2023 Ruling 2022-0931631R3 - Loss consolidation arrangement

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 Lossco can apply existing non-capital losses against interest income received on a loan made to Profitco under a loss consolidation arrangement and whether Profitco can deduct the interest payments.

Position: Yes.

Reasons: The proposed transactions conform to our requirements for these types of loss consolidation rulings on the basis that the entities involved are related and affiliated and the proposed transactions would be legally effective and commercially plausible.

XXXXXXXXXX								2022-093163

XXXXXXXXXX

Dear XXXXXXXXXX

Re: CONTAINS TAXPAYER INFORMATION
Advance Income Tax Ruling – Loss Consolidation Arrangement (2022-093163)
XXXXXXXXXX

This is in reply to your letter dated XXXXXXXXXX, as amended XXXXXXXXXX, in which you requested an advance income tax ruling (the “Ruling”) on behalf of the above named taxpayers (the “Taxpayers”). We understand that to the best of your knowledge and that of the Taxpayers, none of the Proposed Transactions or issues involved in this Ruling are the same as or substantially similar to transactions or issues that are:

(i) in a previously filed tax return of the Taxpayers or a related person and:

(a) being considered by the CRA in connection with such return;

(b) under objection by the Taxpayers or a related person; or

(c) the subject of a current or completed court process involving the Taxpayers or a related person; or

(ii) the subject of a ruling request previously considered by the Income Tax Rulings Directorate.

This letter is based solely on the Facts and Proposed Transactions described below. The documentation submitted with the ruling request does not form part of the Facts and Proposed Transactions, and any references thereto are provided solely for the convenience of the reader.

Unless otherwise stated:

(i) all references to a statute are to the relevant provision of the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1, as amended, (the “Act”), or, where appropriate, the Income Tax Regulations, C.R.C., c.945, as amended, (the “Regulations”);

(ii) all references to monetary amounts are in Canadian dollars; and

(iii) the singular should be read as plural and vice versa where the circumstances so require.

DEFINITIONS

The following abbreviations, terms and expressions have the meanings specified, and the relevant parties to the Proposed Transactions will be referred to as follows:

“adjusted cost base” and has the meaning assigned by section 54;

“affiliated persons” has the meaning assigned by section 251.1 without reference to the definition of “controlled” in subsection 251.1(3);

“Agreeing Province” means a province that has entered into an agreement with the Government of Canada under which the Government of Canada will collect taxes payable under the income tax statute of that province and will make payments to that province in respect of the taxes so collected;

“arm’s length” has the meaning assigned by subsection 251(1);

“BCA1” means XXXXXXXXXX;

“BCA2” means XXXXXXXXXX;

“CRA” means Canada Revenue Agency;

“Daylight Loan” means the loan described in Paragraph 12;

“dividend rental arrangement” has the meaning assigned by subsection 248(1);

“excepted dividend” has the meaning assigned by section 187.1;

“excluded dividend” has the meaning assigned by subsection 191(1);

“fair market value” means the highest price available in an open and unrestricted market between informed and prudent parties dealing at arm’s length and under no compulsion to act, expressed in terms of cash;

“financial intermediary corporation” has the meaning assigned by subsection 191(1);

“General Anti-avoidance Provision of an Agreeing Province” means:

XXXXXXXXXX

“guarantee agreement” has the meaning assigned by subsection 112(2.2);

“Lossco” means XXXXXXXXXX, the corporation described in Paragraph 4;

“Lossco Class A Dividends” is defined in Paragraph 10(d);

“Lossco Class A Preferred Shares” means the preferred shares described in Paragraph 10;

“Lossco Class B Preferred Shares” means the preferred shares described in Paragraph 11;

“Newco” means a subsidiary wholly-owned corporation to be formed by Profitco in Paragraph 17;

“Newco Common Shares” means the common shares described in Paragraph 17;

“Newco Preferred Shares” means the preferred shares described in Paragraph 17;

“New Profitco Loan” means the loan described in Paragraph 23;

“non-capital loss” has the meaning assigned by subsection 111(8);

“paid-up capital” has the meaning assigned by subsection 89(1);

“Paragraph” means a numbered paragraph in this letter;

“Parentco Loan” means the loan described in Paragraph 8;

