1998 Ruling 9810903 - SUPPLEMENTAL RULING

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the 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 docupient, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

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xxxxxxxxxx 981090
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Attention: xxxxxxxxxx

XXXXXXXXXX, 1998

Dear Sirs:

Re: XXXXXXXXXX
Amendments to Advance Income Tax Ruling 3-980799

This is in reply to your letter dated XXXXXXXXXX, in which you advised us of certain revisions to the proposed transactions described in advance income tax ruling 3-980799 dated XXXXXXXXXX, 1998 (the "Ruling Letter")

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

1. Paragraph 9 of the Proposed Transactions is replaced by the following:

"9. Child 1, Child 2 and Child 3 will incorporate Newco pursuant to the provisions of the BCA. Newco will be a taxable Canadian corporation. The authorized capital of Newco will include common shares and 4 classes of redeemable, retractable voting preferred shares (such preferred shares are hereinafter referred to as the Newco Class A Preferred Shares, the Newco Class B Preferred Shares, the Newco Class C Preferred Shares and the Newco Class D Preferred Shares), No shares of Newco will be issued on incorporation

2. Paragraph 10 of the Proposed Transactions is replaced by the following:

"10. Holdco X and Brother X will transfer their shares of Opco to Newco in exchange for Newco Class A Preferred Shares and Newco Class C Preferred Shares, respectively, in each case having a fair market value equal to the fair market value of the shares of Opco transferred to Newco by each of Holdco X and Brother X, as the case may be, Holdco X and Newco and Brother X and Newco will jointly elect, 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 shares described herein. The amount agreed upon in each such election will be equal to the transferor's adjusted cost base of the transferred shares, which amount will not be greater than their fair market value

The amount that will be added to the stated capital of the Class A Preferred Shares of Newco to be issued to Holdco X will be equal to the adjusted cost base to Holdco X of the transferred shares immediately before the disposition. The amount that will be added to the stated capital of the Class C Preferred Shares of Newco to be issued to Brother X will be equal to the adjusted cost base to Brother X (determined in accordance with paragraph 84.1(2)(a.1)) of the transferred shares immediately before the disposition."

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 Jax Rulings and
Interpretations Directorate
Policy and Legislation Branch