2018 Ruling 2018-0778961R3 - Partial transfer to new funds

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: 1) Will the proposed transfers of the Transfer Percentages to the corresponding New Funds be qualifying dispositions as described in subsection 107.4(1)? 2) Will certain proposed transfers of all of the property of a Transferor to a Tranferee be qualifying exchanges as described in section 132.2? 3) Will GAAR apply?

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

Reasons: 1) Meets the requirements. 2) Meets the requirements. 3) There is no abuse or misuse.

XXXXXXXXXX						2018-077896

XXXXXXXXXX, 2018

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling Request

This is in reply to your letter of XXXXXXXXXX as amended by your letter dated XXXXXXXXXX, requesting rulings on behalf of certain taxpayers (the “Taxpayers”) namely XXXXXXXXXX mutual fund trusts (the “Participating XXXXXXXXXX Public Funds”), certain unit trusts (the “Exchanging XXXXXXXXXX Pooled Funds”), XXXXXXXXXX new trusts to be established (the “New Funds”), and certain investors in the XXXXXXXXXX Public Funds (the “XXXXXXXXXX Group”). We also acknowledge the information provided by you in a telephone discussion on XXXXXXXXXX.

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

(i) in previously filed tax returns of a Taxpayer or a person related to a Taxpayer;

(ii) being considered by a tax services office or a tax centre in connection with previously filed tax returns of a Taxpayer or a person related to a Taxpayer;

(iii) under objection by a Taxpayer or a person related to a Taxpayer;

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

(v) the subject of a ruling previously considered by the Directorate, in respect of the same Taxpayers.

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.

Unless otherwise stated, all references to a statute are to 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.

1.1 Definitions

In this letter, the following terms have the following meanings:

1.1.1 “Act” means the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.), c.1, as amended;

1.1.2 XXXXXXXXXX;

1.1.3 “Distribution Time” means a time on the Effective Day that is after the close of trading on XXXXXXXXXX on the Effective Day and that is immediately before the Valuation Time;

1.1.4 “Effective Day” means a day following the issuance of this letter and on which XXXXXXXXXX is open for trading, and on which the first series of transactions described below under Proposed Transactions will be effected;

1.1.5 “Exchanging XXXXXXXXXX Pooled Fund” means a XXXXXXXXXX Pooled Fund which will participate in a “qualifying exchange”, as described in section 132.2 of the Act, as described below in the second series of transactions under Proposed Transactions, and “Exchanging XXXXXXXXXX Pooled Funds” means all such XXXXXXXXXX Pooled Funds;

1.1.6 “Exchanging Unitholder” means a holder of Series D Units or Series O Units of one of the Participating XXXXXXXXXX Public Funds who is a member of the XXXXXXXXXX Group and who chooses to dispose of such Units of the Participating XXXXXXXXXX Public Fund and acquire Units of a corresponding New Fund, and “Exchanging Unitholders” means all of such holders;

1.1.7 XXXXXXXXXX;

1.1.8 XXXXXXXXXX;

1.1.9 XXXXXXXXXX;

1.1.10 XXXXXXXXXX;

1.1.11 XXXXXXXXXX;

1.1.12 “XXXXXXXXXX Group” means the Unitholders of the XXXXXXXXXX Public Funds XXXXXXXXXX;

1.1.13 “XXXXXXXXXX Pooled Funds” means the unit trusts listed on Schedule B attached hereto, some of which are “mutual fund trusts” within the meaning of subsection 132(6) of the Act, and each of which is governed by the XXXXXXXXXX Fund Agreement;

1.1.14 “XXXXXXXXXX Public Funds” means XXXXXXXXXX funds listed in Schedule A attached hereto, each of which is a separate trust governed by the XXXXXXXXXX Trust Agreement, and includes the Participating XXXXXXXXXX Public Funds, and the Other XXXXXXXXXX Public Funds;

1.1.15 “XXXXXXXXXX Trust Agreement” means a trust agreement governed by the laws of XXXXXXXXXX, which governs the XXXXXXXXXX Public Funds;

1.1.16 “Initial Unit” has the meaning described in paragraph 1.3.3 below;

1.1.17 “Net Asset Value” of a Participating XXXXXXXXXX Public Fund at a particular time means the value of the assets of the Participating XXXXXXXXXX Public Fund at that time, less the amount of all of its liabilities, including all accrued liabilities, at that time;

