the amendment is, in the opinion of the Trust’s lawyers, not a material change which adversely affects the pecuniary value of the interest of any Unitholders and does not relate to:

(i) any material change in the position, authority or responsibility of the Trustee; or

(ii) any change in the investment policy of the Trust or to the Declaration of Trust, if such change is material or is otherwise required by the Declaration of Trust.

20. Units of the Trust are either directly sold to investors by the Trust or sold via Securities Dealers. Most of the currently issued and outstanding Existing Units have been sold to the Existing Unitholders by the Trust directly, without the involvement of Securities Dealers.

21. Where Securities Dealers are involved in the sale of Units, Grandfathered Trailer Fees are paid to Securities Dealers by Investment LP.

22. Grandfathered Trailer Fees are currently borne by all Existing Unitholders, regardless of whether they purchased their Units through Securities Dealers or not.

23. Pursuant to the Services Agreement, Operating GP provides to Operating LP certain services in connection with the acquisition, the ownership and the operation of the Properties. Among other things, as consideration for the services provided, Operating LP pays a Management Fee to Operating GP.

PROPOSED TRANSACTIONS

24. The Trustee will amend and restate the Declaration of Trust. The amendments will be done pursuant to the authority granted by Section XXXXXXXXXX since, in the opinion of the Trust’s lawyers, they do not constitute material changes that will adversely affect the pecuniary value of the interest of any Unitholders and they do not relate:

a) to any material change in the position, authority or responsibility of the Trustee; or

b) to any change in the investment policy of the Trust or the Declaration of Trust.

25. Subsection XXXXXXXXXX of the Declaration of Trust will be amended to allow the issuance of Units in one or more Classes of Units, as well as in fractions. More specifically, such Subsection will provide that, subject to any additional rights and limitations, restrictions and conditions attributable to any Class of Units (other than Class F Units) by the Trustee, in its sole discretion, the Units will be entitled to the rights and subject to the limitations, restrictions and conditions set out in the Amended Declaration of Trust.

26. The Amended Declaration of Trust will include a new provision, Article XXXXXXXXXX, the salient features of which are described below. As a consequence, subsequent Articles of the Declaration of Trust will be renumbered in the Amended Declaration of Trust.

27. Section XXXXXXXXXX of the Amended Declaration of Trust will grant the Trustee the power and authority, from time to time, to create one or more Classes of Units on such terms and conditions as the Trustee may determine, provided that such creation does not adversely affect the pecuniary value of the interest of any Unitholders in the Trust.

28. Section XXXXXXXXXX of the Amended Declaration of Trust will create two Classes of Units. The first Class will be designated as Class F Units and the second Class will be designated as Class A Units. This proposed Section will also provide that the Existing Units will be re-designated as Class F Units on a one-for-one basis.

29. Thereafter, Class F Units will be issued to Unitholders who will purchase their Units directly from the Trust and Class A Units will be issued to those Unitholders who will purchase their Units through Securities Dealers.

30. Except for Class A Units and Class F Units, Section XXXXXXXXXX of the Amended Declaration of Trust will provide that, before the issuance of a Class of Units, the Trustee will execute a Supplemental Indenture.

31. Any Units in any Class of Units created by Supplemental Indenture will, as provided in Section XXXXXXXXXX of the Amended Declaration of Trust:

a) be designated by a letter by the Trustee; and

b) have such rights and restrictions with respect to subscription price and other terms and conditions of their offering and manner of subscription, sharing in the Trust Property and other matters as the Trustee will determine to be appropriate, which rights and restrictions may be different from the rights and restrictions which will pertain to the Units of any other Class of Units.

32. Subsection XXXXXXXXXX of the Amended Declaration of Trust will provide that, subject to the terms and conditions included in a Supplemental Indenture in respect of a newly created Class of Units, each Unit (including Class A Units and Class F Units) will entitle the Unitholders to the following:

a) an equal undivided beneficial interest or share in any distribution from the Trust (whether of Distributable Cash Flow, Trust Income, Net Realized Capital Gains or other amounts) and in the Trust Property in the event of the termination or winding-up of the Trust;

b) one vote at all meetings of Unitholders;

c) the right to rank equally and rateably without discrimination, preference or priority with other Units; and

d) the right to require the Trust to redeem such Unit in accordance with the terms set forth in Article XXXXXXXXXX of the Amended Declaration of Trust.

33. As per Section XXXXXXXXXX of the Amended Declaration of Trust, all of the Units in a specific Class of Units will have the same rights, benefits and other attributes and will rank equally with every other Unit in such Class of Units and no Unit in a specific Class will have any preference or priority over any other Unit of such Class. The number of Units issued in a specific Class of Units will be unlimited, unless the number of Units for such Class is limited at the time the Class of Units is established.

34. Pursuant to Subsection XXXXXXXXXX of the Amended Declaration of Trust, Units of different Classes may have different rights, benefits and other attributes from Units of other Classes. Subject to limitations and requirements determined from time to time by the Trustee, in its sole discretion, acting reasonably and stated in the Disclosure Documents, any Unit (other than a Class F Unit) of a particular Class of Units will be entitled to be re-designated by the Trustee as a Unit of another Class, provided, however, that any such re-designation will not entitle the Unitholder of the Units which are the subject of such re-designation to any Trust Property or any redemption proceeds.

35. Section XXXXXXXXXX of the Amended Declaration of Trust will provide that, at the option of the Trustee, the maximum number of Units of any Class may be limited. Such limitation is to be expressed in the Supplemental Indenture providing for the creation of the Class of Units.

