30 November 1997 Ruling 9716063 - BUTTERFLY

Unedited CRA Tags

55(3)(b)

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Text of Severed Letter

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.

FACTS

PROPOSED TRANSACTIONS

Preliminary Transactions

Distribution of Property of DC1

Distribution of Property of DC2

Distribution of Property of DC3

Share Redemptions

Winding-up of the Subsidiaries and the Distributing Corporations

Post-Butterfly Transactions

ADDITIONAL INFORMATION

PURPOSE OF THE PROPOSED TRANSACTIONS

RULINGS GIVEN

COMMENTS

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.

XXXXXXXXXX
XXXXXXXXXX 971606
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling

We are writing in response to your letter of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayers. In your letters of XXXXXXXXXX you provided additional information in respect of the facts and proposed transactions described in your original letter. We also acknowledge the information provided during our various telephone conversations (XXXXXXXXXX).

To the best of your knowledge, and that of the taxpayers involved, none of the issues contained herein:

(i) is in an earlier return of the taxpayers or a related person;

(ii) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayers or a related person;

(iii) is under objection by the taxpayers or a related person; and

(iv) is before the courts or, if a judgement has been issued, the time limit for appeal to a higher court has not expired.

Unless otherwise stated all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended, (the "Act").

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

(a) "adjusted cost base" ("ACB") has the meaning assigned to that term in section 54 of the Act;

(b) "BCA" means the Business Corporations Act (XXXXXXXXXX) and, where applicable, its predecessor statutes;

(c) "Canadian-controlled private corporation ("CCPC") has the meaning assigned to that term by subsection 125(7) of the Act;

(d) "capital dividend account" ("CDA") has the meaning assigned by subsection 89(1) of the Act;

(e) "capital property" has the meaning assigned to that term in section 54 of the Act;

(f) "cost amount" has the meaning assigned by subsection 248(1) of the Act;

(g) "DC1" means XXXXXXXXXX and is more fully described at paragraphs 1 and 2 hereof;

(h) "DC2" means XXXXXXXXXX and is more fully described at paragraph 2 hereof;

(i) "DC3" means XXXXXXXXXX and is more fully described at paragraph 3 hereof;

(j) "depreciable property" has the meaning assigned to that term in subsection 13(21) of the Act;

(k) "eligible property" has the meaning assigned to that term by subsection 85(1.1) of the Act;

(l) "Estate" means the XXXXXXXXXX was an individual resident in Canada. XXXXXXXXXX died on XXXXXXXXXX. Pursuant to her will, she appointed XXXXXXXXXX to be the executors (the "Executors") of her Estate. The Executors have satisfied the specific bequests made by XXXXXXXXXX in her will. Consequently, Mrs. A is the only person with an interest in the Estate. It is expected that the Estate will be under administration for a considerable period of time.

(m) "Holdco 1" means XXXXXXXXXX and is more fully described at paragraph 4 hereof;

(n) "Holdco 2" means XXXXXXXXXX and is more fully described at paragraph 5 hereof;

(o) "Holdco 3" means XXXXXXXXXX and is more fully described at paragraph 6 hereof;

(p) "Holdco 4" means XXXXXXXXXX, a corporation incorporated under the BCA;

(q) "Holdco 5" means XXXXXXXXXX, a corporation incorporated under the BCA;

(r) "Mrs. A" means XXXXXXXXXX, a resident of Canada;

(s) "Mr. B" means XXXXXXXXXX, a resident of Canada;

(t) "Mr. C" means XXXXXXXXXX, a resident of Canada;

(u) "paid-up capital" ("PUC") has the meaning assigned to that term by subsection 89(1) of the Act;

(v) "refundable dividend tax on hand" ("RDTOH") has the meaning assigned to that term in subsection 129(3) of the Act;

(w) "related" has the meaning assigned to that term under subsection 251(2) of the Act;

(x) "restricted financial institution" ("RFI") has the meaning assigned to that term under subsection 248(1) of the Act;

(y) "specified financial institution" ("SFI") has the meaning assigned to that term by subsection 248(1) of the Act;

(z) "specified investment business" ("SIB") has the meaning assigned to that term by subsection 125(7) of the Act;

(aa) "Subco 1" means XXXXXXXXXX, a corporation incorporated under the BCA;

(bb) "Subco 2" means XXXXXXXXXX, a corporation incorporated under the BCA;

(cc) "taxable Canadian corporation" ("TCC") has the meaning assigned to that term by subsection 89(1) of the Act;

(dd) "taxable dividend" has the meaning assigned to that term by subsection 89(1) of the Act;

(ee) "Trust #1" means the XXXXXXXXXX Trust #1, a trust resident in Canada; and

(ff) "Trust #2" means the XXXXXXXXXX Trust #2, a trust resident in Canada.

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

FACTS

1. DC1, a corporation incorporated under the laws on XXXXXXXXXX, is a TCC and a CCPC. The issued and outstanding capital of DC1 consists of XXXXXXXXXX common shares. XXXXXXXXXX common shares are owned by each of Holdco 1, Holdco 2 and Holdco 3.

The common shares of DC1 represent capital property to each of Holdco 1, Holdco 2 and Holdco 3. DC1 is connected with each of Holdco 1, Holdco 2 and Holdco 3 within the meaning assigned by paragraph 186(4)(b) of the Act. Each of Holdco 1, Holdco 2 and Holdco 3 has a substantial interest in DC1 pursuant to paragraph 191(2)(b) of the Act.

2. DC2, a corporation incorporated under the laws of XXXXXXXXXX, is a TCC and a CCPC. The issued and outstanding capital of DC2 consists of XXXXXXXXXX common shares. XXXXXXXXXX common shares are owned by each of Holdco 1, Holdco 2 and Holdco 3.

The common shares of DC2 represent capital property to each of Holdco 1, Holdco 2 and Holdco 3. DC2 is connected with each of Holdco 1, Holdco 2 and Holdco 3 within the meaning assigned by paragraph 186(4)(b) of the Act. Each of Holdco 1, Holdco 2 and Holdco 3 has a substantial interest in DC2 pursuant to paragraph 191(2)(b) of the Act.

Each of DC1 and DC2 owns investment assets, including undivided interests as tenants in common in XXXXXXXXXX separate parcels of real property. DC1 owns a XXXXXXXXXX% undivided interest in those properties and DC2 owns a XXXXXXXXXX% undivided interest in these properties. DC1 and DC2 have always treated the revenue from these properties as investment income for the purposes of the Act. Accordingly, for the purposes of paragraph 55(3)(b) of the Act, the assets of DC1 and DC2 consist only of cash or near cash property and investment property. Other than as described below, neither DC1 nor DC2 owns any shares of another corporation.

Each of the undivided interests in the properties owned by DC1 and DC2 constitutes capital property for the purposes of the Act.

In addition to its interests in the properties described above, DC1 and DC2 owns, respectively, XXXXXXXXXX and XXXXXXXXXX Class A Preference Shares in the capital of each of Holdco 2, Subco 1 and Subco 2. The Class A Preference Shares of Holdco 2, Subco 1 and Subco 2 owned by DC1 and DC2 have stated capital of $XXXXXXXXXX each. The PUC of the Class A Preference Shares of each such corporation is presently less than their stated capital. Holders of the Class A Preference Shares are entitled to a preferential fixed non-cumulative dividend at the rate of XXXXXXXXXX% and are entitled to receive their repayment of capital in priority to other shares. The Class A Preference Shares are redeemable at the option of each of Holdco 2, Subco 1 and Subco 2 on the payment of the amount paid up on such shares plus a premium of XXXXXXXXXX% thereof and are non-voting. All relevant parties have agreed that upon the purchase of the Class A Preference Shares as a result of the proposed transactions described in paragraphs 18, 22 and 32 below, no premium will be paid to the respective holders thereof.

DC1 and DC2 do not have significant influence, within the meaning of section 3050 of the CICA Handbook, over Holdco 2, Subco 1 and Subco 2.

DC1 and DC2 have balances in their RDTOH account and CDA.

3. DC3, a corporation incorporated under the laws of XXXXXXXXXX, is a TCC and a CCPC. The issued and outstanding capital of DC3 consists of XXXXXXXXXXcommon shares and XXXXXXXXXX Class B Shares. The Estate, Mr. B and Mr. C each own 1 common share and XXXXXXXXXX Class B Shares. The fair market value of the common shares and the Class B Shares of DC3 exceeds their ACB and PUC. The common shares and the Class B Shares of DC3 represent capital property to each of the Estate, Mr. B and Mr. C.