“Partnership A” means XXXXXXXXXX, the partnership described in Paragraph 4;

“permanent establishment” has the meaning assigned by subsection 400(2) of the Regulations;

“Profitco” means XXXXXXXXXX, the corporation described in Paragraph 1;

“Profitco Loan” means the loan described in Paragraph 14;

“Proposed Transactions” means the transactions described in Paragraphs 9 to 24;

“public corporation” has the meaning assigned by subsection 89(1);

“Redemption Note” means the note described in Paragraph 24(g);

“related persons” has the meaning assigned by subsection 251(2);

“specified financial institution” has the meaning assigned by subsection 248(1);

“subsidiary wholly-owned corporation” has the meaning assigned by subsection 248(1);

“Stock Exchange” means XXXXXXXXXX;

“taxable Canadian corporation” has the meaning assigned by subsection 89(1);

“taxable dividend” has the meaning assigned by subsection 89(1);

“taxable preferred share” has the meaning assigned by subsection 248(1); and

“term preferred share” has the meaning assigned by subsection 248(1).

FACTS

1. Profitco is a taxable Canadian corporation incorporated on XXXXXXXXXX in the province of XXXXXXXXXX. Profitco was continued under the BCA1 on XXXXXXXXXX and was further continued under the BCA2 on XXXXXXXXXX. Profitco is a public corporation, the shares of which are listed on the Stock Exchange. Profitco’s business is engaged in XXXXXXXXXX. Profitco’s head office is located at XXXXXXXXXX. Profitco files its tax and information returns at the XXXXXXXXXX.

2. The taxation year of Profitco ends on XXXXXXXXXX. It is currently expected that Profitco will be taxable in its taxation year ending on XXXXXXXXXX and subsequent years, and as such, will have sufficient income for tax purposes to fully utilize as a deduction the interest paid or payable on the Profitco Loan. Profitco’s taxable income from the three preceding taxation years and the estimated taxable income for the next three taxation years is as follows:

Taxation Year 		Taxable Income – As Filed

XXXXXXXXXX		      XXXXXXXXXX

Taxation Year 		Estimated Taxable Income (excluding proposed interest)

XXXXXXXXXX		      XXXXXXXXXX

3. In the taxation year ending XXXXXXXXXX, Profitco had permanent establishments in XXXXXXXXXX. The provincial allocations of Profitco’s taxable income for its XXXXXXXXXX taxation year are as follows:

Province		Allocation

XXXXXXXXXX		XXXXXXXXXX

For the XXXXXXXXXX taxation year and taxation years during which the Proposed Transactions are implemented, it is anticipated that the provincial allocations of Profitco’s taxable income will remain relatively consistent and not vary materially from the above allocations.

4. Lossco is a taxable Canadian corporation incorporated on XXXXXXXXXX under the BCA2. Lossco is a subsidiary wholly-owned corporation of Profitco. Lossco’s business holds a XXXXXXXXXX% interest in Partnership A. The remaining XXXXXXXXXX% interest is held by XXXXXXXXXX, an arm’s length third party. Partnership A is a general partnership and is in the business of XXXXXXXXXX. Partnership A is a special purpose partnership and restricts the business activities of its partners’ to only permitted activities. Partnership A’s restrictions provide that Lossco is not permitted to engage or carry on in any other form of business activities outside of the partnership, and Lossco is not permitted to hold any external debt borrowings. As such, Lossco is contractually prohibited from incorporating and investing in a new corporation (Newco is discussed in Paragraph 17). Lossco’s head office is located at XXXXXXXXXX. Lossco files its tax and information returns at the XXXXXXXXXX.

5. The taxation year of Lossco ends on XXXXXXXXXX. As of XXXXXXXXXX, Lossco is estimated to have non-capital losses of $XXXXXXXXXX. The non-capital losses arose from Lossco’s interest in Partnership A and were incurred pursuant to transactions entered into in the ordinary course of Lossco’s business. It is not certain whether Lossco will earn income or generate additional non-capital losses in its taxation year ending on XXXXXXXXXX and in subsequent taxation years. The following details the taxation years when Lossco’s losses were incurred (including estimates for XXXXXXXXXX) as well as Lossco’s estimated taxable income for the next three taxation years:

Taxation Year 		Lossco’s Non-Capital Losses

XXXXXXXXXX		      XXXXXXXXXX

Taxation Year 		Estimated Taxable Income (excluding proposed interest)

XXXXXXXXXX		      XXXXXXXXXX

6. In the taxation year ending XXXXXXXXXX, Lossco had a permanent establishment solely in XXXXXXXXXX. The provincial allocation of Lossco’s taxable income was XXXXXXXXXX% in XXXXXXXXXX. For the XXXXXXXXXX taxation year and taxation years during which the Proposed Transactions are implemented, it is anticipated that the provincial allocations of Lossco’s taxable income will remain relatively consistent and not vary materially from this allocation.

