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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
3-960024
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1996
Dear Sirs:
Re: Advance Income Tax Ruling
XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-captioned taxpayers. We also acknowledge receipt of your letter of XXXXXXXXXX and our telephone conversations in connection herewith.
We understand that to the best of your knowledge and that of the taxpayers involved none of the issues involved in the requested rulings is being considered by a district office or a taxation centre in connection with a tax return already filed, or is under objection or appeal.
DEFINITIONS
In this letter unless otherwise expressly stated:
(a)"Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1 as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;
(b)"non-capital loss" has the meaning assigned by paragraph 111(8)(b);
(c)"taxable Canadian corporation" has the meaning assigned by paragraph 89(1)(i).
Our understanding of the facts and of the proposed transactions is as follows:
FACTS
1.XXXXXXXXXX is a corporation incorporated under the laws of XXXXXXXXXX and is a company resident in XXXXXXXXXX owns all of the issued and outstanding shares of XXXXXXXXXX are corporations incorporated under the laws of XXXXXXXXXX and resident in XXXXXXXXXX.
2.XXXXXXXXXX owns all the issued and outstanding shares of XXXXXXXXXX is a corporation incorporated under the laws of Canada. XXXXXXXXXX are taxable Canadian corporations.
3.XXXXXXXXXX owns all the issued and outstanding shares of XXXXXXXXXX is a corporation incorporated under the laws of XXXXXXXXXX is a taxable Canadian corporation.
4.XXXXXXXXXX owns all the issued and outstanding shares of XXXXXXXXXX is a corporation incorporated under the laws of Canada. XXXXXXXXXX are taxable Canadian corporations.
5.XXXXXXXXXX owns all the issued and outstanding shares of XXXXXXXXXX and the issued and outstanding shares, other than the preference shares held by XXXXXXXXXX are corporations incorporated under the laws of Canada. XXXXXXXXXX is a corporation incorporated under the laws of XXXXXXXXXX are taxable Canadian corporations.
6.XXXXXXXXXX has approximate non-capital losses of $XXXXXXXXXX which will expire in its taxation year ending in the year XXXXXXXXXX.
7.XXXXXXXXXX has approximate non-capital losses of $XXXXXXXXXX the last of which will expire in its taxation year ending in the year XXXXXXXXXX.
8.XXXXXXXXXX has approximate non-capital losses of $XXXXXXXXXX the last of which will expire in its taxation year ending in the year XXXXXXXXXX.
9.XXXXXXXXXX holds redeemable preference shares in the capital of XXXXXXXXXX having an aggregate redemption price of approximately $XXXXXXXXXX. In a previous ruling and supplementary ruling (our files 3-941764 and 1-952504, respectively) cash held by XXXXXXXXXX was loaned to XXXXXXXXXX. $XXXXXXXXXX was loaned to XXXXXXXXXX and $XXXXXXXXXX to XXXXXXXXXX. These loans are interest-free and will mature no later than XXXXXXXXXX.
10.XXXXXXXXXX have accumulated surplus cash from operations and investment in the amounts of approximately $XXXXXXXXXX. Prior to the implementation of the proposed transactions described herein, each of XXXXXXXXXX may accumulate additional surplus cash. XXXXXXXXXX do not have any outstanding loans.
PROPOSED TRANSACTIONS
11.XXXXXXXXXX will lend to XXXXXXXXXX amounts that will not exceed in the aggregate the lesser of its surplus cash and $XXXXXXXXXX. Each of the loans will be a non-interest-bearing demand loan having a maximum term of XXXXXXXXXX.
12.XXXXXXXXXX will issue to each of XXXXXXXXXX a promissory note as evidence of its indebtedness.
13.XXXXXXXXXX will use the money borrowed from XXXXXXXXXX.
(a)directly in its business;
(b)to lend or invest in arm's-length situations;
(c)to lend to other corporations in Canada that are wholly-owned directly or indirectly by XXXXXXXXXX at interest rates ranging between XXXXXXXXXX to Canadian members of the XXXXXXXXXX group of corporations; or
(d)in a combination of any or all of the foregoing uses.
XXXXXXXXXX may from time to time vary the use or uses of all or of part of the money borrowed, provided that all of the borrowed money will at all times continue to be used as specified above.
14.XXXXXXXXXX will repay in cash, at a date that is no later than the date that is XXXXXXXXXX from the date of the proposed transactions described in paragraph 11 above, the amounts borrowed from XXXXXXXXXX and the non-interest-bearing notes issued by XXXXXXXXXX will be surrendered for cancellation.
PURPOSE OF THE PROPOSED TRANSACTION
15.The purpose of the proposed transactions is to enable XXXXXXXXXX to earn sufficient income so as to utilize its accumulated non-capital losses.
RULINGS
Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, proposed transactions and the purposes of the proposed transactions, we confirm the following:
A.The provisions of subsections 15(1), 15(9), 56(2), 246(1) and paragraphs 69(1)(a) and (b) will not apply to the proposed transactions, in and by themselves.
B.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.
These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R2 dated September 28, 1990 issued by Revenue Canada and are binding provided that the proposed transactions (other than the transaction described in paragraph 14 above) are completed before XXXXXXXXXX.
These rulings are based on the Act as it currently reads and do not take into account any future amendments, whether currently proposed or not, to the Act.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and Interpretations
Directorate
Policy and Legislation Branch
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