30 November 1997 Ruling 9723063 - XXXXXXXXXX

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.

Principal Issues:

Will XXXXXXXXXX ("X Co") qualify for exemption under paragraph 149(1)(d) following the transfer of XXXXXXXXXX X Co shares from XXXXXXXXXX

Position TAKEN:

Yes.

Reasons FOR POSITION TAKEN:

Upon the above transfer of shares, XXXXXXXXXX will be registered holders and beneficial owners of all the issued and outstanding shares in the capital of X Co. The Department's stated position (see par. 5 of IT-347R2 and files 950988, 953015 and 960059) is that the ownership test in 149(1)(d) "could be on the basis of a single holding of shares or capital or on the basis of two or more separate holdings...of one or more of the provincial governments..." XXXXXXXXXX

Bill C-28, which received first reading on December 10, 1997, contains proposed amendments to paragraph 149(1)(d). While these amendments provide additional restrictions as to when a corporation can qualify for exemption when a municipality owns shares or capital, the amendments do not affect our above position on ownership by multiple governments.

XXXXXXXXXX
XXXXXXXXXX 		3-972306
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Attention: XXXXXXXXXX

XXXXXXXXXX, 1998

Dear Sirs:

Re: Advance Income Tax Ruling
XXXXXXXXXX
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of XXXXXXXXXX ("X Co"). We also acknowledge receipt of the additional information provided in your letters of XXXXXXXXXX.

To the best of your knowledge and that of the taxpayer involved, none of the issues involved in the requested ruling is being considered by a Tax Services Office or a Tax Centre in connection with an income tax return already filed and none of the issues is under objection or appeal.

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

FACTS

1. X Co was established under the XXXXXXXXXX.

2. XXXXXXXXXX

3. XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

4.

XXXXXXXXXX

5. X Co is a "public agency" as defined in the XXXXXXXXXX.

6. The authorized share capital of X Co consists of an unlimited number of voting common shares. The issued and outstanding share capital consists of XXXXXXXXXX common shares, all of which are owned by XXXXXXXXXX.

7.

XXXXXXXXXX

8.

XXXXXXXXXX

PROPOSED TRANSACTIONS

9.

XXXXXXXXXX

10. XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

11.

XXXXXXXXXX

12. XXXXXXXXXX, X Co will apply for continuance under the Canada Business Corporations Act. The Articles of Continuance will provide that X Co's authorized share capital will consist of:

(a) an unlimited number of common shares having the right to vote, to receive dividends, and to share in the assets of the corporation upon a winding up of X Co; and

(b) an unlimited number of non-voting preferred shares, which may be issued in one or more series, having the right to receive cumulative dividends at such a rate as the Board of Directors may determine at the time of issue of such shares in preference to the common shares of X Co, and the right to receive the issue price of such preferred shares upon winding up of X Co in preference to the common shares, but in equal rank between series of preferred shares.

13.

XXXXXXXXXX

The shares will be transferred effective XXXXXXXXXX or such later date as the parties may mutually agree upon. Upon the transfer, XXXXXXXXXX will be registered holders and beneficial owners of all the issued and outstanding shares in the capital of X Co.

PURPOSE OF PROPOSED TRANSACTIONS

14. The purpose of the proposed transactions is to provide XXXXXXXXXX with an equitable ownership interest in X Co.

RULING

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, and purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our ruling is as follows:

Following the transfer of shares of X Co to XXXXXXXXXX, provided that all the shares of X Co are at all relevant times owned by XXXXXXXXXX we confirm that the X Co will be exempt from income tax on its taxable income under Part I of the Income Tax Act (the "Act") by virtue of paragraph 149(1)(d) of the Act.

The above ruling is given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996, and is binding provided that the proposed transactions are completed by XXXXXXXXXX.

This ruling is based on the Act in its present form and does not take into consideration any proposed amendments to the Act.

OPINION

Provided that our understanding of the facts and proposed transactions described herein is correct and further provided that the proposed amendments relating to paragraph 149(1)(d) and subsection 149(1.1) of the Act are enacted in substantially the same form as proposed in subclauses 178(1) and (4) of Bill C-28 which received first reading on December 10, 1997, it is our opinion that, following the transfer of shares of X Co to XXXXXXXXXX X Co will be exempt from income tax on its taxable income under Part I of the Act by virtue of paragraph 149(1)(d) of the Act.

Yours truly,

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch