2024 Ruling 2023-0998721R3 - Double post-mortem pipeline

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Post-mortem pipeline ruling involving two pipeline transactions.

Position: Favourable rulings provided.

Reasons: In accordance with the Act and our published positions.

XXXXXXXXXX									2023-099872

XXXXXXXXXX, 2024

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX
(collectively referred to as the “Taxpayers”)

This is in reply to your letter dated XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-noted Taxpayers.

This letter is based solely on the facts, proposed transactions, additional information and purposes of the proposed transactions described below. Any documentation submitted in connection with your request does not form part of the facts, proposed transactions or additional information unless specifically reproduced therein and any references to documentation are provided solely for the convenience of the reader.

We understand that to the best of your knowledge and that of each of the Taxpayers involved, none of the proposed transactions and/or issues involved in this ruling are the same as, or substantially similar to, transactions and/or issues that are:

a. in a previously filed tax return of the Taxpayers or person related to the Taxpayers;

b. being considered by the CRA in connection with a previously filed tax return of the Taxpayers or a person related to the Taxpayers;

c. under objection by the Taxpayers or a person related to the Taxpayers;

d. before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired; and

e. the subject of an advance income tax ruling previously issued by the Income Tax Rulings Directorate of the CRA in connection with the Taxpayers or a person related to the Taxpayers.

The tax account numbers, Tax Services Offices and the Tax Centres and addresses of the Taxpayers involved are as follows:

XXXXXXXXXX

Unless otherwise stated:

i. All references herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.) (the “Act”), as amended to the date of this letter;

ii. All terms and conditions used in this letter that are defined in the Act have the meaning given in such definition;

iii. All references to monetary amounts are in Canadian dollars; and

iv. 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 (as defined below) will be referred to as follows:

“ACB” means “adjusted cost base” as that term is defined in section 54;

“Act 1” means the Business Corporations Act, XXXXXXXXXX;

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

“Amalco” means the corporation to be formed upon the amalgamation of Newco A, Newco B and Opco, as described in Paragraph 30;

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

“capital property” has the meaning assigned by section 54;

“CCPC” means “Canadian-controlled private corporation” as that term is defined in subsection 125(7);

“CDA” means “capital dividend account” as that term is defined in subsection 89(1);

“Child 1” means XXXXXXXXXX, the child of Taxpayer A and Taxpayer B. Child 1 is resident in Canada;

“Child 1 Trust” means XXXXXXXXXX, an inter vivos trust, the sole beneficiary of which is Child 1. Child 1 Trust is a resident of Canada. The trustees of the Child 1 Trust include Child 1, Child 1’s child and Child 1’s spouse;

“Child 2” means XXXXXXXXXX, the child of Taxpayer A and Taxpayer B. Child 2 is resident in Canada;

“Child 2 Trust” means XXXXXXXXXX, an inter vivos trust, the sole beneficiary of which is Child 2. Child 2 Trust is a resident of Canada. The trustees of the Child 2 Trust include Child 2, Child 2’s spouse XXXXXXXXXX, a person unrelated to Child 2 and his spouse;

“Child 3” means XXXXXXXXXX, the child of Taxpayer A and Taxpayer B. Child 3 is resident in Canada;

“Child 3 Trust” means XXXXXXXXXX, an inter vivos trust for the exclusive benefit of Child 3. Child 3 Trust is a resident of Canada. The trustees of the Child 3 Trust include Child 3, Child 1 and Child 3’s spouse;

“CRA” means the Canada Revenue Agency;

“eligible property” has the meaning assigned by subsection 85(1.1);

“ERDTOH” means “eligible refundable dividend tax on hand” which has the meaning assigned by subsection 129(4);

“Estate A” means the estate of the late XXXXXXXXXX which is governed by Taxpayer A’s last will and testament;

“Estate B” means the estate of the late XXXXXXXXXX which is governed by Taxpayer B’s last will and testament;

“FMV” means “fair market value,” which refers to the amount, expressed in money terms, that is 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 and contracting for a taxable purchase and sale, expressed in terms of money;

“GRIP” means “general rate income pool” as that term is defined by subsection 89(1);

“NERDTOH” means “non-eligible refundable dividend tax on hand” which has the meaning assigned by subsection 129(4);