36. Subject to any limitation as to the maximum number of Units of any particular Class of Units, Section XXXXXXXXXX of the Amended Declaration of Trust will provide that additional Units may be issued as part of any Class of Units previously issued, in which case such Units will bear the same designating letter as has been applied to the similar previous issue and will be numbered consecutively upwards, following the number of the Units of the previous issue.

37. According to Subsection XXXXXXXXXX of the Amended Declaration of Trust, the Trustee will continue to declare payable to the Unitholders all or any part of the Distributable Cash Flow for each Distribution Period in which such amounts are realized. However, the Trustee will, in its discretion, allocate for distribution an amount equal to the Grossed-up Distributable Cash Flow pro rata among the Classes of Units based on the number of Units outstanding in each Class. Class Specific Expenses will then be applied to reduce the amount of Grossed-Up Distributable Cash Flow allocable to the Class to which such Class Specific Expenses relate, as the Trustee may determine in its sole discretion.

38. The Trustee will continue, based on Subsection XXXXXXXXXX of the Amended Declaration of Trust, to allocate, declare payable and/or make distributions, from time to time, out of the Trust Income, the Net Realized Capital Gains, the capital of the Trust or otherwise in any year, in such amount or amounts, and in respect of such Classes, and on such dates and to Unitholders of record of such Classes on such dates, as the Trustee may determine.

39. The rights of the Existing Unitholders to receive the amounts described in Paragraph 37 and 38 of this letter will be the same as the rights described in Subparagraphs 19c) and 19d) above.

40. The Amended Declaration of Trust will include a new provision, Subsection XXXXXXXXXX, which will provide that, in determining the amounts to be allocated to a Class of Units under Section XXXXXXXXXX of the Amended Declaration of Trust, the Trustee shall:

a) divide an amount equal to the sum of Trust Income or such other amounts as the Trustee determines and any Class Specific Expenses among the Classes of Units in proportion to the amount of cash distributions paid or payable in respect of each Class of Units for such taxation year; and

b) reduce the amounts determined in Subparagraph 40a) above by the Class Specific Expenses that are attributable to each Class.

41. After the amendments made to the Declaration of Trust, the Units will continue to be either directly sold to investors by the Trust or sold via Securities Dealers. Where Securities Dealers will be involved in the sale of Units, Trailer Fees will be paid to Securities Dealers by Operating GP.

42. The Services Agreement will be amended to include the Additional Management Fee. As such, Operating GP will charge to Operating LP an Additional Management Fee in respect of Class A Units.

43. The Additional Management Fee will give rise to an adjustment to cash distributions in respect of Class A Units in order, for the Class A Unitholders, to indirectly bear the costs of the Trailer Fees.

44. The proposed schedule XXXXXXXXXX of the Amended Services Agreement will provide that Operating GP, in its sole discretion, will determine the NAV attributable to: (i) any Class of Units of the Trust and (ii) the interest of Investment GP in Investment LP.

45. Neither the amendment or the restatement of the Declaration of Trust or the re-designation of the Existing Units will result in a termination of the Trust under the laws of XXXXXXXXXX;

46. The Proposed Transactions and the Trust Amendments will not result in the creation of a new trust under the laws of XXXXXXXXXX.

PURPOSE OF PROPOSED TRANSACTIONS

47. The Trustee and Operating GP wish to increase the engagement with Securities Dealers who charge a Trailer Fee for Units purchased by their clients, in order to grow the overall investor and asset base of the Trust.

48. The Proposed Transactions and the Trust Amendments are contemplated to better target Trailer Fees to those who purchase their Units of the Trust through Securities Dealers going forward. This is intended to facilitate the Trustee’s ability to market the Trust Units to different segments of the investor market through tailoring different fees and expenses appropriate to each segment by offering separate Classes of Units.

RULINGS GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, the Proposed Transactions and the purpose of Proposed Transactions, and that the Proposed Transactions are completed in the manner described above, our rulings are as follows:

A. The Trust Amendments will not, in and by themselves, result in a disposition by the Trust of the Trust Property or in the creation of a new trust for purposes of the Act.

B. The re-designation of the Existing Units into Class F Units will not, in and by itself, result in a disposition by the Existing Unitholders of their Existing Units for purposes of the Act.

C. Subject to comment c under the heading “Comments” below, the implementation of the Proposed Transactions will not, in and by itself, cause subsection 104(7.1) of the Act to apply so as to deny the deduction by the Trust of any amount it is otherwise entitled to deduct under paragraph 104(6)(b) of the Act in respect of amounts paid or payable to its Unitholders.

COMMENTS

Except as expressly stated, these advance income tax rulings do not imply acceptance, approval or confirmation of any other income tax implications of the facts or the 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 the Province of XXXXXXXXXX;

b. whether the Trust is, at any particular time, a Mutual Fund Trust, a SIFT Trust or a REIT;

c. the tax consequences of any future exercise of the Trustee’s discretions granted in Subsections XXXXXXXXXX of the Amended Declaration of Trust described in Paragraphs 25 and 34 of this letter;

d. whether the re-designation of a Unit of a particular Class of Units as a Unit of another Class, as provided in Paragraph 34 of this letter, will result in a disposition of the particular Unit by the Unitholder; and

e. the tax consequences of any amendments made to the Declaration of Trust before the date of this letter.

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

The above advance income tax rulings, which are based on the Act and the Income Tax Regulations 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 the Information Circular 70-6R7 Advance Income Tax Rulings and Technical Interpretations, dated April 22, 2016, and are binding on the CRA provided that the proposed transactions are completed within XXXXXXXXXX months of the date of this letter.

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

Yours truly,

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