1.1.18 XXXXXXXXXX;

1.1.19 “New Fund” means one of XXXXXXXXXX new unit trusts to be established as described below, including XXXXXXXXXX, and “New Funds” means all of them, with each New Fund corresponding to a particular Participating XXXXXXXXXX Public Fund in the sense that the New Fund will have the same investment objectives and strategies as the corresponding Participating XXXXXXXXXX Public Fund;

1.1.20 “New Fund Unit” means a Unit of a New Fund;

1.1.21 “Other XXXXXXXXXX Public Funds” means XXXXXXXXXX Public Funds, including XXXXXXXXXX, that are not Participating XXXXXXXXXX Public Funds;

1.1.22 “Participating XXXXXXXXXX Public Funds means XXXXXXXXXX;

1.1.23 “Proposed Transactions” means the transactions described in paragraphs 1.3.1 to 1.3.20 below under the heading “Proposed Transactions”;

1.1.24 “Series D Unit” means a Unit of a Participating XXXXXXXXXX Public Fund or a New Fund designated as a Series D Unit;

1.1.25 “Series O Unit” means a Unit of a Participating XXXXXXXXXX Public Fund or a New Fund designated as a Series O Unit;

1.1.26 “XXXXXXXXXX Fund Agreement” means a trust agreement governed by XXXXXXXXXX between XXXXXXXXXX and the Trustee, made as of XXXXXXXXXX under which the XXXXXXXXXX Pooled Funds are governed;

1.1.27 “Taxpayers” means the Participating XXXXXXXXXX Public Funds, the Exchanging XXXXXXXXXX Pooled Funds, the New Funds, and the investors included in the XXXXXXXXXX Group who choose to be Exchanging Unitholders;

1.1.28 “Transferee” has the meaning assigned in paragraphs 1.3.14 and 1.3.15 below;

1.1.29 “Transferor” has the meaning assigned in paragraphs 1.3.14 and 1.3.15 below;

1.1.30 “Transfer Percentage” for a Participating XXXXXXXXXX Public Fund means the percentage by value that its Units held by Exchanging Unitholders represents of all of its issued and outstanding Units;

1.1.31 “Trustee” means XXXXXXXXXX, the trustee of each of the XXXXXXXXXX Pooled Funds and New Funds;

1.1.32 XXXXXXXXXX;

1.1.33 “Unit” means a Unit of beneficial interest in a fund that is a unit trust as defined in the Act;

1.1.34 “unit trust” means a trust described in subsection 108(2) of the Act;

1.1.35 “Unitholder” means a person whose name appears in the register of a fund as a holder of Units of that fund; and

1.1.36 “Valuation Time” means a time on the Effective Day, after XXXXXXXXXX has closed for trading on the Effective Day, and that is immediately after the Distribution Time.

1.2 Statement of Facts

1.2.1 XXXXXXXXXX is a “taxable Canadian corporation” and a “public corporation” within the meaning of subsection 89(1) of the Act.

1.2.2 XXXXXXXXXX

1.2.3 The Trustee is a “taxable Canadian corporation” within the meaning of subsection 89(1) of the Act.

1.2.4 Each XXXXXXXXXX Public Fund was established and operates as a separate trust under the XXXXXXXXXX Trust Agreement.

1.2.5 Each Participating XXXXXXXXXX Public Fund is, and will remain, resident in Canada at all relevant times and is a “mutual fund trust” within the meaning of subsection 132(6) of the Act.

1.2.6 The beneficial interest in each XXXXXXXXXX Public Fund is divided into Units. The XXXXXXXXXX Trust Agreement permits each XXXXXXXXXX Public Fund to issue more than one series of Units. Currently, each Participating XXXXXXXXXX Public Fund has several series of issued and outstanding Units. The principal difference among the various series of Units is the management fee that is borne by each series of Units.

1.2.7 At no time has any Participating XXXXXXXXXX Public Fund been established or maintained primarily for the benefit of Unitholders who are not resident in Canada.

1.2.8 Each Participating XXXXXXXXXX Public Fund has specific investment objectives and investment strategies and XXXXXXXXXX.

1.2.9 Some of the XXXXXXXXXX Public Funds have invested in other XXXXXXXXXX Public Funds with the result that there are “fund-on-fund” structures. Schedule C attached hereto illustrates the structure of the XXXXXXXXXX Public Funds and the “fund-on-fund” structures.

1.2.10 Members of the XXXXXXXXXX Group hold either Series D Units or Series O Units of the XXXXXXXXXX Public Funds including the Participating XXXXXXXXXX Public Funds.

