2025 Ruling 2024-1002911R3 - Debt Reorganization

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) Whether the Proposed Transactions would result in a disposition of a given debt instrument, otherwise than for the assignor, upon assignment of the debt; 2) Whether the Proposed Transactions would impact the deduction pursuant to paragraph 20(1)(c) ; 3) What is the proceeds of disposition of a given debt receivable that is assigned in satisfaction of bonds, as contemplated by the Proposed Transactions ; 4) How would section 80 apply to the Proposed Transactions.

Position: 1) No ; 2) No ; 3) The proceeds for the assignor will be equal to the FMV of the corresponding bonds that are extinguished as a result of the assignment ; 4) Section 80 will apply to the difference between the lesser of principal amount of the given debt that is extinguished and the amount for which it was issued, on the one hand, and the FMV of the debt receivable assigned therefor, on the other hand.

Reasons: The Law.

XXXXXXXXXX 2024-100291

XXXXXXXXXX, 2025

Dear XXXXXXXXXX:

Re: 	Advance Income Tax Ruling Request 
	XXXXXXXXXX

We are writing in response to your letter of XXXXXXXXXX, seeking an advance income tax ruling on behalf of the above-noted entities (the “Requestors”), as amended by your letter of XXXXXXXXXX. We also acknowledge the information and submissions provided in subsequent correspondence.

We understand that to the best of your knowledge and that of the Requestors, 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 or information return of the Requestors or a related person and:

A. being considered by the CRA in connection with any such tax or information return;

B. under objection by the Requestors or a related person; or

C. the subject of a current or completed court process involving the Requestors or a related person; or

the subject of a ruling request previously considered by the Income Tax Rulings Directorate in relation to the Requestors or a related person. The tax account numbers, addresses, Tax Services Office and the Tax Center of the Requestors are as follows:

XXXXXXXXXX

This document is based solely on the facts and proposed transactions described below. The documentation submitted with the request does not form part of the facts and proposed transactions, and any references thereto are provided solely for the convenience of the reader.

Definitions

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 (5th Supp.) c. 1, as amended, (the “Act”);

ii. all terms used herein 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.

In this letter, the following terms or expressions have the meanings specified:

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

“affiliated persons” has the meaning assigned by section 251.1;

“Amendment and Restatement” has the meaning assigned to it in Paragraph 33;

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

“Canadian Bonds” means the bonds governed and secured by the Trust Indenture, issued by Issuer and described in Paragraphs 7 and following;

“Canadian Bond Series” has the meaning assigned to it in Paragraph 9;

“Canadian Debtholders” means the holders of the Canadian Bonds;

“Canadian Mirror Loans” means the loans made by Issuer to LP as described in Paragraph 17, and “Canadian Mirror Loan” means any one of them, depending on the context;

“Canadian partnership” has the meaning assigned by subsection 102(1);

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

“CBCA” means the Canada Business Corporations Act, R.S.C. 1985, c. C-44;

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

XXXXXXXXXX;

“Consent Fee” has the meaning assigned to it in Paragraph 37;

“CRA” means Canada Revenue Agency;

“Debtholders” means, collectively, the Canadian Debtholders and US Noteholders, and “Debtholder” means any one of them, depending on the context;

“Debts” means, collectively, the Canadian Bonds and the US Notes, and “Debt” means any one of them, depending on the context;

“Debt Series” means, collectively, all of the Canadian Bond Series and all of the US Note Series, and a “Debt Series” mean any one of them, depending on the context;

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

“Holdco 1” means XXXXXXXXXX, and is more fully described in Paragraph 2;

“Holdco 2” means XXXXXXXXXX, and is more fully described in Paragraph 3;

“Holdco 3” means XXXXXXXXXX, and is more fully described in Paragraph 5;

“Intercompany Loan Agreement” has the meaning assigned to it in Paragraph 28;

“Issuer” means XXXXXXXXXX and is more fully described in Paragraph 4;

“LP” means XXXXXXXXXX and is more fully described in Paragraph 6;

“Make-Whole Amount” means: (i) in the case of each Canadian Bonds, the amount, if any, to be paid by Issuer to the Debtholders in the event it wishes to redeem any of the Canadian Bonds before its term (excluding accrued and unpaid interest) pursuant to the terms of the relevant Canadian Bond that is in excess of the principal amount of such Canadian Bond, and (ii) in the case of each US Note, the amount, if any, that Issuer is required to pay in the event it wishes to prepay any such US Note as calculated under the terms of the applicable Note Purchase and Guaranty Agreement and corresponding US Note in addition to the principal of such US Note;