“Newco A” means a corporation to be incorporated under Act 1 by Estate A, as described in Paragraph 22;

“Newco B” means a corporation to be incorporated under Act 1 by Estate B, as described in Paragraph 22;

“Newco B Note” means the demand non-interest bearing promissory note described in Paragraph 27

“Note” means the demand non-interest bearing promissory note described in Paragraph 25;

“Opco” means XXXXXXXXXX, a corporation incorporated under Act 1 as described in Paragraph 1;

“Paragraph” refers to a numbered paragraph in this letter;

“Predecessor Corporations” means Newco A, Newco B and Opco collectively;

“proceeds of disposition” has the meaning assigned by section 54;

“Proposed Transactions” means the transactions described in Paragraphs 22 to 34 of this letter;

“PUC” means “paid-up capital” as that term is defined in subsection 89(1);

“resident in Canada” means resident in Canada for purposes of the Act;

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

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

“Taxpayer A” means the late XXXXXXXXXX;

“Taxpayer B” means the late XXXXXXXXXX; and

“V-Day basis” has the meaning determined under paragraph 84.1(2)(a.1) for the purposes of clause “B” in paragraph 84.1(1)(a).

FACTS

1. Opco is a taxable Canadian corporation and a CCPC with a taxation year end of XXXXXXXXXX. Opco carries on a business, the primary purpose of which is to derive interest income from a portfolio of loans receivable and to derive dividend income from shares held in private corporations. Opco was formed on XXXXXXXXXX as a result of the amalgamation of XXXXXXXXXX. Opco began carrying on its business a number of years prior to the death of Taxpayer A.

2. Immediately following the settlement of the Child 1 Trust, Child 2 Trust and Child 3 Trust on XXXXXXXXXX, each of Child 1, Child 2 and Child 3 transferred all of their shares of Opco to their respective trust on a tax-deferred basis.

3. Opco’s authorized share capital includes the following classes of shares:

a. An unlimited number of Opco Class A and Class B Shares

i. that entitle the holder to XXXXXXXXXX vote per share;

ii. that entitle the holder to discretionary dividends; and

iii. that entitle the holder to participate in the remaining assets of Opco in the event of a wind-up, liquidation or dissolution of Opco.

b. An unlimited number of Opco Class C Shares

i. that do not entitle the holder to vote;

ii. that entitle the holder to discretionary dividends; and

iii. that entitle the holder to participate in the remaining assets of Opco in the event of a wind-up, liquidation or dissolution of Opco.

c. An unlimited number of Opco Class D Shares

i. that entitle the holder to XXXXXXXXXX votes per share;

ii. that do not entitle the holder to dividends;

iii. that are redeemable all or in part, at the option of the holder or the corporation, at an amount equal to the FMV of the consideration received upon the issuance of such shares;

iv. that require the corporation to redeem all shares held by a shareholder upon their death in consideration for an amount equal to the FMV of the consideration received upon the issuance of such shares; and

v. that entitle the holder to an amount equal to the FMV of the consideration received upon the issuance of such shares in the event of a wind-up, liquidation or dissolution of Opco.

d. An unlimited number of Opco Class E Shares, Class F Shares, Class G Shares and Class H Shares

i. that do not entitle the holder to vote;

ii. that entitle the holder to a monthly preferential and non-cumulative dividend of XXXXXXXXXX% of the FMV of the consideration received upon the issuance of such shares;

iii. that are redeemable all or in part, at the option of the holder or the corporation, at an amount equal to the FMV of the consideration received upon issuance, plus any unpaid and declared dividends; and

iv. that entitle the holder to an amount equal to the FMV of the consideration received upon the issuance of such shares in the event of a wind-up, liquidation or dissolution of Opco.

4. Immediately before their death, Taxpayer A owned XXXXXXXXXX Opco Class D Shares having an aggregate FMV of $XXXXXXXXXX, an aggregate ACB of $XXXXXXXXXX and PUC of $XXXXXXXXXX, and XXXXXXXXXX Opco Class F Shares, having an aggregate FMV of $XXXXXXXXXX, an aggregate ACB of $XXXXXXXXXX and PUC of $XXXXXXXXXX, and exercised de jure control of Opco with XXXXXXXXXX% of the Opco voting rights.