1.2.11 XXXXXXXXXX has reached an agreement with XXXXXXXXXX for the transfer to XXXXXXXXXX in respect of the XXXXXXXXXX Public Funds, including the Participating XXXXXXXXXX Public Funds and the Other XXXXXXXXXX Public Funds. XXXXXXXXXX deals at arm’s length with XXXXXXXXXX. It has been decided that it is commercially sound and reasonable to propose to the XXXXXXXXXX Group that they maintain the management by XXXXXXXXXX of their investments in the Participating XXXXXXXXXX Public Funds.

1.2.12 Therefore, before XXXXXXXXXX transfers to XXXXXXXXXX the XXXXXXXXXX with respect to the XXXXXXXXXX Public Funds, and with the knowledge of XXXXXXXXXX, it has been decided to offer to some holders of Series D Units and Series O Units of the Participating XXXXXXXXXX Public Funds, the option to become Unitholders of XXXXXXXXXX newly-established unit trusts (the “New Funds”) that will be managed by XXXXXXXXXX. Those who accept this offer, (the “Exchanging Unitholders”) will, immediately after the completion of the first series of transactions described in the Proposed Transactions below, hold Units of a New Fund instead of their units of the corresponding Participating XXXXXXXXXX Public Fund.

1.2.13 XXXXXXXXXX would like to offer the Exchanging Unitholders the ability to dispose of their Units of a Participating XXXXXXXXXX Public Fund and acquire Units of the corresponding New Fund without causing either the Participating XXXXXXXXXX Public Fund or the Exchanging Unitholders to realize any gain or loss for income tax purposes.

1.2.14 XXXXXXXXXX is also XXXXXXXXXX of a group of investment funds established as unit trusts (the “XXXXXXXXXX Pooled Funds”), some of which are “mutual fund trusts” within the meaning of subsection 132(6) of the Act.

1.2.15 The XXXXXXXXXX Pooled Funds are governed under the XXXXXXXXXX Fund Agreement under which each XXXXXXXXXX Pooled Fund is and operates as a separate trust. Each of the Exchanging XXXXXXXXXX Pooled Funds is and will remain resident in Canada at all relevant times. At no time has any Exchanging XXXXXXXXXX Pooled Fund been established or maintained primarily for the benefit of Unitholders who are not resident in Canada.

1.2.16 Some of the XXXXXXXXXX Pooled Funds have investment objectives and investment strategies similar to those of a Participating XXXXXXXXXX Public Fund. The XXXXXXXXXX Pooled Funds hold principally XXXXXXXXXX. None of the XXXXXXXXXX Pooled Funds XXXXXXXXXX.

1.2.17 It is planned that XXXXXXXXXX will communicate with members of the XXXXXXXXXX Group who are the holders of Series D Units and Series O Units of the Participating XXXXXXXXXX Public Funds, will send them information that describes the Proposed Transactions, and will request that such Unitholders provide a direction and consent regarding their participation in the Proposed Transactions.

1.3 Proposed Transactions

1.3.1 The XXXXXXXXXX Trust Agreement will be amended to allow XXXXXXXXXX, as trustee of the Participating XXXXXXXXXX Public Funds to enter into transactions on behalf of the Participating XXXXXXXXXX Public Funds that will result in “qualifying dispositions”, within the meaning of subsection 107.4(1) of the Act. Further amendments to the XXXXXXXXXX Trust Agreement will allow the trustee to allocate capital gains realized on the disposition of property undertaken in order to fund payment to a Unitholder who has requested that the Unitholder’s Units in a Participating XXXXXXXXXX Public Fund be redeemed. The terms of the XXXXXXXXXX Trust Agreement will be amended as follows:

XXXXXXXXXX

(a) Creation of New Funds and Transfers of Property to New Funds

1.3.2 In XXXXXXXXXX new unit trusts (each a “New Fund”) will be created under the XXXXXXXXXX Fund Agreement. Each New Fund will correspond to one of the Participating XXXXXXXXXX Public Funds (the “corresponding Participating XXXXXXXXXX Public Fund”), in the sense that the New Fund will have investment objectives and investment strategies that are substantially similar to those of its corresponding Participating XXXXXXXXXX Public Fund and that will enable the New Fund to hold exactly the same investments as its corresponding Participating XXXXXXXXXX Public Fund immediately after the Qualifying Disposition on the Effective Day. Each New Fund will be authorized to issue an unlimited number of series of Units of the New Fund and in particular will be authorized to issue Series D and Series O Units having terms and conditions identical to the Series D and Series O Units of its corresponding Participating XXXXXXXXXX Public Fund.