“Mirror Loans” means, collectively, the Canadian Mirror Loans and the US Mirror Loans, and “Mirror Loan” means any one of them, depending on the context;

“Mirror Loan Series” has the meaning assigned to it in Paragraph 28;

“Non-Resident Debtholder” means any Debtholder who is not resident of Canada for purposes of the Act;

“Note Purchase and Guaranty Agreement” means the agreement entered into between Issuer, LP and certain US Noteholders, pursuant to which one or two US Note Series, as the case may be, are issued.

“Original Issuance Amount” means the amount for which a Debt was issued;

“Paragraph” means a numbered or lettered paragraph of this letter;

“Parent LP” means XXXXXXXXXX, and is more fully described in Paragraph 1;

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

“Proposed Amendments” means the proposed amendments to subsection 214(15) and paragraph 212(1)(i) contained in the Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations released by the Department of Finance of Canada on August 12, 2024.

“Proposed Transactions” means the transactions set out in Paragraphs 33 to 37.

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

XXXXXXXXXX;

“relevant spot rate” has the meaning assigned by subsection 261(1);

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

“Transfer” has the meaning assigned to it in Paragraph 35;

“Trustee” means XXXXXXXXXX;

“Trust Indenture” has the meaning set out in Paragraph 7;

“U.S.” means the United States of America;

“US Mirror Loans” means the loans made by Issuer to LP as described in Paragraph 27, and
“US Mirror Loan” means any one of them, depending on the context;

“US Noteholders” means the holders, each as beneficial owner, of the US Notes;

“US Notes” means the notes issued by Issuer in the U.S. described in Paragraphs 18 and following;

“US Note Series” has the meaning assigned to it in Paragraph 19.

Facts

A complete description of all the relevant facts is as follows:

The Parties

1. Parent LP is a limited partnership formed in accordance with the XXXXXXXXXX. Parent LP is a Canadian partnership. The general partner of Parent LP is XXXXXXXXXX, and it holds a XXXXXXXXXX% interest in Parent LP. The limited partners of Parent LP are XXXXXXXXXX, which respectively hold XXXXXXXXXX% of the partnership interests in Parent LP. Parent LP owns all of the issued and outstanding shares of the capital stock of Holdco 1.

2. Holdco 1 is a corporation formed under XXXXXXXXXX. Holdco 1 is a TCC and a CCPC. Holdco 1 owns all of the issued and outstanding shares of the capital stock of Holdco 2 and Holdco 3.

3. Holdco 2 is a corporation formed under and governed by the XXXXXXXXXX. Holdco 2 is a TCC and a CCPC. Holdco 2 owns all of the issued and outstanding shares of the capital stock of Issuer.

4. Issuer is a corporation formed under XXXXXXXXXX, and currently governed by the XXXXXXXXXX. Issuer is a TCC and a CCPC. Issuer owns a XXXXXXXXXX% general partner interest in LP.

5. Holdco 3 is a corporation formed under and governed by the CBCA. Holdco 3 is a TCC and a CCPC. Holdco 3 owns a XXXXXXXXXX% limited partner interest in LP.

6. LP is a limited partnership formed in accordance with the XXXXXXXXXX. LP is a Canadian partnership. LP’s assets consist principally of: (i) business property, consisting mainly of the assets used in the business of XXXXXXXXXX, (ii) limited partnership interests, (iii) shares of the capital stock of TCCs, and (iv) shares of the capital-stock of non-resident corporations.

The Canadian Bonds

7. The Canadian Bonds were issued by the Issuer and are governed and secured pursuant to an amended and restated trust indenture dated as of XXXXXXXXXX between the Issuer and XXXXXXXXXX, as supplemented by various other supplemental indentures (collectively the “Trust Indenture”).

8. Issuer has issued Canadian Bonds from time to time over the years, up until the last issuance of Canadian Bonds on XXXXXXXXXX. After XXXXXXXXXX, Issuer ceased to issue Canadian Bonds.