DC3 owns investment assets including XXXXXXXXXX separate parcels of real property as well as an interest in a parcel of real estate situated in XXXXXXXXXX. DC3 has always treated the revenue from the real estate as investment income for the purposes of the Act. Accordingly, for the purposes of paragraph 55(3)(b) of the Act, the assets of DC3 consist only of cash or near cash property and investment property. DC3 does not own any shares of other corporations.

Each of the real estate properties owned by DC3 constitutes capital property for the purposes of the Act.

DC3 has a balance in its RDTOH account and CDA.

Legal title to the real property owned by DC1, DC2 and DC3 described herein and above is held by corporations as bare trustee/nominees. Consequently, each of DC1, DC2 and DC3 own only the beneficial interest in such real property. References to transfers of property described in the paragraphs below will be to transfers of beneficial interests only.

4. Holdco 1, a corporation incorporated under the laws of XXXXXXXXXX, is a TCC and a CCPC. The authorized capital of Holdco 1 consists of an unlimited number of common shares and an unlimited number of Class A voting preference shares. The issued and outstanding capital of Holdco 1 consists of 2 Class A Shares that are owned by Mr. C and XXXXXXXXXX common shares that are owned by Holdco 4 . Mr. C is related to both Holdco 1 and Holdco 4 for the purposes of section 55 of the Act.

5. Holdco 2, a corporation incorporated under the laws of XXXXXXXXXX, is a TCC and a CCPC. The authorized capital of Holdco 2 consists of XXXXXXXXXX Class A Preference Shares, XXXXXXXXXX Class C Preference Shares, XXXXXXXXXX Class D Preference Shares, XXXXXXXXXX Class F Shares, XXXXXXXXXX Common Shares and XXXXXXXXXX Voting Special Shares.

The issued and outstanding capital of Holdco 2 is held as follows:

Shareholder	Class A	Class C	Common	Special	Class F

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Holdco 2 is controlled by Holdco 5, a TCC which is not related to any of Mr. B, Trust #1 or Trust #2. The Voting Special Shares of Holdco 2 were acquired by Holdco 5 as a result of a series of transactions which was the subject of advance income tax ruling 953017 which was issued on XXXXXXXXXX, 1996.

6. Holdco 3, a corporation incorporated under the laws of XXXXXXXXXX, is a TCC and a CCPC. The issued and outstanding capital of Holdco 3 consists of 1 Class A Preference Share, XXXXXXXXXX Class B Preference Shares and XXXXXXXXXX common shares.

At the time of her death XXXXXXXXXX owned all of the issued and outstanding shares of Holdco 3. As a consequence of XXXXXXXXXX death, all of her shares of Holdco 3 passed to the Estate.

On XXXXXXXXXX, the Executors of the Estate distributed all of the issued shares of Holdco 3 to Mrs. A. Consequently, Mrs. A is now the registered and beneficial owner of all the issued and outstanding shares of Holdco 3. This transaction was a transaction described in paragraph 55(3.2)(d) of the Act.

The aggregate ACB of the outstanding shares of Holdco 3 is $XXXXXXXXXX and the aggregate PUC of those shares is $XXXXXXXXXX.

7. Subco 1 and Subco 2 is each a TCC and a CCPC.

The authorized share capital of Subco 1 includes XXXXXXXXXX non-voting Class A Preference Shares, XXXXXXXXXX Common Shares, Voting Special Shares and Class F Shares. The issued and outstanding share capital of Subco 1 consists of:

(a) XXXXXXXXXX Class A Preference Shares, of which XXXXXXXXXX are owned by Mr. C, XXXXXXXXXX are owned by DC2 and XXXXXXXXXX are owned by DC1;

(b) XXXXXXXXXX Common Shares, all of which are owned by Holdco 4;

(d) XXXXXXXXXX Class F Shares which are owned by a corporation related to Mr. C.

The authorized share capital of Subco 2 includes XXXXXXXXXX Class A Preference Shares and XXXXXXXXXX Common Shares and Voting Special Shares. The issued and outstanding share capital of Subco 2 consists of:

(a) XXXXXXXXXX Class A Preference Shares, XXXXXXXXXX of which are owned by DC1 and XXXXXXXXXX of which are owned by DC2;

(b) XXXXXXXXXX Common Shares, all of which are owned by the Estate of XXXXXXXXXX; and

8. None of Mrs. A, Mr. B or Mr. C is related to each other. Similarly, none of Holdco 1, Holdco 2 or Holdco 3 is related to each other.

9. Except as described herein, none of the shareholders of DC1, DC2 or DC3 acquired any of their shares of such corporations in contemplation of the proposed transactions described below.

PROPOSED TRANSACTIONS

Preliminary Transactions

10. Holdco 3 will cause a new corporation ("Newco 3") to be incorporated under the BCA. The authorized capital of Newco 3 will consist of an unlimited number of Class A Shares and an unlimited number of common shares. Holdco 3 will subscribe for one common share in the capital of Newco 3 for nominal consideration.

The Class A Shares of Newco 3 will have the following attributes:

i) each Class A Share will be redeemable at the option of the corporation and retractable at the option of the holder for an amount equal to $XXXXXXXXXX, together with all declared and unpaid dividends thereon;

ii) the Class A Shares will not carry any votes;

iii) the holder of each Class A Share will be entitled to receive non-cumulative dividends in an amount or amounts to be determined by the directors of the corporation from time to time; and

iv) the Class A Shares will rank in priority to the common shares on a dissolution of the corporation.

Holdco 3 will transfer its XXXXXXXXXX common shares of DC1 and DC2 to Newco 3 pursuant to subsection 85(1) of the Act. As sole consideration for these transfers, Newco 3 will issue Class A Shares to Holdco 3 having an aggregate redemption amount and fair market value equal to the aggregate fair market value of the XXXXXXXXXX common shares of DC1 and DC2 received by Newco 3.

Holdco 3 and Newco 3 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the rules in subsection 85(1) of the Act apply in respect of each such transfer. The amount agreed upon in such election will be equal to the lesser of the amounts described in subparagraph 85(1)(c.1)(i) and (ii) of the Act.

The total amount that will be added to the stated capital account of the Class A Shares of Newco 3 as a result of the acquisition by Newco 3 of the XXXXXXXXXX common shares of DC1 and DC2 will be equal to the cost of the common shares of DC1 and DC2 to Newco 3 as determined pursuant to subsection 85(1) of the Act.

The XXXXXXXXXX common shares of DC1 and DC2 will be capital property to Newco 3. DC1 and DC2 will be connected with Newco 3 within the meaning assigned by paragraph 186(4)(b) of the Act. Newco 3 will have a substantial interest in DC3 pursuant to paragraph 191(2)(b) of the Act.

10.1 Each of Holdco 1, Holdco 2 and Newco 3 will cause a new corporation ("Sub-Holdco 1", "Sub-Holdco 2" and "Sub-Newco 3", respectively) to be incorporated under the BCA. Each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will be a TCC and a CCPC. The authorized share capital of each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will consist of an unlimited number of Class A Shares and an unlimited number of common shares. The Class A Shares of each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will have the following attributes:

ii) the Class A Shares will carry one vote per share;

iii) the holder of each Class A Share will be entitled to receive non-cumulative dividends in an amount or amounts to be determined by the directors of the corporation from time to time;

iv) the Class A Shares will rank in priority to the common shares on a dissolution of the corporation; and

v) the Specified Amount, for purposes of subsection 191(4) of the Act, in respect of the Class A Shares will be $XXXXXXXXXX per share, which amount will be equal to the fair market value of the property received by such corporation as consideration for each such share.

Holdco 1, Holdco 2 and Newco 3, as the case may be, will subscribe for a sufficient number of common shares of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3, as the case may be, for nominal consideration, to ensure that it will control its respective subsidiary after the Class A Shares of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3, as the case may be, have been distributed to DC1 or DC2, as the case may be, as proposed in paragraph 18 below.

In addition, Newco 3 will cause a second new corporation ("Sub-Newco 4") to be incorporated under the BCA. Sub-Newco 4 will be a TCC and a CCPC. The authorized share capital of Sub-Newco 4 will consist of an unlimited number of Class A Shares and an unlimited number of common shares. Newco 3 will subscribe for a nominal number of common shares of Sub-Newco 4 for nominal consideration. The Class A Shares of Sub-Newco 4 will have the following attributes:

ii) the Class A Shares will not carry any voting rights;

iii) the holder of each Class A Share will be entitled to receive non-cumulative dividends in an amount or amounts to be determined by the directors of the corporation from time to time; and

iv) the Class A Shares will rank in priority to the common shares on a dissolution of the corporation.