1.3.3 When each New Fund is created, one Series D or Series O Unit as appropriate of the New Fund (the “Initial Unit”) will be issued to XXXXXXXXXX for nominal consideration. But for this nominal consideration, a New Fund will hold no assets prior to the proposed transactions which follow taking place.

1.3.4 At the Distribution Time, each of the Participating XXXXXXXXXX Public Funds will make payable to its Unitholders a distribution in an amount equal to its income for purposes of the Act (including net capital gains realized) for the period from XXXXXXXXXX.

1.3.5 As of the Valuation Time, the Net Asset Value of each series of Units of the Participating XXXXXXXXXX Public Funds will be determined.

1.3.6 Immediately after the Valuation Time, each Participating XXXXXXXXXX Public Fund will determine, based on the Net Asset Value of its Units at the Valuation Time, the percentage by value that its Units held by Exchanging Unitholders represents of all of its issued and outstanding Units (the “Transfer Percentage”).

1.3.7 Effective after the closing of trading on XXXXXXXXXX on the Effective Day, each Participating XXXXXXXXXX Public Fund will transfer the Transfer Percentage of each of its properties, (in the case of XXXXXXXXXX, including some of its holding of Units of XXXXXXXXXX), and including the Transfer Percentage of any cash held by it, to its corresponding New Fund. The corresponding New Fund will issue Series D and/or Series O Units (as the case may be) to each of the Exchanging Unitholders of the Participating XXXXXXXXXX Public Fund, such that the Net Asset Value of the New Fund Units issued to each Exchanging Unitholder will equal the Net Asset Value of the Exchanging Unitholder’s Units of the corresponding Participating XXXXXXXXXX Public Fund at the Valuation Time. Also at that time, the Series D and/or Series O Units held by Exchanging Unitholders in the Participating XXXXXXXXXX Public Fund will be cancelled for no consideration. No action will be required from the Exchanging Unitholders in connection with the cancellation of such Units.

1.3.8 New XXXXXXXXXX will have received the Transfer Percentage of Units of XXXXXXXXXX. As noted, it is not intended that this holding of units in XXXXXXXXXX will be retained; rather, as described below, New XXXXXXXXXX will dispose of this investment following completion of the foregoing proposed transactions.

1.3.9 Following the completion of the foregoing steps described above, on or shortly after the Effective Day, New XXXXXXXXXX and investors in the XXXXXXXXXX Group will dispose of their Units in XXXXXXXXXX in exchange for cash or in kind consideration. Also, the investors in the XXXXXXXXXX Group will be offered the opportunity to redeem their Units in the Other XXXXXXXXXX Public Funds in exchange for cash or in kind consideration and it is anticipated that such redemptions may take place on or shortly after the Effective Day following completion of the foregoing steps described above.

1.3.10 In the foregoing transactions described in 1.3.7 above, for each class of identical securities held by a Participating XXXXXXXXXX Public Fund, the Participating XXXXXXXXXX Public Fund will transfer the Transfer Percentage of such securities to its corresponding New Fund. If and as necessary, each such Participating XXXXXXXXXX Public Fund may take advantage of the provisions of subsection 107.4(2.1) of the Act to avoid the need to transfer a fractional share to its corresponding New Fund. If there are securities or other properties held by a Participating XXXXXXXXXX Public Fund which cannot be transferred to the corresponding New Fund, or if the Participating XXXXXXXXXX Public Fund is not able to take advantage of the provisions of subsection 107.4(2.1) of the Act with respect to the transfer of certain securities, the Participating XXXXXXXXXX Public Fund will dispose of these securities (through market sales) prior to the Effective Day.

1.3.11 With respect to each of the foregoing transactions in which a Participating XXXXXXXXXX Public Fund transfers the Transfer Percentage of each of its properties to the corresponding New Fund, and each corresponding New Fund issues Units to the Exchanging Unitholders, at the same moment in time, [and after having been either reduced to the appropriate fraction of a Unit or subdivided in more than one Unit so as to have the same Net Asset Value as the Units issued by the New Fund], the Initial Unit, as reduced or subdivided as the case may be, issued by each of the New Funds will be redeemed for an amount equal to its subscription price, i.e. a nominal consideration.

1.3.12 Each New Fund that is or becomes a mutual fund trust at any particular time before the 91st day after the end of its first taxation year will elect under subsection 132(6.1) of the Act in its return of income for that year so as to be deemed to have been a mutual fund trust from the beginning of that first taxation year.