5. Taxpayer A passed away on XXXXXXXXXX. Under the last will and testament of Taxpayer A, the residue of Estate A, which included Taxpayer A’s shares of the capital stock of Opco, referred to in Paragraph 4, was to be transferred to a trust for the sole benefit of Taxpayer B. However, since Taxpayer B died before Estate A was settled, the trust for the benefit of Taxpayer B was never formed. According to the last will and testament of Taxpayer A, the residue of Estate A will be divided equally between three testamentary trusts, each for the sole benefit of Child 1, Child 2 and Child 3.

6. Taxpayer A was deemed to have disposed of the XXXXXXXXXX Opco Class D Shares and the XXXXXXXXXX Opco Class F Shares immediately before death, and to have received proceeds of disposition equal to their FMV at that time. Estate A was deemed to have acquired the XXXXXXXXXX Opco Class D Shares and the XXXXXXXXXX Opco Class F Shares at a cost equal to the proceeds of disposition to Taxpayer A.

7. Estate A is resident in Canada and all beneficiaries of Estate A are resident in Canada. Its first taxation year end was XXXXXXXXXX. Estate A holds its shares of Opco as capital property.

8. The liquidators of Estate A include Child 1, Child 3 and an arm’s length individual, XXXXXXXXXX is not related to, and deals at arm’s length with, Taxpayer A, Child 1, Child 2 and Child 3.

9. The terms and conditions attached to the Opco Class D Shares (as noted in Paragraph 3c.iv, above) require Opco to redeem the Opco Class D Shares upon the death of a shareholder for an amount equal to the FMV of the consideration received by Opco on the issuance of such shares. On XXXXXXXXXX, Opco redeemed from Estate A, the XXXXXXXXXX Opco Class D Shares for an amount of $XXXXXXXXXX. Subsequent to this redemption, Estate A no longer had any voting rights in Opco. Following the redemption of the Opco Class D Shares held by Estate A, Taxpayer B exercised de jure control of Opco with XXXXXXXXXX% of the Opco voting rights.

10. Immediately before their death, Taxpayer B owned:

a. XXXXXXXXXX Opco Class C Shares, having an aggregate FMV of $XXXXXXXXXX and an aggregate ACB of $XXXXXXXXXX and PUC of $XXXXXXXXXX;

b. XXXXXXXXXX Opco Class D Shares, having an aggregate FMV of $XXXXXXXXXX and a nominal PUC and ACB;

c. XXXXXXXXXX Opco Class E Shares, having an aggregate FMV of $XXXXXXXXXX and an aggregate ACB and PUC of $XXXXXXXXXX.

11. Taxpayer B passed away on XXXXXXXXXX. Under the last will and testament of Taxpayer B, the shares of the capital stock of Opco that Taxpayer B held, referred to in Paragraph 10, are to be divided equally between Child 1 and Child 3.

12. As a consequence of Taxpayer B’s death, Taxpayer B was deemed to have disposed of the XXXXXXXXXX Opco Class C Shares, the XXXXXXXXXX Opco Class D Shares and the XXXXXXXXXX Opco Class E Shares immediately before death, and to have received proceeds of disposition equal to their FMV at that time. Estate B was deemed to have acquired the XXXXXXXXXX Opco Class C Shares, the XXXXXXXXXX Opco Class D Shares and the XXXXXXXXXX Opco Class E Shares at a cost equal to the proceeds of disposition to Taxpayer B.

13. Estate B is resident in Canada and all beneficiaries of Estate B are resident in Canada. Its first taxation year end was XXXXXXXXXX. Estate B holds its shares of Opco as capital property.

14. The liquidator of Estate B is XXXXXXXXXX, an individual who is not related to, and deals at arm’s length with Taxpayer B, Child 1, Child 2 and Child 3.

15. Upon Taxpayer B’s death, Opco received $XXXXXXXXXX of life insurance proceeds under a life insurance policy that Opco held, under which Taxpayer B’s life was insured.