11. Each of the Estate and Mr. B will cause a new corporation ("Newco 1" and "Newco 2", respectively) to be incorporated under the BCA. The authorized capital of Newco 1 and Newco 2 will consist of an unlimited number of Class A Shares and an unlimited number of common shares. The Estate and Mr. B will subscribe for one common share in the capital of Newco 1 and Newco 2, as the case may be, for nominal consideration.

The Class A Shares of each of Newco 1 and Newco 2 will have the following attributes:

ii) the Class A Shares will not carry any votes;

iii) the holder of each Class A Share will be entitled to receive non-cumulative dividends in an amount or amounts to be determined by the directors of the corporation from time to time; and

iv) the Class A Shares will rank in priority to the common shares on a dissolution of the corporation.

12. The Estate will transfer its 1 common share and XXXXXXXXXX Class B Shares of DC3 to Newco 1 pursuant to subsection 85(1) of the Act. As sole consideration for these transfers, Newco 1 will issue Class A Shares to the Estate having an aggregate redemption amount and fair market value equal to the aggregate fair market value of the 1 common share and XXXXXXXXXX Class B Shares of DC3 received by Newco 1.

The Estate and Newco 1 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the rules in subsection 85(1) of the Act apply in respect of each such transfer. The amount agreed upon in such election will be equal to the lesser of the amounts described in subparagraph 85(1)(c.1)(i) and (ii) of the Act.

The total amount that will be added to the stated capital account of the Class A Shares of Newco 1 as a result of the acquisition by Newco 1 of the 1 common share and the XXXXXXXXXX Class B Shares of DC3 will not exceed the greater of the PUC and the ACB, as adjusted in accordance with paragraphs 84.1(2)(a) and (a.1) of the Act, of the common share and Class B Shares of DC3 received in return therefor.

The 1 common share and the XXXXXXXXXX Class B Shares of DC3 will be capital property to Newco 1. DC3 will be connected with Newco 1 within the meaning assigned by paragraph 186(4)(b) of the Act. Newco 1 will have a substantial interest in DC3 pursuant to paragraph 191(2)(b) of the Act.

13. Mr. B will transfer his 1 common share and XXXXXXXXXX Class B Shares of DC3 to Newco 2 pursuant to subsection 85(1) of the Act. As sole consideration for these transfers, Newco 2 will issue Class A Shares to Mr. B having an aggregate redemption amount and fair market value equal to the aggregate fair market value of the 1 common share and XXXXXXXXXX Class B Shares of DC3 received by Newco 1.

Mr. B and Newco 2 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the rules in subsection 85(1) of the Act apply in respect of each such transfer. The amount agreed upon in such election will be equal to the lesser of the amounts described in subparagraph 85(1)(c.1)(i) and (ii) of the Act.

The total amount that will be added to the stated capital account of the Class A Shares of Newco 2 as a result of the acquisition by Newco 2 of the 1 common share and the XXXXXXXXXX Class B Shares of DC3 will not exceed the greater of the PUC and the ACB, as adjusted in accordance with paragraphs 84.1(2)(a) and (a.1) of the Act, of the common share and Class B Shares of DC3 received in return therefor.

The 1 common share and the XXXXXXXXXX Class B Shares of DC3 will be capital property to Newco 2. DC3 will be connected with Newco 2 within the meaning assigned by paragraph 186(4)(b) of the Act. Newco 2 will have a substantial interest in DC3 pursuant to paragraph 191(2)(b) of the Act.

14. Mr. C will transfer his 1 common share and XXXXXXXXXX Class B Shares of DC3 to Holdco 1 pursuant to subsection 85(1) of the Act. As sole consideration for these transfers, Holdco 1 will issue Class A Shares to Mr. C having an aggregate redemption amount and fair market value equal to the aggregate fair market value of the 1 common share and XXXXXXXXXX Class B Shares of DC3 received by Holdco 1.

Mr. C and Holdco 1 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the rules in subsection 85(1) of the Act apply in respect of each such transfer. The amount agreed upon in such election will be equal to the lesser of the amounts described in subparagraph 85(1)(c.1)(i) and (ii) of the Act.

The total amount that will be added to the stated capital account of the Class A Shares of Holdco 1 as a result of the acquisition by Holdco 1 of the 1 common share and the XXXXXXXXXX Class B Shares of DC3 will not exceed the greater of the PUC and the ACB, as adjusted in accordance with paragraphs 84.1(2)(a) and (a.1) of the Act, of the common share and Class B Shares of DC3 received in return therefor.

The 1 common share and the XXXXXXXXXX Class B Shares of DC3 will be capital property to Holdco 1. DC3 will be connected with Holdco 1 within the meaning assigned by paragraph 186(4)(b) of the Act. Holdco 1 will have a substantial interest in DC3 pursuant to paragraph 191(2)(b) of the Act.

15. Each of Newco 1 and Newco 2 will cause a new corporation ("Sub-Newco 1" and "Sub-Newco 2", respectively) to be incorporated under the BCA. Each of Sub-Newco 1 and Sub-Newco 2 will be a TCC and a CCPC. The authorized share capital of each of Sub-Newco 1 and Sub-Newco 2 will consist of an unlimited number of Class A Shares and an unlimited number of common shares. The Class A Shares of each of Sub-Newco 1 and Sub-Newco 2 will have the following attributes:

ii) the Class A Shares will carry one vote per share;

iii) the holder of each Class A Share will be entitled to receive non-cumulative dividends in an amount or amounts to be determined by the directors of the corporation from time to time;

iv) the Class A Shares will rank in priority to the common shares on a dissolution of the corporation; and

Newco 1 and Newco 2, as the case may be, will subscribe for a sufficient number of common shares of Sub-Newco 1 and Sub-Newco 2, as the case may be, for nominal consideration, to ensure that it will control its respective subsidiary after the Class A Shares of Sub-Newco 1 and Sub-Newco 2, as the case may be, have been issued to DC3 as proposed in paragraph 26 below.

Distribution of Property of DC1

16. Immediately before the property transfers described in paragraph 18 below, the property of DC1 will be classified into three types of property for the purposes of the definition of "distribution" in subsection 55(1), as follows:

(a) cash or near cash property, comprising all of the current assets of DC1, including any cash, term deposits and marketable securities (other than portfolio investments);

(b) investment property, comprising all the assets of DC1, other than cash or near cash property, any income from which would, for the purposes of the Act, be income from property or a specified investment business; and

(c) business property, comprising all of the assets of DC1, other than cash or near cash property, any income from which would, for purposes of the Act, be income from an active business carried on by DC1.

For these purposes, DC1 will only have cash or near cash property and investment property. Furthermore, the Class A Preference Shares of Holdco 2, Subco 1 and Subco 2 owned by DC1, as described in paragraph 2 above, will be classified as investment property.

For greater certainty, any tax accounts, such as the balance of any RDTOH account or CDA of DC1, will not be considered property of DC1 for purposes of the proposed transactions described herein.

17. In determining the net fair market value of its cash or near cash property, investment property and business property immediately before the property transfers described in paragraph 18 below, the liabilities of DC1 will be allocated to, and be deducted in the calculation of, the net fair market value of each such type of property of DC1 in the following manner:

(a) Current liabilities of DC1 (including the current portion of long term debt) will be allocated to cash or near cash property of DC1 in the proportion that the fair market value of each such property is of the fair market value of all cash or near cash property of DC1. The aggregate amount of current liabilities allocated to these assets will not exceed the aggregate fair market value of the cash or near cash property of DC1.

(b) Liabilities, other than current liabilities of DC1 that relate to a particular property, will then be allocated to the particular property (and effectively to the type to which the particular property belongs) to the extent of its fair market value. The liabilities that pertain to a type of property, but not to a particular property, will then be allocated to that type of property, but not in excess of the net fair market value of such type of property after the allocation of liabilities to a particular property as described herein;

(c) if any liabilities remain after the allocations described in steps (a) and (b) above are made ("excess unallocated liabilities'), such excess unallocated liabilities will then be allocated to the cash or near cash property and investment property, if any, of DC1 based on the relative net fair market value of each type of property prior to the allocation of such excess unallocated liabilities.