9. Each new Canadian Bond issuance was designated as a series (each a “Canadian Bond Series”) and is evidenced by the outstanding Canadian Bonds (as listed in Paragraph 11 below), which include, amongst other documents, a global certificate.

10. The Canadian Bond Series have the following characteristics:

a) each Canadian Bond Series bears interest at an annual fixed stipulated rate, with such interest being payable in cash semi-annually;

b) principal and interest, and all other amounts payable thereunder, are payable in Canadian dollars;

c) each Canadian Bond Series is issued for a fixed term;

d) each Canadian Bond Series is issued for proceeds equal to its principal amount less a nominal discount;

e) all amounts owing, or that may become owing, under each Canadian Bond Series are guaranteed by LP;

f) the Canadian Bonds are secured by a hypothec of first rank on the universality of the movable and immovable property, present and future, of Issuer and of LP;

g) the Canadian Bonds rank equally between themselves (and with the US Notes and with certain other secured debts of LP for which collateral Canadian Bonds have been issued), but prior to the unsecured obligations of Issuer and LP;

h) each Canadian Bond Series is redeemable in whole or in part from time to time at the option of Issuer. Where the Canadian Bonds are redeemed before a certain cut-off date, Issuer must pay all accrued and unpaid interest as of the redemption date, as well as a redemption price at least equal to, but that may exceed, the outstanding principal at such time as calculated based on the formula provided for under the terms of the relevant Canadian Bond Series (i.e., including, depending on the circumstances, a Make-Whole Amount); and

i) where the Canadian Bonds are redeemed on or after a certain cut-off date, the redemption price is equal to XXXXXXXXXX% of the principal amount of the relevant Canadian Bond Series, together with accrued and unpaid interest as of the redemption date.

11. The following Canadian Bond Series are currently outstanding:

			Coupon		Issue 	Maturity	Principal Amount	FMV as at XXXXX
					Date	Date		(still outstanding)	(C$)
								(C$)
	Series XXXXX	XXXXX		XXXXX	XXXXX		XXXXX			XXXXX

12. The Canadian Bonds were issued at a nominal discount to their principal amount.

13. There have been no prepayments of any portion of the principal amount of the Canadian Bonds since their issuance.

14. The FMV of each Canadian Bond Series fluctuates from day-to-day considering, amongst other factors, its fixed interest rate and maturity date.

15. Apart from their interest rate, term and principal amount, the Canadian Bond Series are substantially similar to one another.

16. The Trust Indenture and the Canadian Bonds are governed by, and are to be construed in accordance with, the laws of the Province of XXXXXXXXXX.

17. All of the proceeds from each Canadian Bond issuance were used by Issuer to make an interest-bearing loan to LP (each, a “Canadian Mirror Loan” and collectively, the “Canadian Mirror Loans”), described below in Paragraphs 28 to 32, on the same date as the corresponding Canadian Bond Series.

The US Notes

18. Issuer issued XXXXXXXXXX notes in the US (the “US Notes”) between XXXXXXXXXX. Since XXXXXXXXXX, Issuer has not issued further notes in the US.

19. Each new US Note was issued in accordance with a Note Purchase and Guaranty Agreement and was designated as a series (each a “US Note Series”).

20. The US Note Series have the following characteristics:

a) each US Note Series bears interest at an annual fixed stipulated rate (with each US Note Series having a different interest rate), with such interest being payable in cash semi-annually;

b) the principal and interest, and all other amounts payable thereunder, are payable in US dollars;

c) each US Note Series is issued for a fixed term;

d) each US Note Series is issued for proceeds equal to its principal amount less a nominal discount;

e) all amounts owing or that may become owing under the US Notes are guaranteed by LP;

f) the US Notes are secured by a hypothec of first rank on the universality of the movable and immovable property, present and future of each of Issuer and LP;

g) the US Notes rank equally between themselves (and with the Canadian Bond Series and with certain other secured debts of LP for which collateral Canadian Bonds have been issued) but prior to the unsecured obligations of Issuer and LP; and

h) the US Notes may be prepaid in whole or in part from time to time at the option of Issuer, in which case, Issuer may also have to pay a Make-Whole Amount based on the formula provided for in the relevant Note Purchase and Guaranty Agreement to the relevant US Noteholders.