7. Lossco is authorized to issue an unlimited number of common shares without nominal or par value. There are XXXXXXXXXX common shares issued and outstanding, all of which are held by Profitco.

8. Profitco and Lossco have an existing non-interest bearing loan outstanding, whereby Profitco is the borrower of funds advanced by Lossco (“Parentco Loan”) in the amount of approximately $XXXXXXXXXX. The Parentco Loan originated in the XXXXXXXXXX taxation year and it was established from a loan of the cash generated from Lossco’s XXXXXXXXXX% interest in Partnership A. As a result of Profitco’s cash pooling arrangement (described in Paragraph 23), any cash proceeds that were received by Lossco were loaned to Profitco under the Parentco Loan.

PROPOSED TRANSACTIONS

9. The authorized share capital of Lossco will be amended to add two classes of preferred shares, class A and class B.

10. The class A preferred shares in the capital of Lossco (the “Lossco Class A Preferred Shares”) will have the following attributes:

(a) non-voting;

(b) non-participating;

(c) redeemable at the option of the issuer and retractable at the option of the holder for a redemption price equal to the fair market value of the consideration for which the shares are issued, plus any accrued but unpaid dividends. The payment of the redemption price may be satisfied, at the issuer’s option, either by (i) payment of cash; or (ii) delivery of property having a fair market value at the time of redemption equal to the aggregate redemption price, in each case together with an amount in cash equal to all accrued and unpaid dividends (whether or not declared) to but excluding the date fixed for such redemption; and

(d) entitlement to a cumulative dividend, payable semi-annually, calculated by reference to the redemption amount of Lossco Class A Preferred Shares at a rate estimated at XXXXXXXXXX% + XXXXXXXXXX% per annum (the “Lossco Class A Dividends”). The dividend rate will be finalized when the Proposed Transactions are implemented.

11. The class B preferred shares in the capital of Lossco (the “Lossco Class B Preferred Shares”) will have the following attributes:

(a) non-voting;

(b) non-participating;

(c) redeemable at the option of the issuer and retractable at the option of the holder for a redemption price equal to the fair market value of the consideration for which the shares are issued, plus any declared but unpaid dividends. The payment of the redemption price may be satisfied, at the issuer’s option, either by (i) payment of cash; or (ii) delivery of property having a fair market value at the time of redemption equal to the aggregate redemption price; and

(d) entitlement to a dividend at the time and in the amount to be determined at the discretion of the directors of the corporation.

12. Profitco will borrow approximately $XXXXXXXXXX from an arm’s length financial institution on a daylight loan basis (the “Daylight Loan”). The Daylight Loan will be finalized when the Proposed Transactions are implemented.

13. Profitco will use the proceeds from the Daylight Loan to subscribe for Lossco Class A Preferred Shares having an aggregate redemption amount, fair market value, adjusted cost base and paid-up capital equal to the total amount of the subscription proceeds.

14. Lossco will use the proceeds from the issuance of the Lossco Class A Preferred Shares to make an interest bearing loan (the “Profitco Loan”) to Profitco. The Profitco Loan will bear interest at approximately XXXXXXXXXX% per annum. The Profitco Loan will be subordinated to all other existing and future unsecured and unsubordinated indebtedness of Profitco. The Profitco Loan will be payable on demand. The interest on the Profitco Loan will be paid semi-annually. The rate of interest will be finalized when the Proposed Transactions are implemented.