18. DC1 will then directly or indirectly transfer at fair market value one third of the net fair market value of its cash or near-cash property and investment property to each of Holdco 1, Holdco 2 and Newco 3 in the manner described below. To accomplish this objective DC1 will transfer:

(a) to Sub-Holdco 1, a portion of its cash or near cash property and investment property, including the Class A Preference Shares of Subco 1 owned by it,

(b) (i) to Sub-Holdco 2, a portion of its cash or near cash property and investment property, but not including the Class A shares of Holdco 2 owned by it, and (ii) to Holdco 2, its Class A Preference Shares of Holdco 2; and

(c) to Sub-Newco 3 a portion of its cash or near cash property and investment property, including the Class A Preference Shares of Subco 2 owned by it.

The indirect transfer of the property of DC1 to each of Holdco 1, Holdco 2 and Newco 3 will be accomplished when each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will be wound up as described in paragraph 30 below.

As a result of the transfers described in (a), (b) and (c) above, the net fair market value of the cash or near-cash property and the investment property to be received by each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 (after allocating and deducting, in the manner described in paragraph 17 above, the liabilities of DC1 which are to be assumed by Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 as described herein, including the Excess DC1 Liabilities assumed as described below) computed as though the Class A Preference Shares of Holdco 2 owned by DC1 were distributed to Sub-Holdco 2 along with the other assets of DC1 to be transferred to Sub-Holdco 2 as described herein, will be equal to or approximate the proportion (the "Holdco 1 Proportion", "Holdco 2

Proportion" or "Newco 3 Proportion", as the case may be) of the net fair market value of each type of property of DC1, determined in the manner described in paragraphs 16 and 17 above, immediately before the transfer of property described herein, that:

(a) the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of DC1 owned by Holdco 1, Holdco 2 or Newco 3, as the case may be, at that time

is of

(b) the fair market value, immediately before the transfer, of all of the issued shares of the capital stock of DC1 at that time.

Although the proportion of the net fair market value of DC1's cash or near-cash property and investment property transferred to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, may not be exactly equal to the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be, it will be approximately equal to the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be. Any difference between the net fair market value of the cash or near-cash property and investment property transferred to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, from DC1 and the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be, of the net fair market value of DC1's cash or near-cash property and investment property will not exceed 1% of the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be, of the net fair market value of the cash or near-cash property and investment property of DC1.

As consideration for such transfers, each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will assume certain liabilities of DC1 to the extent that, in the aggregate, such liabilities do not exceed the aggregate agreed amounts referred to in paragraph 19 below in respect of the assets received by Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3, as the case may be, and will issue to DC1 Class A Shares having an aggregate Class A Redemption Amount and fair market value equal to the amount by which the fair market value of the assets received by it exceeds the amount of the liabilities assumed by Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be.

As consideration for the Class A Preference Shares of Holdco 2 transferred to it, Holdco 2 will issue to DC1 a non-interest bearing note (the "1st Holdco 2 Note") having a principal amount and fair market value equal to the redemption amount of the Class A Preference Shares, ignoring the 10% premium. DC1 will accept the 1st Holdco 2 Note as full payment for the redemption amount of the Class A Preference Shares of Holdco 2.

Where the liabilities of DC1 in respect of one or more of the "packages" of properties transferred to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, exceeds the agreed amount referred to herein (such liabilities are referred to as the "Excess DC1 Liabilities"), Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, will assume the Excess DC1 Liabilities contemporaneously with the acquisition. As consideration for the assumption of the Excess DC1 Liabilities, DC1 will issue to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, a demand interest-bearing promissory note having a face amount and fair market value equal to the Excess DC1 Liabilities assumed by it (the "DC1 Promissory Notes").

The Class A Shares of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, issued to DC1 will be entitled to more than 10% (but less than 50%) of the voting rights under all circumstances in respect of the issued share capital of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, and will represent more than 10% of the fair market value of all of the issued share capital of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, such that each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will be connected with DC1 pursuant to paragraph 186(4)(b) of the Act.

19. DC1 and each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the provisions of subsection 85(1) of the Act apply to the transfer of each property of DC1 that is an eligible property. The amount agreed upon in each such election in respect of each of the eligible properties so transferred will be equal to:

(a) in the case of capital property (other than depreciable property of a prescribed class) and inventory, an amount equal to the least of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) of the Act; and

(b) in the case of depreciable property of a prescribed class, an amount equal to the least of the cost amount of such property, the cost of such property to DC1 and the fair market value of such property at the time of disposition.

For greater certainty the agreed amount for any eligible property included in the subsection 85(1) elections referred to herein will not be greater than the fair market value, at the time of the disposition, of such property, nor will it be less than the amount of any liabilities assumed by Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, as consideration for the transfer of such property.

Each of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3 will add to the stated capital account maintained for its Class A Shares, pursuant to subsection 24(2) of the BCA, an amount equal to the aggregate fair market value of the assets received by it, excluding, where applicable, the DC1 Promissory Note, less the amount of the liabilities assumed by it on the transfers, excluding, where applicable, the Excess DC1 Liabilities assumed by it as consideration for the DC1 Promissory Note.

Distribution of Property of DC2

20. Immediately before the property transfers described in paragraph 22 below, the property of DC2 will be classified into three types of property for the purposes of the definition of "distribution" in subsection 55(1), as follows:

(a) cash or near cash property, comprising all of the current assets of DC2, including any cash, term deposits and marketable securities (other than portfolio investments);

(b) investment property, comprising all the assets of DC2, other than cash or near cash property, any income from which would, for the purposes of the Act, be income from property or a specified investment business; and

(c) business property, comprising all of the assets of DC2, other than cash or near cash property, any income from which would, for purposes of the Act, be income from an active business carried on by DC2.

For these purposes, DC2 will only have cash or near cash property and investment property. Furthermore, the Class A Preference Shares of Holdco 2, Subco 1 and Subco 2 owned by DC2, as described in paragraph 2 above, will be classified as investment property.

For greater certainty, any tax accounts, such as the balance of any RDTOH account or CDA of DC2, will not be considered property of DC2 for purposes of the proposed transactions described herein.

21. In determining the net fair market value of its cash or near cash property, investment property and business property immediately before the property transfers described in paragraphs 22 below, the liabilities of DC2 will be allocated to, and be deducted in the calculation of, the net fair market value of each such type of property of DC1 in the following manner:

(a) Current liabilities of DC2 (including the current portion of long term debt) will be allocated to cash or near cash property of DC2 in the proportion that the fair market value of each such property is of the fair market value of all cash or near cash property of DC2. The aggregate amount of current liabilities allocated to these assets will not exceed the aggregate fair market value of the cash or near cash property of DC2.

(b) Liabilities, other than current liabilities of DC2 that relate to a particular property, will then be allocated to the particular property (and effectively to the type to which the particular property belongs) to the extent of its fair market value. The liabilities that pertain to a type of property, but not to a particular property, will then be allocated to that type of property, but not in excess of the net fair market value of such type of property after the allocation of liabilities to a particular property as described herein;

(c) if any liabilities remain after the allocations described in steps (a) and (b) above are made ("excess unallocated liabilities'), such excess unallocated liabilities will then be allocated to the cash or near cash property and investment property, if any, of DC2 based on the relative net fair market value of each type of property prior to the allocation of such excess unallocated liabilities.

22. DC2 will then directly or indirectly transfer at fair market value one third of the net fair market value of its cash or near-cash property and investment property to each of Holdco 1, Holdco 2 and Newco 3 in the manner described below. To accomplish this objective DC1 will transfer:

(a) to Sub-Holdco 1, a portion of its cash or near cash property and investment property, including the Class A Preference Shares of Subco 1 owned by it,

(c) to Sub-Newco 3 a portion of its cash or near cash property and investment property, including the Class A Preference Shares of Subco 2 owned by it.

The indirect transfer of the property of DC2 to each of Holdco 1, Holdco 2 and Newco 3 will be accomplished when each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will be wound up as described in paragraph 30 below.

As a result of the transfers described in (a), (b) and (c) above, the net fair market value of the cash or near-cash property and the investment property to be received by each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 (after allocating and deducting, in the manner described in paragraph 21 above, the liabilities of DC2 which are to be assumed by Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 as described herein, including the Excess DC2 Liabilities assumed as described below) computed as though the Class A Preference Shares of Holdco 2 owned by DC2 were distributed to Sub-Holdco 2 along with the other assets of DC2 to be transferred to Sub-Holdco 2 as described herein, will be equal to or approximate the proportion (the "Holdco 1 Proportion", "Holdco 2 Proportion" or "Newco 3 Proportion", as the case may be) of the net fair market value of each type of property of DC2, determined in the manner described in paragraphs 20 and 21 above, immediately before the transfer of property described herein, that:

(a) the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of DC2 owned by Holdco 1, Holdco 2 or Newco 3, as the case may be, at that time

is of

(b) the fair market value, immediately before the transfer, of all of the issued shares of the capital stock of DC2 at that time.

Although the proportion of the net fair market value of DC2's cash or near-cash property and investment property transferred to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, may not be exactly equal to the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be, it will be approximately equal to the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be. Any difference between the net fair market value of the cash or near-cash property and investment property transferred to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, from DC2 and the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be, of the net fair market value of DC2's cash or near-cash property and investment property will not exceed 1% of the Holdco 1 Proportion, Holdco 2 Proportion or Newco 3 Proportion, as the case may be, of the net fair market value of the cash or near-cash property and investment property of DC2.

As consideration for such transfers, each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will assume certain liabilities of DC2 to the extent that, in the aggregate, such liabilities do not exceed the aggregate agreed amounts referred to in paragraph 23 below in respect of the assets received by Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3, as the case may be, and will issue to DC2 Class A Shares having an aggregate Class A Redemption Amount and fair market value equal to the amount by which the fair market value of the assets received by it exceeds the amount of the liabilities assumed by Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be.

As consideration for the Class A Preference Shares of Holdco 2 transferred to it, Holdco 2 will issue to DC2 a non-interest bearing note (the "2nd Holdco 2 Note") having a principal amount and fair market value equal to the redemption amount of the Class A Preference Shares, ignoring the 10% premium. DC2 will accept the 2nd Holdco 2 Note as full payment for the redemption amount of the Class A Preference Shares of Holdco 2.

Where the liabilities of DC2 in respect of one or more of the "packages" of properties transferred to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, exceeds the agreed amount referred to herein (such liabilities are referred to as the "Excess DC2 Liabilities"), Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, will assume the Excess DC2 Liabilities contemporaneously with the acquisition. As consideration for the assumption of the Excess DC2 Liabilities, DC2 will issue to Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, a demand interest-bearing promissory note having a face amount and fair market value equal to the Excess DC2 Liabilities assumed by it (the "DC2 Promissory Notes").

The Class A Shares of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, issued to DC2 will be entitled to more than 10% (but less than 50%) of the voting rights under all circumstances in respect of the issued share capital of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, and will represent more than 10% of the fair market value of all of the issued share capital of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3, as the case may be, such that each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will be connected with DC2 pursuant to paragraph 186(4)(b) of the Act.

23. DC2 and each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the provisions of subsection 85(1) of the Act apply to the transfer of each property of DC2 that is an eligible property. The amount agreed upon in each such election in respect of each of the eligible properties so transferred will be equal to:

(b) in the case of depreciable property of a prescribed class, an amount equal to the least of the cost amount of such property, the cost of such property to DC2 and the fair market value of such property at the time of disposition.

Each of Sub-Holdco 1, Sub-Holdco 2 or Sub-Newco 3 will add to the stated capital account maintained for its Class A shares, pursuant to subsection 24(2) of the BCA, an amount equal to the aggregate fair market value of the assets received by it, excluding, where applicable, the DC2 Promissory Note, less the amount of the liabilities assumed by it on the transfers, excluding, where applicable, the Excess DC2 Liabilities assumed by it as consideration for the DC2 Promissory Note.

Distribution of Property of DC3

24. Immediately before the transfers of property as described in paragraph 26 below, the property of DC3 will be classified into three types of property for the purposes of the definition of "distribution" in subsection 55(1), as follows:

(a) cash or near cash property, comprising all of the current assets of DC3, including any cash, term deposits and marketable securities (other than portfolio investments);

(b) investment property, comprising all the assets of DC3, other than cash or near cash property, any income from which would, for the purposes of the Act, be income from property or a specified investment business; and

(c) business property, comprising all of the assets of DC3, other than cash or near cash property, any income from which would, for purposes of the Act, be income from an active business carried on by DC3.

For these purposes, DC3 will only have cash or near cash property and investment property.

For greater certainty, any tax accounts, such as the balance of any RDTOH account or CDA of DC3, will not be considered property of DC3 for purposes of the proposed transactions described herein.

25. In determining the net fair market value of its cash or near cash property, investment property and business property immediately before the property transfers described in paragraph 25 below, the liabilities of DC3 will be allocated to, and be deducted in the calculation of, the net fair market value of each such type of property of DC3 in the following manner:

(a) Current liabilities of DC3 (including the current portion of long term debt) will be allocated to cash or near cash property of DC3 in the proportion that the fair market value of each such property is of the fair market value of all cash or near cash property of DC3. The aggregate amount of current liabilities allocated to these assets will not exceed the aggregate fair market value of the cash or near cash property of DC3.

(b) Liabilities, other than current liabilities of DC3 that relate to a particular property, will then be allocated to the particular property (and effectively to the type to which the particular property belongs) to the extent of its fair market value. The liabilities that pertain to a type of property, but not to a particular property, will then be allocated to that type of property, but not in excess of the net fair market value of such type of property after the allocation of liabilities to a particular property as described herein;

(c) if any liabilities remain after the allocations described in steps (a) and (b) above are made ("excess unallocated liabilities'), such excess unallocated liabilities will then be allocated to the cash or near cash property and investment property, if any, of DC3 based on the relative net fair market value of each type of property prior to the allocation of such excess unallocated liabilities.

26. Following the determination of the net fair market value of each type of property owned by DC3 as described in paragraphs 24 and 25 above, DC3 will then sell at fair market value to each of Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1 a portion of its cash or near-cash property and investment property. As a result of such transfers, the net fair market value of the cash or near-cash property and the investment property to be received by each of Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1 (after allocating and deducting, in the manner described in paragraph 25 above, the liabilities of DC3 which are to be assumed by Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1 as described herein, including the Excess DC3 Liabilities assumed as described below) will be equal to or approximate the proportion (the "Newco 1 Proportion", "Newco 2 Proportion" or "Holdco 1 Proportion", as the case may be) of the net fair market value of each type of property of DC3, determined in the manner described in paragraphs 23 and 24 above, immediately before the transfer, that:

(a) the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of DC3 owned by Newco 1, Newco 2 or Holdco 1, as the case may be, at that time

is of

(b) the fair market value immediately before the transfer of all of the issued shares of the capital stock of DC3 at that time.

Although the proportion of the net fair market value of DC3's cash or near-cash property and investment property transferred to Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, may not be exactly equal to the Newco 1 Proportion, Newco 2 Proportion or Holdco 1 Proportion, as the case may be, it will be approximately equal to the Newco 1 Proportion, Newco 2 Proportion or Holdco 1 Proportion, as the case may be. Any difference between the net fair market value of the cash or near-cash property and investment property transferred to Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, from DC3 and the Newco 1 Proportion, Newco 2 Proportion or Holdco 1 Proportion, as the case may be, of the net fair market value of DC3's cash or near-cash property and investment property will not exceed 1% of the Newco 1 Proportion, Newco 2 Proportion or Holdco 1 Proportion, as the case may be, of the net fair market value of the cash or near-cash property and investment property of DC3, as the case may be.

As consideration for such transfers, each of Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1 will assume certain liabilities of DC3 to the extent that, in the aggregate, such liabilities do not exceed the aggregate agreed amounts referred to in paragraph 27 below in respect of the assets received by Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1, as the case may be, and will issue to DC3 Class A Shares having an aggregate Class A Redemption Amount and fair market value equal to the amount by which the fair market value of the assets received by it exceeds the amount of the liabilities assumed by Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be.

Where the liabilities of DC3 in respect of one or more of the "packages" of properties transferred to Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, exceeds the agreed amount referred to herein (such liabilities are referred to as the "Excess DC3 Liabilities"), Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, will assume the Excess DC3 Liabilities contemporaneously with the acquisition. As consideration for the assumption of the Excess DC3 Liabilities, DC3 will issue to Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, a demand interest-bearing promissory note having a face amount and fair market value equal to the Excess DC3 Liabilities assumed (the "DC3 Promissory Note").

The Class A Shares of Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1, as the case may be, issued to DC3 will be entitled to more than 10% (but less than 50%) of the voting rights under all circumstances in respect of the issued share capital of Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, and will represent more than 10% of the fair market value of all of the issued share capital of Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, such that each of Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1 will be connected with DC3 pursuant to paragraph 186(4)(b) of the Act.

27. DC3 and each of Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the provisions of subsection 85(1) of the Act apply to the transfer of each property of DC3 that is an eligible property. The amount agreed upon in each such election in respect of each of the eligible properties so transferred will be equal to:

(b) in the case of depreciable property of a prescribed class, an amount equal to the least of the cost amount of such property, the cost of such property to DC3 and the fair market value of such property at the time of disposition.