(b) Combination of New Funds and XXXXXXXXXX Pooled Funds

1.3.13 After completion of the foregoing transactions and in XXXXXXXXXX each of the XXXXXXXXXX New Funds and their corresponding XXXXXXXXXX Pooled Funds (the “Exchanging XXXXXXXXXX Pooled Fund”) will enter into transactions as described in section 132.2 of the Act. Immediately before these transactions, the Exchanging XXXXXXXXXX Pooled Fund will be a fund that qualifies as a mutual fund trust within the meaning set out in subsection 132(6) without taking into account subsection 132(6.1) of the Act. The XXXXXXXXXX Pooled Funds which will enter into these transactions will be the XXXXXXXXXX Fund, the XXXXXXXXXX Fund and the XXXXXXXXXX Fund.

1.3.14 Where the particular New Fund meets the requirements in paragraph 132(6)(c) of the Act and section 4801 of the Regulations under the Act to qualify as a mutual fund trust, and otherwise actually qualifies as a mutual fund trust as defined in subsection 132(6), then the New Fund will be the “Transferor” and the Exchanging XXXXXXXXXX Pooled Fund will be the “Transferee”, both terms as defined in section 132.2, with the result that the New Fund will ultimately be terminated, and the Exchanging XXXXXXXXXX Pooled Fund will be the continuing fund after the transactions have been completed.

1.3.15 Where the particular New Fund meets all of the requirements to qualify as a mutual fund trust within the meaning of subsection 132(6) except that it does not meet the requirements in paragraph 132(6)(c) of the Act and section 4801 of the Regulations under the Act with respect to the distribution of its units to a sufficient number of Unitholders holding a sufficient number of Units, then the New Fund will be the “Transferee” and the Exchanging XXXXXXXXXX Pooled Fund will be the “Transferor”, both terms as defined in section 132.2, with the result that the Exchanging XXXXXXXXXX Pooled Fund will ultimately be terminated, and the New Fund will be the continuing fund after the transactions have been completed. In such case, the transactions will be completed before such date as will ensure that the New Fund will meet the requirements in paragraph 132(6)(c) and section 4801 of the Regulations, so as to qualify as a mutual fund trust within the meaning of subsection 132(6) of the Act, prior to the date that is the 91st day after the end of the first taxation year of the New Fund. Also in such case, the New Fund will elect pursuant to subsection 132(6.1) of the Act to be deemed to have been a mutual fund trust from the date that it was established.

1.3.16 The fund that is the Transferor as described above will transfer all of its property to the fund that is the Transferee. The Transferor will receive Units of the Transferee as the sole consideration for such property. Within 60 days after the transfer, the Transferor will redeem all of its issued and outstanding Units in exchange for transferring to its Unitholders consideration consisting only of Units of the Transferee.

1.3.17 The Transferor and the Transferee will jointly elect as required by paragraph (e) of the definition of “qualifying exchange” in section 132.2 of the Act by filing with the Minister of National Revenue form T1169 Election on Disposition of Property by a Mutual Fund Corporation (or a Mutual Fund Trust) to a Mutual Fund Trust before the due date for such election, in compliance with subsection 132.2(6) of the Act.

1.3.18 Pursuant to and in accordance with and within the limits of paragraph 132.2(3)(a) of the Act, the Transferee may elect with respect to any particular property owned by it, other than property transferred to it by the Transferor, an amount in excess of its cost amount so as to be deemed to realize a capital gain.

1.3.19 Pursuant to and in accordance with and within the limits set out in the provisions of paragraph 132.2(4)(b) of the Act, with respect to a property transferred by the Transferor to the Transferee, the Transferor and Transferee may elect for the property to be deemed to have been disposed of for an amount that will result in the Transferor being deemed to realize a capital gain on the transfer of the property to the Transferee.

1.3.20 Each Transferor will be terminated after completion of the foregoing transactions and the filing of the election described in subsection 132.2(6) of the Act.

1.4 Purpose of the Proposed Transactions

1.4.1 The purpose of the transactions described above under “Creation of New Funds and Transfer of Property to New Funds” is to allow the Exchanging Unitholders to become investors in the corresponding New Funds and thereby continue to have their investments managed by XXXXXXXXXX, rather than remaining as investors in the Participating XXXXXXXXXX Public Funds and having their investments managed by XXXXXXXXXX.

