1999 Ruling 9901523 - DPS - 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: Minor changes to ruling #982061 - primarily grammatical and for clarification

Position: OK

Reasons: No major changes

XXXXXXXXXX
XXXXXXXXXX 990152
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

We are writing in response to your correspondence of XXXXXXXXXX wherein you had requested certain amendments and corrections to the advance income tax ruling dated XXXXXXXXXX, 1999 (our file reference 982061) (the “Ruling”) issued to yourself on behalf of the of the above-noted corporations. All abbreviated references herein have the same meaning as those in the Ruling.

Paragraph 2 of the Ruling is amended to read as follows:

XXXXXXXXXX

It is a “taxable Canadian corporation”, as that term is defined in subsection 89(1) of the Act, and a “specified financial institution” as that term is defined in subsection 248(1) of the Act. The Revenue Canada account number of XXXXXXXXXX and it deals with the XXXXXXXXXX Taxation Services Office.

Paragraph 5 of the Ruling is amended to read as follows:

All Purchasers, with the exception of XXXXXXXXXX (as defined in paragraph 12, below), deal at “arm’s length”, within the meaning of that term in subsection 251(1) of the Act, with XXXXXXXXXX (as defined in paragraph 7, below) and the other members of the XXXXXXXXXX (as defined in paragraph 17, below). Collectively, XXXXXXXXXX and Subsequent Purchasers are referred to herein as the “Arm’s Length Purchasers”. Collectively, XXXXXXXXXX and Subsequent Purchasers are referred to herein as “Purchasers”.

Subparagraph 25(c) of the Ruling is amended to read as follows:

The Class XXXXXXXXXX preferred shares of XXXXXXXXXX have a cumulative annual third priority dividend of XXXXXXXXXX% based upon the redemption price of $XXXXXXXXXX per share, and rank in third position after the Class XXXXXXXXXX and Class XXXXXXXXXX preferred shares on liquidation, dissolution or winding-up.

Paragraph 47 of the Ruling is amended to read as follows:

XXXXXXXXXX, or a corporation owned by him, may subscribe for up to XXXXXXXXXX Class XXXXXXXXXX preferred shares of XXXXXXXXXX at a price of $XXXXXXXXXX per share. The subscription price will be payable on or about XXXXXXXXXX, in accordance with the requirements of the XXXXXXXXXX (as described in paragraph 48, below).

Paragraph 48 of the Ruling is amended to read as follows:

As a condition of the participation of XXXXXXXXXX in the proposed restructuring, XXXXXXXXXX will be required to guarantee an amount equal to the lesser of the “operating cash loss” of XXXXXXXXXX (except to the extent that such loss relates to amounts paid or payable to XXXXXXXXXX) for the XXXXXXXXXX fiscal year ended XXXXXXXXXX and $XXXXXXXXXX (the “XXXXXXXXXX”).

The “operating cash loss” will be funded during the year advances under the Revolving Credit, as described in subparagraph 65(d), below, and payment under the XXXXXXXXXX will be required by XXXXXXXXXX.

The XXXXXXXXXX will be satisfied either by payment of the required funds to XXXXXXXXXX or by subscription of up to XXXXXXXXXX Class XXXXXXXXXX preferred shares of XXXXXXXXXX or a combination of both.

Subparagraph 50(a) of the Ruling is amended to read as follows:

$XXXXXXXXXX to repay a portion of the XXXXXXXXXX, as described in subparagraph 27(b), above. This portion of the facility will bear interest at XXXXXXXXXX% per annum.

Paragraph 53 of the Ruling is amended to read as follows:

Prior to XXXXXXXXXX will acquire all of the Class XXXXXXXXXX and Class XXXXXXXXXX Units of the Partnership owned by XXXXXXXXXX from XXXXXXXXXX at fair market value.

Clause 65(c)(i) of the Ruling is amended to read as follows:

When the XXXXXXXXXX, as described in subparagraph (a), above, is acquired by the Beneficial Holders of the Class XXXXXXXXXX Special Shares pursuant to the Debt Put/Call Agreement I, as described in paragraph 84, below;

The last two sentences of paragraph 73 of the Ruling is amended to read as follows:

XXXXXXXXXX will pay letter of credit fees to XXXXXXXXXX or a substitute letter of credit issuer (the "XXXXXXXXXX"), quarterly in arrears, of XXXXXXXXXX% per annum (or such amount as may be charged by a substitute letter of credit issuer) on the amount of Class XXXXXXXXXX Special Shares which are the subject of the XXXXXXXXXX letter of credit as consideration for issuing letter of credit support for the Class XXXXXXXXXX Special Shares.