For greater certainty the agreed amount for any eligible property included in the subsection 85(1) elections referred to herein will not be greater than the fair market value, at the time of the disposition, of such property, nor will it be less than the amount of any liabilities assumed by Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1, as the case may be, as consideration for the transfer of such property.

Each of Sub-Newco 1, Sub-Newco 2 or Sub-Holdco 1 will add to the stated capital account maintained for its Class A shares, pursuant to subsection 24(2) of the BCA, an amount equal to the aggregate fair market value of the assets received by it, excluding, where applicable, the DC3 Promissory Note, less the amount of the liabilities assumed by it on the transfers, excluding, where applicable, the Excess DC3 Liabilities assumed by it as consideration for the DC3 Promissory Note.

28. Following the completion of the transfers of assets referred to in paragraphs 18, 22 and 26 above, each of Sub-Newco 1, Sub-Newco 2, Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 will redeem its Class A Shares held by DC1, DC2 and DC3, as the case may be, for an amount equal to their fair market value, being the Class A Redemption Amount of such shares, and as payment of the Class A Redemption Amount will, where applicable, deliver to DC1, DC2 and DC3, as the case may be, for cancellation the DC1 Promissory Note, DC2 Promissory Note or DC3 Promissory Note, as the case may be, held by it and will issue to DC1, DC2 or DC3, as the case may be, a new non-interest bearing promissory note (the "Sub-Newco 1 Note", "Sub-Newco 2 Note", "1st Sub-Holdco 1 Note", "2nd Sub-Holdco 1 Note", "3rd Sub-Holdco 1 Note", "1st Sub-Holdco 2 Note", "2nd Sub-Holdco 2 Note", "1st Sub-Newco 3 Note" and "2nd Sub-Newco 3 Note") payable on demand and assignable by the holder thereof having a principal amount and fair market value equal to the amount by which the Class A Redemption Amount exceeds the fair market value of the DC1 Promissory Note, DC2 Promissory Note or DC3 Promissory Note, as the case may be. Each of DC1, DC2 and DC3 will, in each case, accept the delivery for cancellation of the DC1 Promissory Note, DC2 Promissory Note or DC3 Promissory Note, as the case may be, and the delivery of the Sub-Newco 1 Note, Sub-Newco 2 Note, 1st Sub-Holdco 1 Note, 2nd Sub-Holdco 1 Note, 3rd Sub-Holdco 1 Note, 1st Sub-Holdco 2 Note, 2nd Sub-Holdco 2 Note, 1st Sub-Newco 3 Note and 2nd Sub-Newco 3 Note, as the case may be, as full payment of the redemption amount for the Class A Shares of each of Sub-Newco 1, Sub-Newco 2, Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3 so redeemed.

29. In order to avoid a Part IV tax circularity problem, Holdco 2 will request permission from its local tax services office to change its fiscal year end to the day on which the share redemptions described in paragraph 28 above occur. Provided that permission for this change is granted, Holdco 2 will adopt this new fiscal year end. In the event the proposed transactions are carried out near Holdco 2's normal fiscal year end, the share redemptions described in paragraph 28 above will be carried out immediately before the fiscal year end and the winding-up process as described in paragraphs 30 and 31 below will be carried out after the fiscal period end.

Winding-up of the Subsidiaries and the Distributing Corporations

30. Shortly after the transaction described in paragraph 29 above, Newco 1, Newco 2, Holdco 1, Holdco 2 and Newco 3 will cause Sub-Newco 1, Sub-Newco 2, Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3, respectively, to be wound up pursuant to the provisions of the BCA. As a result of the wind-ups, the assets and liabilities of Sub-Newco 1 (including the obligation owing by Sub-Newco 1 to DC3 under the Sub-Newco 1 Note), Sub-Newco 2 (including the obligation owing by Sub-Newco 2 to DC3 under the Sub-Newco 2 Note), Sub-Holdco 1 (including the obligations owing by Sub-Holdco 1 to each of DC1, DC2 and DC3 under the 1st, 2nd and 3rd Sub-Holdco 1 Notes, respectively), Sub-Holdco 2 (including the obligations owing by Sub-Holdco 2 to each of DC1 and DC2 under the 1st and 2nd Sub-Holdco 2 Notes, respectively) and Sub-Newco 3 (including the obligations owing by Sub-Newco 3 to each of DC1 and DC2 under the 1st and 2nd Sub-Newco 3 Notes, respectively) will become assets and liabilities of Newco 1, Newco 2, Holdco 1, Holdco 2 and Newco 3, respectively.

31. On the day following the share redemptions described in paragraph 28 above, the shareholders of DC1, DC2 and DC3, will, by special resolution, resolve to wind up and dissolve DC1, DC2 and DC3 under the applicable provisions of the BCA. In connection with the winding-up;

i) DC1 will distribute to Holdco 1 the 1st Sub-Holdco 1 Note;

ii) DC1 will distribute to Holdco 2 the 1st Sub-Holdco 2 Note and the 1st Holdco 2 Note;

iii) DC1 will distribute to Newco 3 the 1st Sub-Newco 3 Note;

iv) DC2 will distribute to Holdco 1 the 2nd Sub-Holdco 1 Note;

v) DC2 will distribute to Holdco 2 the 2nd Sub-Holdco 2 Note and the 2nd Holdco 2 Note;

vi) DC2 will distribute to Newco 3 the 2nd Sub-Newco 3 Note;

vii) DC3 will distribute to Holdco 1 the 3rd Sub-Holdco 1 Note;

viii) DC3 will distribute to Newco 1 the Sub-Newco 1 Note; and

ix) DC3 will distribute to Newco 2 the Sub-Newco 2 Note.

Prior to the distribution of such notes, DC1, DC2 and DC3 will elect, pursuant to subsection 83(2) of the Act, in prescribed manner and prescribed form that the full amount of any resulting dividend referred to in subparagraph 88(2)(b)(i) of the Act be deemed to be a capital dividend.

As a result of the assignment and distribution of the above notes, the obligations under the notes will be cancelled.

Following receipt of the dividend refund to which DC1, DC2 and DC3 will become entitled as a result of the proposed transactions described herein, each of DC1 and DC2 will distribute one-third of such amount to each of Holdco 1, Holdco 2 and Newco 3 and DC3 will distribute one-third of such amount to each of Newco 1, Newco 2 and Holdco 1. The refund will not arise until after the end of the fiscal period in which the dividend was paid (or deemed paid).

All properties and liabilities of DC1, DC2 and DC3 will have been distributed or discharged, as the case may be. Articles of Dissolution will then be executed and filed accordingly. The common shares of each of DC1, DC2 and DC3 and the Class B shares of DC3 will be cancelled and each of DC1, DC2 and DC3 will be dissolved.

Post-Butterfly Transactions

32. The Class A Preference Shares of Subco 1 and Subco 2 will be distributed by DC1 and DC2, indirectly, as described in paragraphs 18 and 22 above, to Holdco 1 and Newco 3, respectively. Sometime after the proposed transactions described in paragraphs 10 to 31 above, Subco 1 will purchase its Class A Preference Shares held by Holdco 1 and Subco 2 will purchase its Class A Preference Shares held by Newco 3. Holdco 1 and Newco 3 will each waive its right to the 10% premium when it sells the Class A Preference Shares to Subco 1 and Subco 2, respectively. Subco 1 and Subco 2 are not related to Holdco 1 and Newco 3, respectively. However, for purposes of paragraph 55(3.1)(c) of the Act, the value of the Subco 1 shares held by Holdco 1 and the Subco 2 shares held by Newco 3 will be less than 10% of the value of the property acquired by Holdco 1 and Newco 3 pursuant to the distributions made by DC1 and DC2 as described in paragraphs 18 and 22 above.

33. Immediately following the transactions described in paragraphs 10 to 32 above, Newco 3 will transfer some of the property it received from DC1 and DC2 to Sub-Newco 4. As consideration for such transfers, Sub-Newco 4 will assume certain liabilities of Newco 3 to the extent that, in the aggregate, such liabilities do not exceed the aggregate agreed amounts referred to in paragraph 34 below in respect of the assets received by Sub-Newco 4 and will issue to Newco 3 Class A Shares having an aggregate Class A Redemption Amount and fair market value equal to the amount by which the fair market value of the assets received by it exceeds the amount of the liabilities assumed by Sub-Newco 4. At all times throughout the series of transactions which includes the proposed transactions described herein and after the incorporation of Sub-Newco 4, Newco 3 and Sub-Newco 4 will be related to each other for the purposes of section 55 of the Act.