15. Profitco will use the proceeds from the Profitco Loan to repay the Daylight Loan.

16. The transactions described in Paragraphs 12 to 15 are anticipated to be completed on the same day.

17. At some time following the Proposed Transactions described in Paragraphs 9-16, but before the first partial repayment of the Parentco Loan (described in Paragraph 20), Profitco will incorporate a new wholly-owned subsidiary (“Newco”) under the BCA2. Newco will be a taxable Canadian corporation. The taxation year-end of Newco will be XXXXXXXXXX. The activities of Newco will be limited to the activities described in the Proposed Transactions. The authorized share capital of Newco will include an unlimited number of common shares (“Newco Common Shares”) and an unlimited number of preferred shares (“Newco Preferred Shares”). Newco’s business activities will be limited to investing the proceeds received upon the issuance of the Newco Preferred Shares to Profitco as described in Paragraph 21(b) below.

18. Newco will be authorized to issue an unlimited number of Newco Common Shares without nominal or par value. Newco will issue Newco Common Shares to Profitco for a nominal amount of $XXXXXXXXXX.

19. The Newco Preferred Shares will have the following attributes:

(a) non-voting;

(b) non-participating;

(c) redeemable at the option of the issuer and retractable at the option of the holder for a redemption price equal to the fair market value of the consideration for which the shares are issued, plus any declared but unpaid dividends. The payment of the redemption price may be satisfied, at the issuer’s option, either by (i) payment of cash; or (ii) delivery of property having a fair market value at the time of redemption equal to the aggregate redemption price; and

(d) entitlement to a dividend at the time and in the amount determined at the discretion of the directors of the corporation.

20. The following transactions will occur, in the following order, semi-annually for each fiscal year until the Parentco Loan is fully repaid:

(a) Lossco will demand partial repayment of the Parentco Loan in an amount equal to the accrued Lossco Class A Dividends payable at that time. Profitco will pay this amount to Lossco in cash;

(b) Lossco will pay the accrued and unpaid Lossco Class A Dividends in cash;

(c) Profitco will pay the accrued and unpaid interest on the Profitco Loan in cash; and

(d) Lossco will loan the funds received as interest on the Profitco Loan to Profitco under the New Profitco Loan (described in Paragraph 23).

21. At the time the Parentco Loan has been fully repaid, the following transactions will occur, in the following order, semi-annually, for each fiscal year until the loss consolidation arrangement is unwound (as described in Paragraph 24):

(a) At the time in which the Parentco Loan has been fully repaid, Profitco will subscribe for Newco Preferred Shares in cash in an amount equal to the accrued Lossco Class A Dividends payable at that time. The Newco Preferred Shares will have an aggregate redemption amount, fair market value, adjusted cost base and paid-up capital equal to the total amount of the subscription proceeds;

(b) Newco will use the proceeds from the Newco Preferred Shares subscription ( described in Paragraph 21(a)) to subscribe for Lossco Class B Preferred Shares in cash, which will have an aggregate redemption amount, fair market value, adjusted cost base and paid-up capital equal to the total amount of the subscription proceeds and which will be equal to the amount of the accrued Lossco Class A Dividends payable at that time;

(c) Lossco will pay the accrued and unpaid Lossco Class A Dividends in cash;

(d) Profitco will pay the accrued and unpaid interest on the Profitco Loan in cash; and

(e) Lossco will loan the funds received as interest on the Profitco Loan to Profitco under the New Profitco Loan (described in Paragraph 23).

22. The Lossco Class A Dividends will be funded with cash generated from any partial repayments of the Parentco Loan, any partnership distributions from Lossco’s interest in Partnership A, and proceeds received from the issuance of the Lossco Class B Preferred Shares (described in Paragraph 21(b)).

23. Profitco’s corporate group financing policy is to centralize funds at the parent level to fund general corporate expenses and cash management (referred to as a “cash pooling arrangement”). As such, Lossco will use the cash proceeds from the interest earned on the Profitco Loan to make a new non-interest bearing loan to Profitco (the “New Profitco Loan”). The New Profitco Loan will be a revolving credit facility and will be available by way of a drawdown beginning on the date of its issuance. The lender (Lossco) agrees to advance funds to the borrower (Profitco) in an amount not to exceed approximately $XXXXXXXXXX. The New Profitco Loan will be non-interest bearing and payable on demand. The principal amount of the New Profitco Loan (drawdown) increases with every semi-annual interest payment on the Profitco Loan (i.e. when cash proceeds are received from the interest earned on the Profitco Loan, Lossco will loan these funds back to Profitco under the New Profitco Loan). One New Profitco Loan will exist for the duration of the Proposed Transactions.