XXXXXXXXXX will pay letter of credit fees to XXXXXXXXXX or a substitute letter of credit issuer (the "XXXXXXXXXX"), quarterly in arrears, of between XXXXXXXXXX% and XXXXXXXXXX% per annum (or such amount as may be charged by a substitute letter of credit issuer) on the amount of Class XXXXXXXXXX Special Shares which are the subject of the XXXXXXXXXX letter of credit as consideration for issuing letter of credit support for the Class XXXXXXXXXX Special Shares.

Paragraph 92 of the Ruling is amended to read as follows:

After XXXXXXXXXX and also after the date that the Partnership distributes the Class XXXXXXXXXX Preferred Shares of XXXXXXXXXX that it owns to XXXXXXXXXX, as described in paragraph 52, above, XXXXXXXXXX will cancel the XXXXXXXXXX Units of XXXXXXXXXX (or of XXXXXXXXXX, if the name of the partnership has been changed at that time) then owned by XXXXXXXXXX. Upon cancellation of these units, the remaining XXXXXXXXXX Class XXXXXXXXXX Units of XXXXXXXXXX (or of XXXXXXXXXX, if the name of the partnership has been changed) owned by Arm's Length Limited Partners will represent a XXXXXXXXXX% ownership interest of XXXXXXXXXX (or of XXXXXXXXXX, if the name of the partnership has been changed), excluding the interest held by the General Partner.

Ruling “F” of the Ruling is amended to read as follows:

The cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of the XXXXXXXXXX, will, immediately after such debt is acquired by XXXXXXXXXX, be equal to the amount paid therefor, as described in paragraph 67 of the Proposed Transactions.

Ruling “G” of the Ruling is amended to read as follows:

The cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of the XXXXXXXXXX, will, immediately after such debt is acquired by XXXXXXXXXX, be equal to the amount paid therefor, as described in paragraph 75 of the Proposed Transactions.

Ruling “H” of the Ruling is amended to read as follows:

The cost amount, within the meaning of that term in subsection 248)(1) of the Act, to a Purchaser of a Class XXXXXXXXXX Special Share or a Class XXXXXXXXXX Special Share will, immediately after such share is issued, be equal to the amount paid therefor, as described in paragraphs 69, 70, 71, 72, and 77 of the Proposed Transactions.

Ruling “I” of the Ruling is amended to read as follows:

The cost amount, within the meaning of that term in subsection 248(1) of the Act, to a Subsequent Purchaser of a Class XXXXXXXXXX Special Share or a Class XXXXXXXXXX Special Share, will, immediately subsequent to the purchase thereof, as contemplated in paragraph 73 of the Proposed Transactions, be equal to the amount paid therefor, as described in that paragraph.

Ruling “L” of the Ruling is amended to read as follows:

If the XXXXXXXXXX is acquired or reacquired, as the particular case may be, by the Beneficial Holders of the Class XXXXXXXXXX Special Shares, as contemplated in paragraph 84 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act , of that loan to the Beneficial Holders of the Class XXXXXXXXXX Special Shares immediately subsequent to such acquisition or reacquisition, as the case may be, will be equal to the amount paid therefor, as described in that paragraph.

Ruling “M” of the Ruling is amended to read as follows:

If the XXXXXXXXXX is acquired or reacquired, as the particular case may be, by the Beneficial Holders of the Class XXXXXXXXXX Special Shares, as contemplated in paragraph 84 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act, of that loan to the Beneficial Holders of the Class XXXXXXXXXX Special Shares immediately subsequent to such acquisition or reacquisition, as the case may be, will be equal to the amount paid therefor, as described in that paragraph.

Ruling “O” of the Ruling is amended to read as follows:

Section 80 of the Act will not be applicable to XXXXXXXXXX by virtue of the fact that a portion of the interest on the XXXXXXXXXX will be annually waived by XXXXXXXXXX or by virtue of the failure of XXXXXXXXXX to demand repayment of the XXXXXXXXXX as described in subparagraph 65(c) of the Proposed Transactions.

Ruling “Q” of the Ruling is amended to read as follows:

If the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares are reacquired by XXXXXXXXXX in the circumstances described in paragraph 73 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of such reacquired shares immediately subsequent to such reacquisition will be equal to the amount paid therefor, as described in that paragraph.

Ruling “R” of the Ruling is amended to read as follows:

If the Class XXXXXXXXXX Special Shares are acquired by XXXXXXXXXX in the circumstances described in paragraph 83 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of such shares immediately subsequent to such acquisition will be equal to the amount paid therefor, as described in that paragraph.

We confirm that the amended rulings described herein will be binding on Revenue Canada in the manner set forth in the aforementioned Ruling.

We trust that this is the information which you require.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

6

.../cont’d

.../cont’d