16. As described in Paragraph 3c.iv., Opco’s articles of incorporation require Opco to redeem the Opco Class D Shares upon the death of a shareholder for an amount equal to the FMV of the consideration received by Opco on the issuance of such shares. On XXXXXXXXXX, Opco redeemed from Estate B, the XXXXXXXXXX Opco Class D Shares for an amount of $XXXXXXXXXX. Subsequent to this redemption, Estate A no longer had any voting rights in Opco. Following the redemption, Child 1 Trust, Child 2 Trust and Child 3 Trust each held XXXXXXXXXX% the Opco voting rights through the ownership of an equal number of Class D Shares.

17. On XXXXXXXXXX, Estate B borrowed $XXXXXXXXXX from Opco to pay the income taxes owed under the terminal return of Taxpayer B that were due on XXXXXXXXXX.

18. As of XXXXXXXXXX, Opco’s CDA is approximately $XXXXXXXXXX, which is largely attributable to the receipt of the life insurance proceeds described in Paragraph 15.

19. Immediately before the implementation of the Proposed Transactions, Opco’s significant assets will consist largely of interest and non-interest bearing loans receivable from related companies and shareholders, interest receivable, accounts receivable, and investments in private corporations.

20. Immediately before the implementation of the Proposed Transactions, Opco’s liabilities will consist primarily of accounts payable to related parties.

21. The issued and outstanding shares of the capital stock of Opco have the following attributes:

	Shareholder		Class of Shares		Number of Shares held		ACB		PUC
	Estate A		Class F			XXXX					XXXX		XXXX
	Estate B		Class C			XXXX					XXXX		XXXX
				Class E			XXXX					XXXX		XXXX
	Child 1 Trust	Class C			XXXX					XXXX		XXXX
				Class D			XXXX					XXXX		XXXX
	Child 2 Trust	Class C			XXXX					XXXX		XXXX
				Class D			XXXX					XXXX		XXXX
	Child 3 Trust	Class C			XXXX					XXXX		XXXX
				Class D			XXXX					XXXX		XXXX

The redemption amount of the Opco Class D, E and F Shares and the FMV of the Opco Class C Shares are as follows:

	Shareholder		Class of Shares		Redemption amount			FMV
	Estate A		Class F			XXXX					XXXX
	Estate B		Class C			XXXX					XXXX
				Class E			XXXX					XXXX
	Child 1 Trust	Class C			XXXX					XXXX
				Class D			XXXX					XXXX
	Child 2 Trust	Class C			XXXX					XXXX
				Class D			XXXX					XXXX
	Child 3 Trust	Class C			XXXX					XXXX
				Class D			XXXX					XXXX		

PROPOSED TRANSACTIONS

The Proposed Transactions will occur in the order presented unless otherwise indicated, with the exception of filing the applicable election forms, which will be filed within the applicable due dates following the completion of the Proposed Transactions.

22. Estate A will incorporate Newco A under Act 1 and Estate B will incorporate Newco B under Act 1. Newco A and Newco B will both be a taxable Canadian corporation and a CCPC.

23. The authorized share capital of Newco A and Newco B will be comprised of an unlimited number of the following classes of shares:

a. Class A Shares that are entitled to discretionary dividends, are fully participating and carry one vote per share;

b. Class B Shares that carry one vote per share, are not entitled to dividends or other form of participation except the right to receive an amount equal to the consideration received by the corporation for the issuance of the shares; and

c. Class C Shares that do not carry voting rights, have the right to receive a variable non-cumulative and non-preferential dividend between XXXXXXXXXX% and XXXXXXXXXX% of the redemption value annually, have the right to require the corporation to redeem all or part of the shares for their redemption value, which is equal to the FMV of the consideration received by the corporation in consideration for the issuance of the shares, plus any unpaid dividends declared thereon.

24. Estate A will subscribe for XXXXXXXXXX Class A Shares of Newco A for $XXXXXXXXXX and Estate B will subscribe for XXXXXXXXXX Class B Shares of Newco B for $XXXXXXXXXX.

25. Estate A will transfer its XXXXXXXXXX Opco Class F Shares to Newco A in exchange for consideration consisting of a demand non-interest bearing promissory note (the “Note”) and XXXXXXXXXX Class C Share of Newco A. The principal amount and FMV of the Note will not exceed an amount equal to the lesser of the ACB and the FMV of such class of shares at the time of the transfer, less $XXXXXXXXXX.