24. No later than the third anniversary of the issuance of the Profitco Loan, the loss consolidation arrangement will be unwound in the following manner:

(a) Lossco will pay all accrued and unpaid Lossco Class A Dividends in cash to Profitco;

(b) Profitco will pay all accrued and unpaid interest on the Profitco Loan in cash to Lossco;

(c) Profitco, as sole shareholder of Newco, will pass a resolution authorizing and requiring Newco to be wound up into Profitco. A general conveyance of the remaining assets of Newco and assumption of liabilities of Newco, if any, will be executed between Newco and Profitco. Newco will file articles of dissolution with the appropriate corporate registry within a reasonable time after the winding-up resolution is passed;

(d) The Lossco Class B Preferred Shares previously held by Newco will be distributed to Profitco on the winding-up at the cost amount to Newco;

(e) Lossco will demand full repayment of the New Profitco Loan. The New Profitco Loan will be fully repaid and settled;

(f) Lossco will use a portion of the funds received from Profitco on the repayment of the New Profitco Loan, described in Paragraph 24(e), to redeem all of the issued and outstanding Lossco Class B Preferred Shares held by Profitco for an amount equal to their aggregate redemption amount (as described in Paragraph 11(c));

(g) Lossco will redeem all of the issued and outstanding Lossco Class A Preferred Shares held by Profitco in exchange for a promissory note (the “Redemption Note”) for an amount equal to the aggregate redemption amount (as described in Paragraph 10(c)); and

(h) The principal amounts of the Profitco Loan and Redemption Note will be satisfied and extinguished by way of set-off.

ADDITIONAL INFORMATION

25. The Proposed Transactions will be legally effective.

26. At all relevant times, Profitco, Lossco and Newco will be related to a particular corporation described in paragraph (d) of the definition specified financial institution. The Lossco Class A Preferred Shares will be taxable preferred shares and term preferred shares. The Lossco Class A Preferred Shares that will be acquired by Profitco will not be acquired in the ordinary course of Profitco’s business. Lossco is not a financial intermediary corporation.

27. The Lossco Class A Preferred Shares will not be, at any time during the implementation of the Proposed Transactions described herein:

(a) the subject of any undertaking that is referred to in subsection 112(2.2) as a “guarantee agreement”;

(b) the subject of a dividend rental arrangement;

(c) the subject of any secured undertaking of the type described in paragraph 112(2.4)(a); or

(d) issued for consideration that is or includes:

(i) an obligation of the type described in subparagraph 112(2.4)(b)(i) other than an obligation of a corporation that is related (otherwise than by reason of a right referred to in paragraph 251(5)(b)); or

(ii) any right of the type described in subparagraph 112(2.4)(b)(ii).

28. Profitco, Lossco and Newco are affiliated and related persons for purposes of the Act and will continue to be affiliated and related persons throughout the Proposed Transactions.

29. The dividend rate on the Lossco Class A Preferred Shares exceeds the interest rate on the Profitco Loan by XXXXXXXXXX%, generating a positive spread between the dividend yield on the preferred shares acquired with the borrowed funds and the interest rate on that debt.

30. The interest rate on the Profitco Loan will be at a commercial rate and the terms will be arm’s length terms.

31. At the time Lossco is required to pay the Lossco Class A Dividends, Profitco will have the financial capacity, including accessing its leverage capacity, to make the preferred share subscriptions to Newco described in Paragraph 21(a). Profitco will fund the preferred share subscription to Newco from either funds generated from normal operations or funds by borrowing from an arm’s-length financial institution as a daylight loan.

32. The Daylight Loan will have arm’s-length commercial terms customary for that type of loan. The principal amount of the Daylight Loan will not exceed the amount that Profitco could reasonably be expected to borrow from an arm’s length financial institution and/or debt capital markets and will not cause Profitco to contravene any debt covenants.

33. At the time it is required to pay the Lossco Class A Dividends, described in Paragraphs 20(b), 21(c) and 24(a), Lossco will have the financial capacity to satisfy the applicable solvency test and liquidity test under the BCA.

