30 November 1996 Ruling 9731333 - SUPP TO ATR 3-971631

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.

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Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: XXXXXXXXXX (“Opco”)
Advance Income Tax Ruling 3-971631

This is in reply to your letter of XXXXXXXXXX, in which you advised us of the following discrepancies with respect to the facts and proposed transactions described in our letter of XXXXXXXXXX, 1997 (the “Ruling”):

1.The authorized share capital of Opco referred to in paragraph 1 of the Ruling includes Class XXXXXXXXXX shares, none of which have been issued..

2.In paragraph 12 of the Ruling it is mentioned that Opco will transfer all of the properties, except trade accounts receivable, of the Target Business to Newco. In actual fact, Opco has effectively transferred such accounts receivable to Newco. As the receivables are collected, Opco deposits them into Newco’s account. The trade payables are paid from this account. At the date of transfer, the receivables were substantially in excess of trade payables. Opco received an intercompany loan receivable for this excess. No election under subsection 85(1) was made for the receivables.

3.In paragraph 12 of the Ruling the agreed amount in respect of any depreciable property shall be an amount equal to the least of the undepreciated capital cost of all property of that class immediately before the transfer, the cost of the property to Opco and the fair market value thereof.

4.In paragraph 13 of the Ruling it is indicated that the Newco Note 2 will be secured by a floating debenture on the assets of Newco. Opco’s lawyers have advised that it is preferable to secure Opco’s position by a general security agreement rather than a floating debenture.

We confirm that none of the items referred to above will affect the rulings given in the Ruling which will continue to be binding as indicated therein.

Yours truly,

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