34. Newco 3 and Sub-Newco 4 will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have the provisions of subsection 85(1) of the Act apply to the transfer of each property of Newco 3 that is an eligible property. The amount agreed upon in each such election in respect of each of the eligible properties so transferred will be equal to:

For greater certainty the agreed amount for any eligible property included in the subsection 85(1) elections referred to herein will not be greater than the fair market value, at the time of the disposition, of such property, nor will it be less than the amount of any liabilities assumed by Sub-Newco 4 as consideration for the transfer of such property.

Sub-Newco 4 will add to the stated capital account maintained for its Class A shares, pursuant to subsection 24(3) of the BCA, an amount equal to the amount by which the aggregate of the cost of the properties transferred to it (determined pursuant to subsection 85(1) of the Act where relevant) exceeds the amount of the liabilities assumed by it as consideration therefor.

ADDITIONAL INFORMATION

35. Except as described in this letter, no liabilities have been or will be incurred by, and no assets have been or will be acquired by or disposed of by DC1, DC2 or DC3 or a corporation controlled by DC1, DC2 or DC3 in contemplation of and before the proposed transactions described in paragraphs 18, 22 and 26 above. Nor is it contemplated that subsequent to the implementation of the transactions described herein under "Proposed Transactions" that Holdco 1, Holdco 2, Newco 3, Sub-Newco 4, Newco 1 or Newco 2 will transfer or sell any of its assets to any other person as part of a series of transactions that includes these transactions except as described herein.

36. None of DC1, DC2, DC3, Holdco 1, Holdco 2, Newco 3, Newco 1, Newco 2, Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 is, or will be at the time of the proposed transactions, an SFI or a RFI.

37. None of the shares of DC1, DC2, DC3, Holdco 1, Holdco 2, Newco 3, Newco 1, Newco 2, Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 has been or will 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) of the Act as a "guarantee agreement";

(b) a share that is issued or acquired as part of a transaction, event or series of transactions or events of the type described in subsection 112(2.5) of the Act; or

PURPOSE OF THE PROPOSED TRANSACTIONS

38. The purpose of the proposed transactions is to separate the assets of DC1, DC2 and DC3 so that the shareholders of each of these corporations may deal with their respective shares of the assets independently of the other shareholders.

RULINGS GIVEN

Provided that the above statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and that the proposed transactions are carried out as set forth herein, the following rulings are given:

A. Subject to the application of the provisions of subsections 20(1.2) and 26(5) of the Income Tax Application Rules and to the application of paragraph 88(2.2)(b) of the Act, which applies for the purposes stated in the preamble to subsection 88(2.2) of the Act, and subject also to the application of subsection 69(11) of the Act as it may apply to the transfers referred to in (v) to (vii) herein and subsection 13(21.2) of the Act as it may apply to the transfers referred to in (viii) herein, the provisions of subsection 85(1) of the Act will apply to:

(i) the transfer of the common shares of DC1 and DC2 by Holdco 3 to Newco 3 as described in paragraph 10 above,

(ii) the transfer of the 1 common share and XXXXXXXXXX Class B Shares of DC3 by the Estate to Newco 1 as described in paragraph 12 above,

(iii) the transfer of the 1 common share and XXXXXXXXXX Class B Shares of DC3 by Mr. B to Newco 2 as described in paragraph 13 above,

(iv) the transfer of the 1 common share and XXXXXXXXXX Class B Shares of DC3 by Mr. C to Holdco 1 as described in paragraph 14 above,

(v) the transfer of each eligible property which is the subject of an election under subsection 85(1) as described in paragraph 19 above by DC1 to each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3,

(vi) the transfer of each eligible property which is the subject of an election under subsection 85(1) as described in paragraph 23 above by DC2 to each of Sub-Holdco 1, Sub-Holdco 2 and Sub-Newco 3,

(vii) the transfer of each eligible property which is the subject of an election under subsection 85(1) as described in paragraph 27 above by DC3 to each of Sub-Newco 1, Sub-Newco 2 and Sub-Holdco 1, and

(viii) the transfer of each eligible property which is the subject of an election under subsection 85(1) as described in paragraph 34 above by Newco 3 to Sub-Newco 4,

such that the agreed amounts in respect of each such transfer shall be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a) of the Act. For greater certainty, paragraph 85(1)(e.2) of the Act will not apply to the transfers referred to herein.

B. As a result of the redemption by Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 of their Class A Shares held by DC1, DC2 or DC3, as the case may be, as described in paragraph 28 above, and as a result of the distributions by DC1, DC2 and DC3, as the case may be, in the course of its winding-up, as described in paragraph 31 above:

(a) By virtue of paragraphs 84(3)(a) and 84(3)(b) of the Act, each of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1, Sub-Newco 2 and Holdco 2 will be deemed to have paid, and DC1, DC2 and DC3, as the case may be, will be deemed to have received, a taxable dividend equal to the amount by which the amount paid in respect of the redemption by each of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 of its Class A shares, as the case may be, exceeds the PUC of such shares; and

(b) (i) Pursuant to paragraph 88(2)(b) and subsection 84(2), but subject to (ii) to (iv) herein, each of Holdco 1, Holdco 2, Newco 3, Newco 1 and Newco 2 will be deemed to have received a dividend (the "winding-up dividend") on its common shares of DC1 and DC2 or its Class B Shares and common share of DC3, as the case may be, equal to the proportion of the amount by which the aggregate fair market value of the property of DC1, DC2 or DC3, as the case may be, distributed by DC1, DC2 or DC3, as the case may be, to Holdco 1, Holdco 2, Holdco 3, Newco 1 and Newco 2 on its winding-up as consideration for the cancellation of its shares of a particular class, exceeds the PUC thereof, that the number of shares of such class held by Holdco 1, Holdco 2, Newco 3, Newco 1 and Newco 2, as the case may be, is of the number of all shares of that class that are cancelled.

(ii) Pursuant to subparagraph 88(2)(b)(i), such portion of the winding-up dividend referred to in (b)(i) as does not exceed DC1, DC2 or DC3's CDA, as the case may be, determined immediately before the payment of the winding-up dividend shall be deemed, for the purposes of the subsection 83(2) election referred to in paragraph 30 above, to be the full amount of a separate dividend.

(iii) Pursuant to subparagraph 88(2)(b)(ii), the portion of the winding-up dividend that is equal to the lesser of:

(A) DC1, DC2 or DC3's pre-1972 capital surplus on hand, as the case may be, as determined immediately before the payment of the winding-up dividend, and

(B) the amount by which the winding-up dividend exceeds the portion thereof in respect of which DC1, DC2 or DC3, as the case may be, will elect under subsection 83(2)

shall be deemed not to be a dividend.

(iv) Pursuant to subparagraph 88(2)(b)(iii), the winding-up dividend, to the extent that it exceeds the portion thereof referred to in (ii) herein that is deemed to be a separate dividend and the portion referred to in (iii) herein that is deemed not to be a dividend, shall be deemed to be a separate dividend that is a taxable dividend.

C. By virtue of paragraphs 84(3)(a) and 84(3)(b) of the Act, Holdco 2 will be deemed to have paid, and each of DC1 and DC2 will be deemed to have received, a taxable dividend equal to the amount by which the amount paid in respect of the purchase for cancellation by Holdco 2 of its Class A Preference Shares held by DC1 or DC2, as the case may be, as described in paragraphs 18 and 22 above exceeds the PUC of such shares.

D. The deemed dividends referred to in Rulings B and C above, to the extent that they are taxable dividends, will:

(i) be included in each recipients income pursuant to paragraph 12(1)(j) of the Act;

(ii) be deductible by the recipient pursuant to subsection 112(1) of the Act in computing its taxable income for the year in which such dividend is deemed to have been received, and such deduction will not be prohibited by any of subsections 112(2.1), (2.2), (2.3) or (2.4) of the Act; and

(iii) be excluded in computing the proceeds of disposition to the holder of the shares so redeemed or purchased for cancellation pursuant to paragraph (j) of the definition of proceeds of disposition in section 54 of the Act.

E. Provided that the amount paid on the redemption of each Class A Share of each of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 which are to be redeemed, as described in paragraph 28 above, is equal to the Specified Amount referred to in paragraphs 10.1 and 15 above in respect of each such share, Parts IV.1 and VI.1 of the Act will not apply to the dividend deemed to have been paid by each of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2, as described in ruling B(a) above, because each such dividend will, pursuant to subsection 191(4) of the Act, be an excepted dividend for the purposes of section 187.2 and an excluded dividend for the purposes of section 191.1 of the Act.