34. Due to commercial restrictions, Lossco is not able to incorporate or acquire or own any shares of Newco.

35. The Proposed Transactions are not being undertaken to refresh non-capital losses or facilitate the use of such losses in a taxation year after the taxation year in which the losses would have otherwise expired in the hands of Lossco.

36. The interest expense in relation to the interest paid on the Profitco Loan will not exceed Profitco’s income such that it puts Profitco in a loss position.

37. No acquisitions of control have occurred, or are anticipated to occur, that are relevant to the Proposed Transactions.

38. The series of transactions that includes the Proposed Transactions will not involve or result in a benefit being conferred on a taxpayer, or property being disposed of for proceeds that are less than or in excess of the fair market value thereof. Without limiting the generality of the foregoing, Profitco will at all relevant times have the financial capacity to repay all or part of the amount due under the Parentco Loan in cash if required on demand.

PURPOSE OF THE PROPOSED TRANSACTIONS

39. The purpose of the Proposed Transactions is to effect a tax consolidation of Lossco and Profitco in order to permit Profitco to utilize the losses of Lossco. Absent the Proposed Transactions, it is expected that Lossco will not generate significant taxable income and the prior year non-capital losses will remain unused for some time without implementation of the Proposed Transactions.

40. The purpose of the tax consolidation is not to shift income to a lower rate province. Any shift of income in Profitco will be incidental to the Proposed Transactions.

41. The only purpose of both the payment and the receipt of the Lossco Class A Dividends is to provide a reasonable return on the Lossco Class A Preferred Shares issued by Lossco to Profitco. More specifically, none of the purposes of the dividends is to reduce the fair market value or capital gain of any share, or to increase the total cost amounts of any properties.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all 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, and there are no other transactions which may be relevant, we confirm the following:

A. Provided that Profitco has a legal obligation to pay interest on the Profitco Loan, and the Lossco Class A Preferred Shares continue to be held by Profitco for the purpose of gaining or producing income, Profitco will be entitled, pursuant to paragraph 20(1)(c), to deduct in computing its income for a taxation year, the lesser of: (i) the interest payable in respect of the Profitco Loan for that taxation year; and (ii) a reasonable amount in respect thereof.

B. Provided that the payment and receipt of the dividends on the Lossco Class A Preferred Shares, as described in Paragraphs 20(b), 21(c) and 24(a) have no purpose other than as described in the “Purpose of the Proposed Transactions” and the Proposed Transactions are undertaken in the manner described above, subsection 55(2) will not apply to such dividends.

C. The Lossco Class A Dividends will, pursuant to subsection 112(1), be fully deductible in computing Profitco’s taxable income for the taxation year in which the dividends are received, and for greater certainty, such deductions will not be precluded by any of subsections 112(2.1), 112(2.2), 112(2.3), or 112(2.4).

D. The provisions under Part IV.1 and Part VI.1 will not apply to the Lossco Class A Dividends, as the dividends will be “excepted dividends” and “excluded dividends”.

E. The provisions of subsections 15(1), 56(2) and 246(1) will not apply as a result of the Proposed Transactions in and by themselves.

F. 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 confirmed in the rulings given.

G. The General Anti-avoidance Provision of an Agreeing Province will not apply as a result of the Proposed Transactions, in and by themselves, to re-determine the tax consequences confirmed in the rulings given.

The above Rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R12 dated April 1, 2022, and are binding on the CRA provided that the Proposed Transactions are completed within the time frame described in this letter. 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 expressly confirmed, nothing in this letter should be construed as implying that the CRA has confirmed, reviewed, made any determination, or accepted any method for the determination in respect of:

a) the fair market value or adjusted cost base of any property or the paid-up capital of any shares referred to herein;

b) the amount of the non-capital losses, or any other amount of any corporation referred to herein;

c) the provincial income tax implications relating to the allocation of income and expenses under the Proposed Transactions;

d) subject to Ruling G, the application or non-application of a general anti-avoidance provision of any province;

e) the application of the proposed Excessive Interest and Financing Expenses Limitation rules contained in draft legislation released on February 4, 2022 to the Proposed Transactions; and

f) any tax consequences relating to the Facts and Proposed Transactions described herein other than those specifically described in the Rulings given above.

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

Yours truly,

XXXXXXXXXX
for Director
Partnerships and Corporate Financing Section
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch