30 November 1996 Ruling 9730113 - ESTATE FREEZE - TERMS OF PREFERRED SHARES

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.

XXXXXXXXXX 		973011
XXXXXXXXXX  		XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: XXXXXXXXXX
Amendments to Advance Income Tax Ruling 970399

This is in response to your letter of XXXXXXXXXX in which you advised us of certain revisions to the proposed transactions described in advance income tax ruling 970399 which was issued on XXXXXXXXXX, 1997, as amended by our letter of XXXXXXXXXX, 1997 (the "Ruling Letter").

As requested, the Ruling Letter is hereby amended as follows:

1. Paragraph 16(b) of the Proposed Transactions is replaced by the following:

“(b) non-cumulative, non-preferential dividends at the discretion of the directors in an amount of up to XXXXXXXXXX% of the Redemption Amount and, in addition to or in lieu of such dividends, non-cumulative, non-preferential special dividends at the discretion of the directors in an amount of up to the Redemption Amount provided that the Redemption Amount shall be reduced by the amount of the aggregate of such special dividends so declared and paid;”

2. Paragraph 17(b) of the Proposed Transactions is replaced by the following:

“(b) the beneficiaries of the Family Trust shall include all children and other issue of Father, and any corporation incorporated under the laws of Canada, or under the laws of any province of Canada, that is wholly-owned by one or more children or other issue of Father, whether or not the corporation was incorporated at the time of the settlement of the Family Trust, all nieces and nephews of Father and any charitable non-share corporation or any charitable trust, whether or not the charitable corporation or trust was incorporated or created at the time of the settlement of the Family Trust. Issue is not confined to children but includes children and all other lineal descendants;”

3. Paragraph 17(e) of the Proposed Transactions is replaced by the following:

“(e) the trustee will have the discretion to distribute all or part of the capital of the Family Trust at any time to any one or more of the beneficiaries to the exclusion of any one or more of the beneficiaries, provided that if the discretion to distribute all or part of the capital of the Family Trust is exercised at any time when Father is not a trustee, such a distribution must be made equally among the issue of Father per stirpes, and if Father is alive at that time, only to issue who have attained the age of 18 years, or to one or more corporate beneficiaries the shareholders of which are such issue, or, if there are no issue alive, to one or more charitable non-share capital corporations or charitable trusts. While Father is the sole trustee or one of the trustees, charitable donations may be made by the Family Trust. In exercising the discretion as to payment of the capital to the beneficiaries pursuant to this section at any time when Father is a trustee, the trustee shall not be permitted to pay any capital to or for the benefit of any beneficiary who has not attained the age of 18 years, including a corporate beneficiary the shareholder of which has not attained the age of 18 years;”

4. Paragraph 17(f) of the Proposed Transactions is replaced by the following:

“(f) on the Division Date, the trustee shall divide the Trust Fund among the issue of Father alive on the Division Date. If there are no issue of Father then alive, the trustee shall pay or transfer all the Trust Fund to any one or more charitable non-share corporations or charitable trusts as the trustee shall in his absolute discretion determine. Should a beneficiary become entitled to receive a share of the Trust Fund on the Division Date and is under the age of XXXXXXXXXX years, the trustee shall hold such share in trust and shall keep such share invested. The Trustee shall pay all or such part or parts of the net income derived from such share and such part or parts of the capital of such share, as the trustee from time to time in his absolute discretion shall determine, to or for the benefit of the beneficiary until he or she attains the age of XXXXXXXXXX years when the remaining amount of such share shall be paid to him or her for his or her own use absolutely;”

5. Paragraph 17(j) of the Proposed Transactions is replaced by the following:

“(j) every discretion or power conferred on the trustee by the Trust deed or by law shall be an absolute discretion or power and in cases where there are more than two trustees every decision required at any time or from time to time to be made by the trustees may be made by a majority of the trustees, as long as Father is one of the majority while acting as a trustee, and no trustee shall be held liable for any loss or damage occurring as a result of such trustee concurring or refusing or failing to concur in an exercise of any such discretion or power; and”

Notwithstanding the above changes, we confirm that, subject to the conditions set out therein, the rulings given in the Ruling Letter will continue to be binding on Revenue Canada in accordance with the practice outlined in Information Circular 70-6R3, dated December 30, 1996, provided that the proposed transactions described in the Ruling Letter, as hereby amended, are completed in the manner described therein by XXXXXXXXXX.

Yours truly,

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