F. By virtue of the definition of "substantial interest" as set out under paragraph 191(2)(b), Newco 1, Newco 2 and Holdco 1, as the case may be, will have a substantial interest in DC3 immediately before the wind-up of DC3 (and thus immediately before the cancellation of the Class B Shares) as described in paragraph 31 above. Consequently, no tax will be payable under either section 187.2 or section 191.1 in respect of the dividend deemed to have been paid by DC3 to Newco 1, Newco 2 and Holdco 1, as the case may be, upon the wind-up since each such dividend will be an "excepted dividend" within the meaning assigned by paragraph (b) of the definition of "excepted dividend" in section 187.1 in the capacity of Newco 1, Newco 2 and Holdco 1, a the case may be, as the recipient of the particular dividend, and shall be an "excluded dividend" within the meaning of paragraph (a) of the definition of "excluded dividend" in subsection 191(1) in the capacity of DC3 as the payer of the particular dividend.

G. Provided that as part of the series of transactions or events that includes the proposed transactions described herein, there is not:

(i) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(ii) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);

(iii) an acquisition of property in the circumstances described in paragraph 55(3.1)(c): or

(iv) an acquisition of property in the circumstances described in paragraph 55(3.1)(d),

which has not been described herein, then by virtue of paragraph 55(3)(b) of the Act, subsection 55(2) of the Act will not apply to the taxable dividends referred to in the ruling given in B above and, for greater certainty, subsection 55(3.1) of the Act will not apply to deny the exemption under paragraph 55(3)(b) of the Act.

H. By virtue of paragraph 186(4)(b) of the Act, each of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 will be connected with DC1, DC2 or DC3, as the case may be, and each of DC1, DC2 and DC3 will be connected with Holdco 1, Holdco 2, Newco 3, Newco 1 and Newco 2, as the case may be. Consequently,

(a) provided that each of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 is not entitled to a dividend refund (within the meaning of subsection 129(1) of the Act) in respect of its taxation year in which it is deemed to pay the dividend referred to in Ruling B above, each of DC1, DC2 and DC3 will not be subject to Part IV tax under subsection 186(1) of the Act in respect of such dividend; and

(b) each of Holdco 1, Holdco 2, Newco 3, Newco 1 and Newco 2 shall, pursuant to paragraph 186(1)(b), be subject to Part IV tax in an amount equal to that proportion of the dividend refund to which DC1, DC2 or DC3, as the case may be, will become entitled for its taxation year in which the dividends referred to in ruling B(b), above, are paid, that the amount of each such dividend received by Holdco 1, Holdco 2, Newco 3, Newco 1 and Newco 2, as the case may be, is of the aggregate of all taxable dividends paid by DC1, DC2 or DC3, as the case may be, in its taxation year in which such dividend is paid.

I. DC1 and DC2 will be subject to Part IV tax under subsection 186(1)(a) of the Act in respect of the taxable dividends referred to in Ruling C above arising from the purchase of the Class A Preference Shares of Holdco 2 as described in paragraphs 18 and 22 above.

J. The application of subsection 84.1(1) of the Act to:

(i) the transfer of the 1 common share and XXXXXXXXXX Class B Shares of DC3 by the Estate to Newco 1 as described in paragraph 12 above,

(ii) the transfer of the 1 common share and XXXXXXXXXX Class B Shares of DC3 by Mr. B to Newco 2 as described in paragraph 13 above,

(iii) the transfer of the 1 common share and XXXXXXXXXX Class B Shares of DC3 by Mr. C to Holdco 1 as described in paragraph 14 above,

will not result in a reduction of the PUC of the Class A shares of Newco 1, Newco 2 or Holdco 1, as the case may be, or in a dividend deemed to have been paid by Newco 1, Newco 2 or Holdco 1, as the case may be, to the Estate, Mr. B, or Mr. C, as the case may be.

K. The provisions of subsection 85(2.1) of the Act will apply to reduce the PUC of the Class A shares of each of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 referred to in paragraphs 19, 23 and 27 above by the amount by which:

(a) the aggregate PUC of the Class A shares of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2, as the case may be, otherwise determined as a result of the acquisition by Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2, as the case may be, of the property of DC1, DC2 or DC3, as the case may be,

exceeds the amount

(b) by which the aggregate cost to Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2, as the case may be, of the property of DC1, DC2 or DC3, as the case may be, exceeds the fair market value of the liabilities of DC1, DC2 or DC3, as the case may be, assumed by Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2, as the case may be, as part consideration for such property, excluding, for greater certainty, those liabilities assumed by Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2, as the case may be, as consideration for the DC1 Promissory Note, DC2 Promissory Note or DC3 Promissory Note, as the case may be.

L. Subsection 85(2.1) of the Act will not apply to reduce the PUC of the Class A Shares of Sub-Newco 4 issued to Newco 3 as described in paragraph 33 and 34 above.

M. The provisions of subsection 88(1) of the Act will apply to the wind-ups of Sub-Holdco 1, Sub-Holdco 2, Sub-Newco 3, Sub-Newco 1 and Sub-Newco 2 as described in paragraph 30 above.

N. The extinguishment of the debt obligations as a result of the cancellation of the 1st, 2nd and 3rd Sub-Holdco 1 Note, the 1st and 2nd Sub-Holdco 2 Note, the 1st and 2nd Sub-Newco 3 Note, the Sub-Newco 1 Note, the Sub-Newco 2 Note and the 1st and 2nd Holdco 2 Note described in paragraph 31 above, will not give rise to a "forgiven amount", within the meaning thereof in subsections 80(1) and 80.01(1) of the Act.

O. Subsections 1100(2.2), 1100(19), 1101(1ad) and 1102(14) of the Income Tax Regulations will apply to the transfers of property described in paragraphs 18, 22, 26 and 33 above.

P. With the exception of any benefits that may be considered to arise as a consequence of each of Holdco 1, Holdco 3, DC1 and DC2 waiving its right to the 10% premium to which it would otherwise have been entitled upon the purchase of the Class A Preference Shares by Holdco 2, Subco 1 and Subco 2, as the case may be, as described in paragraphs 18, 22 and 32 above, the provisions of subsections 15(1), 56(2) and 246(1) of the Act will not apply to any of the proposed transactions described in paragraphs 10 through 35 above, in and by themselves.

Q. As a result of the proposed transactions, in and by themselves, subsection 245(2) of the Act will not be applied to redetermine the tax consequences confirmed in the rulings given.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 31, 1996 and are binding on Revenue Canada provided that the proposed transactions are completed by XXXXXXXXXX.

The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act which, if enacted into law, could have an effect on the rulings provided herein.

COMMENTS

Nothing in this ruling should be construed as implying that Revenue Canada, Customs, Excise and Taxation has agreed to or reviewed:

(a) the application of Part IV.1 and Part VI.1 of the Act with respect to the taxable dividends, if any, arising on the redemption of the Class A Preference Shares of Holdco 2, Subco 1 and Subco 2 as described in paragraphs 18, 22 and 32 above;

(b) the application of subsection 55(2) of the Act to the taxable deemed dividends, if any, arising on the redemption of the Class A Preference Shares of Holdco 2, Subco 1 and Subco 2 as described in paragraphs 18, 22 and 32 above;

(c) the application of subsections 15(1), 56(2) and 246(1) of the Act with respect to any benefits that may be considered to arise as a consequence of each of Holdco 1, Newco 3, DC1 and DC2 waiving its right to the 10% premium to which it was otherwise entitled upon the purchase of the Class A Preference Shares by Holdco 2, Subco 1 and Subco 2, as the case may be, as described in paragraphs 18, 22 and 32 above. For example, since it is proposed that Holdco 1 will own the Class A Preference Shares of Subco 1 immediately before Subco 1 purchases such shares, and Holdco 4 owns common shares in both Holdco 1 and Subco 1, Holdco 1 may be considered to have conferred a benefit on Holdco 4 pursuant to subsection 15(1) of the Act;

(d) the determination of the fair market value or ACB of any particular asset or the PUC of any shares referred to herein; or

(e) any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.

Yours truly,

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

.../cont’d

		.../cont’d

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30 November 1997 Ruling 9716063 - BUTTERFLY

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FACTS

PROPOSED TRANSACTIONS

Preliminary Transactions

Distribution of Property of DC1

Distribution of Property of DC2

Distribution of Property of DC3

Share Redemptions

Winding-up of the Subsidiaries and the Distributing Corporations

Post-Butterfly Transactions

ADDITIONAL INFORMATION

PURPOSE OF THE PROPOSED TRANSACTIONS

RULINGS GIVEN

COMMENTS