21. The following US Note Series are currently outstanding:

			Coupon		Issue 	Maturity	Principal Amount	Principal Amount	FMV as at XXXXX		FMV as at XXXXX
					Date	Date		(still outstanding)	expressed in C$		(US$)			(C$)
								(US$)			(relevant spot rate
											on issuance)
	Series XXXXX	XXXXX		XXXXX	XXXXX		XXXXX			XXXXX			XXXXX			XXXXX

22. The US Notes were issued at a nominal discount to their principal amount.

23. There have been no prepayments of any portion of the principal amount of the US Notes since their issuance.

24. The FMV of each US Note Series fluctuates from day-to-day considering, amongst other factors, their fixed interest rate and maturity date.

25. Apart from their interest rate, term and principal amount, the US Note Series are substantially similar to one another.

26. Each Note Purchase and Guaranty Agreement is governed by, and shall be construed in accordance with, the laws of the State of XXXXXXXXXX.

27. All of the proceeds from each US Note issuance were used by Issuer to make a an interest-bearing loan to LP (each, a “US Mirror Loan” and collectively, the “US Mirror Loans”), described below in Paragraphs 28 to 32, on the same date as the corresponding US Note Series.

The Mirror Loans

28. For each Canadian Bond Series and US Note Series, a Mirror Loan (for the purposes of this request, each a “Mirror Loan Series”) was entered into and evidenced by an intercompany loan agreement (each, an “Intercompany Loan Agreement”) entered into between Issuer, as lender, LP, as borrower, and the Trustee. The obligations of LP under each Mirror Loan Series are secured by a security interest granted by LP for which a collateral bond was issued by LP. This method of issuing collateral bonds was to ensure that the obligations of LP under each Mirror Loan Series are secured and benefit from the security granted by LP. The Mirror Loan Series are legally valid debts that were entered into on the same day as the relevant Canadian Bond Series and US Notes Series, that are separate and distinct from the Debts.

29. Each Mirror Loan Series has the same principal amount, interest rate, interest accrual period, issue date and maturity date, and is denominated in the same currency as, the Canadian Bond Series or US Note Series to which it corresponds. In addition, each Mirror Loan Series provides that it bears substantially the same terms and conditions as the Canadian Bond Series or US Note Series to which it corresponds.

30. Under each Mirror Loan, LP undertakes to pay (i) any amount owing, or that may become owing, under the terms of the corresponding Canadian Bond or US Note, without XXXXXXXXXX releasing Issuer from such obligation and (ii) all amounts payable by Issuer to the holders of the corresponding Canadian Bond or US Note directly and that such payment shall constitute an equivalent payment from LP to Issuer pursuant to the terms of the relevant Mirror Loan.

31. The ACB to Issuer of each Mirror Loan Series is, for each Mirror Loan Series that corresponds to a Canadian Bond Series, the same as the proceeds for which the corresponding Canadian Bond Series was issued and, in the case of each US Note Series, the same as the proceeds for which the corresponding US Note Series was issued, expressed in Canadian dollars using the relevant spot rate on the date such US Mirror Loan was made.

32. The Mirror Loans are held by Issuer as capital property.

Proposed Transactions

33. The terms of the Mirror Loans will be amended and restated (the “Amendment and Restatement”) to fully set out the terms that are presently set out in the corresponding Canadian Bond Series and US Note Series and that were previously incorporated by reference to the corresponding Debt or not otherwise applicable. Amongst other things, each Mirror Loan Series will continue to have the same maturity date, principal amount, and interest rate. The documents will specify that the intention of the parties is for the Mirror Loans to be continued as the same instrument, and, for greater certainty, that the intention is for the Amendment and Restatement not to constitute: (i) XXXXXXXXXX of any of the Mirror Loans, (ii) a substitution of all or a portion of the Mirror Loans by a new debt, nor (iii) a discharge, rescission or extinguishment of all or a portion of the Mirror Loans.

34. Issuer and LP will pay, in cash, in the same manner they usually do, all interest that is accrued and unpaid under the Debts and the Mirror Loans at such time.

35. The Debtholders and Issuer will proceed with an exchange of the Debts pursuant to the terms of the Trust Indenture, which will be effected by the transfer, by Issuer, to each Debtholder, of the Mirror Loan Series, or portion thereof, corresponding to the Debt Series, or portion thereof, held by such Debtholder as full and final settlement of all obligations of Issuer under each Debt (the “Transfer”). The intention of the parties as to the manner in which the Transfer is to be effected will be stated in a supplement to the Trust Indenture for the Canadian Bond Series and an exchange agreement for the US Note Series. The documents will specify that the intention of the parties is for the Mirror Loans to be continued as the same instrument, and, for greater certainty, that the intention is for the Transfer not to constitute: (i) XXXXXXXXXX of any of the Mirror Loans, (ii) a substitution of all or a portion of the Mirror Loans by a new debt, nor (iii) a discharge, rescission or extinguishment of all or a portion of the Mirror Loans.

Where the XXXXXXXXXX is applicable, the Transfer will be considered as a contract of XXXXXXXXXX, as contemplated by XXXXXXXXXX, effected by the assignment of the Mirror Loans.

36. The Transfer will have the following results:

a) the Debts will be settled and extinguished;

b) Issuer will be released from any and all obligations under the Debts;

c) the Debtholders will become the creditors of LP under the Mirror Loan Series that previously corresponded to their respective Canadian Bond Series or US Note Series, in the same proportions;

d) LP will be released from being a guarantor under the Debts (as a result of the settlement of such Debts);

e) Issuer will no longer be a creditor under the Mirror Loans that correspond to the Debts; and

f) all hypothecs provided by Issuer will be released and discharged.

37. If the Transfer is approved by the Debtholders and is completed, the Debtholders who duly and timely executed and delivered a valid proxy and consent solicitation form or voted in person at the Debtholders meeting will receive from Issuer a certain fee equal to a fixed amount for each XXXXXXXXXX principal amount of Debts represented by such proxy and consent or voted in person at the Debtholders meeting (the “Consent Fee”).

Additional information

38. Each of Issuer and LP deals at arm’s length and is not affiliated with each Debtholder at all relevant times.

39. All interest payable on the Mirror Loans and the Debts, prior to the Proposed Transactions, was fully deductible under paragraph 20(1)(c).

40. The Canadian Mirror Loans are loans governed by the laws applicable in the Province of XXXXXXXXXX.

41. Neither the Amendment and Restatement nor the Transfer of the Canadian Mirror Loans will result in XXXXXXXXXX of the Canadian Mirror Loans under the applicable law.

42. Neither the Amendment and Restatement nor the Transfer of the US Mirror Loans will result in XXXXXXXXXX of the US Mirror Loans pursuant to the XXXXXXXXXX or in a substitution of all or any portion of the US Mirror Loans for a new debt or in a discharge, rescission or extinguishment of all or any portion of the US Mirror Loans, pursuant to the laws of the State of XXXXXXXXXX.

43. Following the Amendment and Restatement, the Canadian Mirror Loans will be governed by the laws applicable in the Province of XXXXXXXXXX and the US Mirror Loans will be governed by the laws of the State of XXXXXXXXXX. The Transfer of the Canadian Mirror Loans will therefore be governed by the laws applicable in the Province of XXXXXXXXXX and the Transfer of the US Mirror Loans will be governed by the laws of the State of XXXXXXXXXX.

44. Pursuant to the Transfer, the Debtholders holding a given Debt Series will become XXXXXXXXXX creditors of LP under the corresponding Mirror Loan Series, to the extent of their respective interests or shares in such Mirror Loans Series (which will correspond to their previous interests in the relevant Debt Series, in the same proportions).

45. Issuer and LP do not actively or regularly trade or deal in U.S. dollars; any trading or dealing in U.S. dollars is limited to hedging the risk of fluctuations in the U.S. dollar arising from their business operations.

Purposes of the Proposed Transactions

The purpose of the Proposed Transactions is to maintain LP’s current stand-alone credit profile rating all the while preserving LP’s entitlement under paragraph 20(1)(c) to deduct the interest payable on the Mirror Loans, as amended and restated.

Rulings

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

A. Provided that the Proposed Transactions do not result in XXXXXXXXXX of the Mirror Loans pursuant to the XXXXXXXXXX or, where the laws of XXXXXXXXXX are applicable, in a substitution of all or any portion of the US Mirror Loans for a new debt or in a discharge, rescission or extinguishment of all or any portion of the US Mirror Loans:

1) the Amendment and Restatement of each Mirror Loan will not, in and of itself, result in a disposition, as contemplated by such definition in subsection 248(1), of the Mirror Loans;

2) LP will not be considered to have made a gain or sustained a loss for purposes of subsection 39(2) in respect of the US Mirror Loans as a result of the Amendment and Restatement and Transfer;

3) the Proposed Transactions will not, in and of themselves, cause any portion of the interest expense payable by LP on the Mirror Loans to no longer be deductible under paragraph 20(1)(c).

B. The Transfer will entail the following:

1) Issuer will dispose of each Mirror Loan Series for proceeds of disposition equal to the FMV, at the time of the Transfer, of the corresponding Canadian Bond Series or US Note Series that will be extinguished (each of which being described in Paragraphs 11 and 21);

2) paragraph 40(2)(e.1), subparagraphs 40(2)(g)(i) and 40(2)(g)(ii) and subsection 40(3.4) will not apply to prevent, restrict or otherwise delay the availability for deduction in the computation of Issuer’s income of any resulting capital losses;

3) for purposes of section 80, the Debts will be considered to have been settled and extinguished and Issuer will be considered to have paid at the time of the Transfer in satisfaction of the principal amount of each Debt Series an amount equal to the FMV of the corresponding Mirror Loan Series at such time;

4) for purposes of subsection 39(2), to the extent that there is a “forgiven amount”, as defined in subsection 80(1), on the settlement and extinguishment of a US Note Series as a result of the Transfer, the amount of the gain made or loss sustained by Issuer on that US Note Series because of fluctuations in the value of the US currency relative to Canadian currency will be determined by the formula A – B, where:

A is the FMV as of Transfer date (as determined in US dollars) of the US Mirror Loan Series delivered to Debtholders on the Transfer in respect of the corresponding US Notes Series, converted to Canadian dollars using the relevant spot rate as of the date the US Note Series was issued; and

B is the FMV of the US Mirror Loan Series (as determined in US dollars) delivered to Debtholders on the Transfer in respect of the corresponding US Note Series, converted to Canadian dollars using the relevant spot rate as of the date of the Transfer

(for greater certainty, a positive amount represents a gain, and a negative amount represents a loss);

5) for purposes of subsection 39(2), to the extent that there is no “forgiven amount”, as defined in subsection 80(1), on the settlement and extinguishment of a US Note Series as a result of the Transfer, the amount of the gain made or loss sustained by Issuer because of fluctuations in the value of the US currency relative to Canadian currency will be determined by the formula A-B, where:

A is the Original Issuance Amount (as determined in US dollars) of the US Note Series converted to Canadian dollars using the relevant spot rate as of the date the US Note Series was issued; and

B is the Original Issuance Amount (as determined in US dollars) of the US Note Series, converted to Canadian dollars using the relevant spot rate as of the date of the Transfer

(for greater certainty, a positive amount represents a gain, and a negative amount represents a loss);

6) according to subsection 39(2), the amount of the gain or loss as determined above, if any (to the extent that such gain or loss would not be respectively included in or deducted from the taxpayer’s income for the year or any other year if section 3 were read in the manner described in paragraph 39(1)(a)), will respectively be deemed to be a capital gain or a capital loss of the Issuer for the year from the disposition of foreign currency.

C. The excess, if any, of the FMV of a Mirror Loan Series over the price for which the corresponding Debt Series was issued will not be subject to Part XIII tax by virtue of paragraph 212(1)(b) or paragraph 212(1)(i).

D. The provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given above.

Opinion

If the Proposed Amendments are enacted in the form as they appeared in the Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations released by the Department of Finance Canada on August 12, 2024, with effect for the period that includes the time at which the Proposed Transactions will occur, the Consent Fee will be an amount that is deemed to be a payment of interest referred to in proposed paragraph 214(15)(c) and will not be subject to Part XIII tax by virtue of either paragraph 212(1)(b) or 212(1)(i).

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 legal qualification of a given transaction, including whether any transaction entails XXXXXXXXXX, substitution, discharge, recission or extinguishment of a given debt at law;

b. the characterization of any property described herein to the holder thereof;

c. whether parties are dealing at arm’s length, are related or are affiliated;

d. the ACB of any property;

e. the FMV of any property;

f. the deductibility of any payment of interest or the reasonableness of any rate of interest;

any provincial tax consequences of the Proposed Transactions or any other tax consequence relating to the Facts, Proposed Transactions, or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the Rulings.

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

Yours truly,

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