1.4.2 With respect to the transactions described under “Combination of New Funds and XXXXXXXXXX Pooled Funds”, for business reasons and sound financial and economic objectives, it is not advisable for XXXXXXXXXX to operate two funds with similar investment objectives and investment strategies. It may therefore be desirable for commercial reasons to combine a XXXXXXXXXX Pooled Fund with a New Fund having similar investment objectives and investment strategies.

1.4.3 Further, some of the Unitholders of a particular New Fund may be registered plans that are required to invest only in qualified investments within the meaning of the Act. Where the New Fund would not otherwise meet the requirements in paragraph 132(6)(c) of the Act and section 4801 of the Regulations under the Act to qualify as a mutual fund trust and therefore ensure that its Units are a qualified investment, it may be necessary to combine the New Fund with a XXXXXXXXXX Pooled Fund so that the New Fund will qualify as a mutual fund trust.

1.5 Rulings Given

Provided (i) that the preceding statements are accurate and constitute complete disclosure of all relevant facts, proposed transactions and purposes thereof, (ii) that the Proposed Transactions are carried out as herein described within the six month period referred to below, and (iii) that there are no other facts or transactions that may be relevant to the rulings given, our advance income tax rulings are as follows:

1.5.1 Each transfer of the Transfer Percentage of a property by a Participating XXXXXXXXXX Public Fund to its corresponding New Fund, as described above in paragraph 1.3.7, will be a “qualifying disposition” within the meaning of subsection 107.4 (1).

1.5.2 Paragraph 107.4(3)(a) will apply to determine the proceeds of disposition realized by a XXXXXXXXXX Public Fund on the transfer of the Transfer Percentage of each of its properties to the corresponding New Fund as described in paragraph 1.3.7 above, and paragraph 107.4(3)(b) will apply to determine the cost to the New Fund of each of the properties so acquired.

1.5.3 Paragraph 107.4(3)(j) will apply in respect of the cancellation of the Units of the Participating XXXXXXXXXX Public Funds held by the Exchanging Unitholders, and the receipt by each such Exchanging Unitholder of Units of the corresponding New Fund, to determine the proceeds of disposition realized by an Exchanging Unitholder on the disposition of his, her or its Units of the Participating XXXXXXXXXX Public Funds, and the cost to such Exchanging Unitholder of its Units in the New Fund, as described in paragraph 1.3.7 above.

1.5.4 Section 132.2 will apply to the transfer by a Transferor of all of its properties to a Transferee and to the redemption of all of the Units of the Transferor for consideration consisting only of Units of the Transferee received on the transfer, as described in paragraph 1.3.16 above.

1.5.5 Unless the Transferee and the Transferor elect otherwise in accordance with, and within the limits described in, paragraph 132.2(4)(b), a Transferor will realize no capital gain or income as a result of the transfer of its properties to the Transferee as described in paragraph 1.3.16 above.

1.5.6 Unless it designates otherwise in accordance with, and within the limits described in, paragraph 132.2(3)(a), a Transferee will realize no capital gain or income as a result of the transactions described in paragraph 1.3.16 above.

1.5.7 The Unitholders of the Transferor will realize no capital gain or income as a result of the transactions described in paragraph 1.3.16 above.

1.5.8 The proposed amendments to the XXXXXXXXXX Trust Agreement described in paragraph 1.3.1 above will not, in and by themselves, result in a resettlement of the XXXXXXXXXX Public Funds nor in a disposition of the Units of the XXXXXXXXXX Public Funds by the Unitholders thereof.

1.5.9 The general anti-avoidance rule in subsection 245(2) will not be applicable as a result of the Proposed Transactions, in and by themselves, to determine the tax consequences confirmed in the rulings as set out above.

1.6 Comments

Nothing in this advance income tax ruling should be construed as implying that Canada Revenue Agency (“CRA”) is ruling on any tax consequences relating to the facts and Proposed Transactions described herein other than those specifically described in the rulings given above. In particular, but without affecting the generality of the foregoing, the CRA has not considered, confirmed or made any determination in respect of:

a. whether any trust described herein is, at any particular time, a mutual fund trust within the meaning of subsection 132(6) or a unit trust within the meaning of subsection 108(2) of the Act; and

b. whether subsection 104(7.1) may apply in respect of allocations by any of the trusts described herein to a redeeming Unitholder.

The above advance income tax rulings, which are based on the Act and 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 Information Circular 70-6R8 Advance Income Tax Rulings and Technical Interpretations, dated November 1, 2018, 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
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

SCHEDULE A

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SCHEDULE B

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SCHEDULE C

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