The amount added to the stated capital (PUC) in respect of the XXXXXXXXXX Class C Share of Newco A will be $XXXXXXXXXX.

Estate A and Newco A will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX Opco Class F Shares, held by Estate A, to Newco A. The agreed amount, in respect of the shares, will not be less than the principal amount of the promissory note, will not exceed the FMV of the shares and will not be less than the lesser of the two amounts specified in paragraph 85(1)(c.1).

26. Estate B will make the following transfers:

a. XXXXXXXXXX Opco Class C Shares to Newco B in exchange for consideration consisting of XXXXXXXXXX Class A Shares of Newco B.

The amount added to the stated capital (PUC) in respect of the XXXXXXXXXX Class A Shares of Newco B will be $XXXXXXXXXX, an amount equal to the aggregate ACB of the Opco Class C Shares transferred to Newco B.

b. XXXXXXXXXX Opco Class E Shares to Newco B in exchange for consideration consisting of XXXXXXXXXX Class C Shares of Newco B.

The amount added to the stated capital (PUC) in respect of the XXXXXXXXXX Class C Shares of Newco B will not exceed the ACB of the Opco Class E Shares transferred to Newco B.

Estate B and Newco B will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfers described above. The agreed amount, in respect of each class of shares, will not exceed the FMV of those shares and will not be less than the lesser of the two amounts specified in paragraph 85(1)(c.1).

27. Newco B will purchase for cancellation up to, but not exceeding, 25% of the Class C Shares of Newco B, owned by Estate B. As consideration for this purchase for cancellation, Newco B will issue to Estate B a demand, non-interest bearing promissory note (the “Newco B Note”).

28. Estate B will assign the Newco B Note to Opco as consideration for the partial repayment of the amount owing by Estate B to Opco, as described in Paragraph 17.

29. Opco will continue to carry on its business for at least one year following the share transfers described in Paragraphs 25 and 26. During the one-year period, Opco will not discontinue or reorganize its business nor purchase for cancellation any Opco shares. During this period, Newco A will not repay any portion of the Note held by Estate A, nor will Newco B purchase for cancellation or redeem any issued and outstanding shares held by Estate B.

30. After a period of at least one year has elapsed from the time of the share transfers described in Paragraphs 25 and 26, Newco A, Newco B and Opco will amalgamate and continue as one corporation, Amalco, in accordance with the provisions of Act 1. Amalco will be a taxable Canadian corporation and a CCPC.

Upon the amalgamation:

a. All of the property (except amounts receivable from any Predecessor Corporations or shares of the capital stock of any Predecessor Corporation) of the Predecessor Corporations immediately before the amalgamation will become property of Amalco by virtue of the amalgamation;

b. All of the liabilities (except amounts payable to any Predecessor Corporation) of the Predecessor Corporations immediately before the amalgamation will become liabilities of Amalco by virtue of the amalgamation; and

c. All the shareholders (except any Predecessor Corporation) who owned shares of the capital stock of any Predecessor Corporation immediately before the amalgamation will receive shares of Amalco because of the amalgamation.

For greater certainty, upon the amalgamation, the Newco B Note owing by Newco B, and receivable by Opco, will be settled.

The authorized share capital of Amalco will be the same as the authorized share capital of Opco, except that Amalco will also be authorized to issue an unlimited number of Amalco Class CC Shares with the same rights and privileges as the Opco Class C Shares described in Paragraph 3b.

31. Amalco will continue to carry on the business in the same manner that it was carried on by Opco prior to the implementation of the Proposed Transactions.

32. The Note will be gradually repaid after the amalgamation, as described in Paragraph 30. For greater certainty, the amount paid in any single quarter of the first year that the Note is outstanding after the amalgamation will not exceed 25% of the principal amount of the Note when it was first issued.

33. The Class G Shares of Amalco will be gradually redeemed after the amalgamation, as described in Paragraph 30. For greater certainty, the amount redeemed by Amalco in any single quarter of the first year after the amalgamation will not exceed more than 25% of the redemption value of the Class G Shares of Amalco when they were first issued.

