7 July 1996 Income Tax Severed Letter 9641283 - Supplemental to ruling 963524

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.

SUMMARY: Supplemental to ruling—ITA-89(1), 186(4)—Advance income tax ruling—Amendment to advance income tax ruling number 963524 issued in 1996. Amendment relates to shares being exchanged in a different ratio than in the original ruling.

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.

PRINCIPAL ISSUES:

supplemental to ruling 963524-shares exchanged XXXXXXXXXX instead of 1 for 1

POSITION:

no impact on rulings given

REASONS:

XXXXXXXXXX 1-964128

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sirs:

Re: XXXXXXXXXX Advance Income Tax Ruling

This is in reply to your letter dated XXXXXXXXXX in which you advised us of a change to the proposed transactions described in ruling letter 963524 dated XXXXXXXXXX, 1996 (the "Ruling Letter") issued on behalf of the above-referenced taxpayers.

Instead of issuing 1 Class XXXXXXXXXX Common, 1 Class XXXXXXXXXX Common or 1 Class XXXXXXXXXX Common share for each common share of XXXXXXXXXX exchanged, XXXXXXXXXX will issue XXXXXXXXXX Class XXXXXXXXXX Common, XXXXXXXXXX Class XXXXXXXXXX Common or XXXXXXXXXX Class XXXXXXXXXX Common shares for each common share exchanged. Paragraph 10 of the Ruling Letter is therefore amended to read as follows:

10. The three groups of common shareholders of XXXXXXXXXX will exchange their existing common shares of XXXXXXXXXX for a separate class of new Common Shares as follows:

XXXXXXXXXX will exchange its XXXXXXXXXX common shares for XXXXXXXXXX Class XXXXXXXXXX Common shares; XXXXXXXXXX will exchange its XXXXXXXXXX common shares for XXXXXXXXXX Class XXXXXXXXXX Common shares; each of the XXXXXXXXXX Individual Shareholders will exchange his XXXXXXXXXX common shares for XXXXXXXXXX Class XXXXXXXXXX Common shares.

The paid-up capital of the existing common shares, $XXXXXXXXXX, will be reallocated amongst the three new classes of Common shares as follows:

Class XXXXXXXXXX Common $XXXXXXXXXX Class XXXXXXXXXX Common $XXXXXXXXXX Class XXXXXXXXXX Common $XXXXXXXXXX $XXXXXXXXXX

The proposed reallocation of paid-up capital to the Class XXXXXXXXXX Common shares will give the Individual Shareholders paid-up capital equal to their adjusted cost base and will equal the paid-up capital the Individual Shareholders would have had if they had subscribed for treasury shares of a separate class at the time they subscribed for common shares of XXXXXXXXXX

The allocation of paid-up capital to the Class XXXXXXXXXX Common shares will give XXXXXXXXXX paid-up capital equal to its pro-rata share of the existing paid-up capital. The paid-up capital of the Class XXXXXXXXXX Common shares will not be greater than the adjusted cost base (determined pursuant to subsection 84.1(2) of the Act) of the XXXXXXXXXX existing common shares of XXXXXXXXXX owned by XXXXXXXXXX. The Class XXXXXXXXXX Common shares to be issued to XXXXXXXXXX will have a fair market value of more than 10% of the fair market value of all the issued shares of the capital stock of XXXXXXXXXX within the meaning of subparagraph 186(4)(b)(ii) of the Act.

The remaining paid-up capital will be allocated to the Class XXXXXXXXXX Common shares owned by XXXXXXXXXX

Ruling A is hereby amended as follows:

A. By virtue of paragraph 186(4)(b) of the Act, XXXXXXXXXX will be connected with XXXXXXXXXX immediately following the exchange of shares described in paragraph 10 above. For greater certainty, the ownership by XXXXXXXXXX of XXXXXXXXXX Class XXXXXXXXXX Common shares of the capital stock of XXXXXXXXXX out of a total of XXXXXXXXXX issued shares, consisting of the Class XXXXXXXXXX Common shares, the Class XXXXXXXXXX Common shares and the Class XXXXXXXXXX Common shares, will constitute ownership of more than 10% of the issued share capital (having full voting rights under all circumstances) of XXXXXXXXXX, for purposes of subparagraph 186(4)(b)(i) of the Act.

Notwithstanding the above changes, we confirm that, subject to the conditions set out therein, the rulings given in the Ruling Letter, as hereby amended, will continue to be binding on Revenue Canada in accordance with the practice outlined in Information Circular 70-6R2, dated September 28, 1990, provided that the proposed transactions described in the Ruling Letter are completed in the manner described therein by XXXXXXXXXX

Yours truly,

for Director Reorganizations and Foreign Division Income Tax Rulings and Interpretations Directorate Policy and Legislation Branch