34. The stated capital (PUC) of the Class CC Shares of Amalco will be gradually reduced, with payment, after the amalgamation, as described in Paragraph 30. For greater certainty, the reduction of the stated capital (PUC), paid by Amalco, in any single quarter of the first year after the amalgamation will not exceed more than 25% of the stated capital (PUC) of the Class CC Shares of Amalco when they were first issued.

ADDITIONAL INFORMATION

35. Neither Taxpayer A nor Taxpayer B have claimed a deduction under section 110.6 in respect of any of the shares of Opco, and no person not dealing at arm’s length with either Taxpayer A and Estate A and with either Taxpayer B and Estate B, previously claimed a deduction under section 110.6 in respect of any of the shares of Opco or any shares which they were substituted for, within the meaning of subsection 248(5).

36. For greater certainty, there is no V-day basis included in the ACB of any class of the shares of Opco or any shares for which such shares were substituted within the meaning of subsection 248(5).

37. Opco may pay dividends to Newco A and Newco B from time to time following the transfers described in Paragraphs 25 and 26. However, prior to the amalgamation described in Paragraph 30, such dividends will be funded by the earnings of Opco and not from the sale of any of its investments.

38. Opco may pay cash dividends to the Class C shareholders from time to time before or after the transfers described in Paragraphs 25 and 26. Such dividends would be exclusively funded by the life-insurance proceeds received by Opco following the death of Taxpayer B.

39. Amalco plans to continue to carry on its business indefinitely.

PURPOSE OF THE PROPOSED TRANSACTIONS

40. The purpose of the Proposed Transactions is to create a “pipeline” to allow for the distribution of funds from Opco to Estate A and Estate B, without triggering additional taxes on the value of each of Estate A’s interest and Estate B’s interest in Opco for which the taxes were already paid or payable as a result of the death of Taxpayer A and Taxpayer B.

RULINGS GIVEN

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

A. Section 84.1 will not apply to deem Estate A to have received a dividend from Newco A, on the disposition of the XXXXXXXXXX Opco Class F Shares to Newco A, as described in Paragraph 25.

B. Section 84.1 will not apply to cause a reduction in the PUC of the XXXXXXXXXX Class A Shares of Newco B and the XXXXXXXXXX Class C Shares of Newco B, as described in Paragraph 26.

C. Subsection 84(2) will not apply, as a result of the Proposed Transactions, in and by themselves, to deem Opco or Amalco, as the case may be, to have paid, and Estate A to have received, a dividend on the issuance or subsequent repayment of the Note, as described in Paragraphs 25 and 32.

D. Subsection 84(2) will not apply, as a result of the Proposed Transactions, in and by themselves, to deem Opco or Amalco, as the case may be, to have paid, and Estate B to have received, a dividend as a consequence of the proposed transactions described in Paragraphs 26, 27, 33 and 34.

The above rulings are given subject to the 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 in the manner and within six months of the date of 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 therein.

OPINION

Provided that (i) the preceding statements constitute a complete and accurate disclosure of all relevant facts, additional information, completed and proposed transactions and purpose of the proposed transactions; (ii) the Proposed Transactions are completed in the manner described above; and (iii) section 245 of the Act is amended in accordance with the Fall Economic Statement Implementation Act, 2003 (Bill C-59) which received first reading in the House of Commons on November 30, 2023, the provisions of subsection 245(2), as amended, will not apply as a result of the Proposed Transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given above.

OTHER COMMENTS

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

a. the PUC of any class of shares or the ACB or FMV of any share or property referred to herein;

b. the capacity of the liquidators of Estate A and Estate B to complete the Proposed Transactions under the last will and testament of Taxpayer A and Taxpayer B, as the case may be;

c. whether any person described herein deals, or does not deal, with any other person at arm’s length; and

d. any other tax consequence relating to the facts, additional information, Proposed Transactions or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not.

Nothing in this letter should be construed as confirmation, express or implied, that, for the purposes of any of the rulings given above, any adjustment to the FMV of the properties transferred, whether pursuant to a price adjustment clause or otherwise, will be effective retroactively to the time of the transfer. Furthermore, the operation of a price adjustment clause may invalidate one or more of the rulings provided. The general position of the CRA with respect to price adjustment clauses is stated in Income Tax Folio S4-F3-C1, Price Adjustment Clauses.

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

Yours truly,

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