1999 Ruling 9912893 - GROUP LOSS UTILIZATION SCHEME

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 1-991289

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling and Advance GST/HST Ruling

This is in reply to your letter of XXXXXXXXXX, in which you advised of changes to the proposed transactions described in our letter of XXXXXXXXXX, 1999 on our file number 3-982916 (the "Ruling"). You also requested that we confirm that each of XXXXXXXXXX Co and XXXXXXXXXX Co will be entitled to claim capital cost allowance on the depreciable assets acquired by each of them from the XXXXXXXXXX, as described in paragraphs 9 and 10 in the Ruling. (Terms defined in the Ruling to have a certain meaning have the same meaning when used in this letter.)

As a result of your letter the following changes are made to the Ruling:

1. Add the following ruling:

"J. Provided that:

(i) XXXXXXXXXX Co acquires the depreciable assets included in the XXXXXXXXXX Assets transferred from each of XXXXXXXXXX, as described in paragraph 9 above;

(ii) XXXXXXXXXX Co acquires the depreciable assets included in the XXXXXXXXXX Assets transferred from each of XXXXXXXXXX as described in paragraph 10 above;

for the purpose of gaining or producing income from a business, XXXXXXXXXX Co or XXXXXXXXXX Co, as the case may be, will be entitled to deduct such capital cost allowance on the depreciable assets acquired pursuant to paragraph 20(1)(a), as is allowed by the Income Tax Regulations (the "Regulations"), in computing income for its respective taxation year ending on XXXXXXXXXX, subject to the restriction under Regulation 1100(3)."

2. In paragraph 9, fifth line, delete the words "preferred shares, with a redemption and retraction amount and" and replace with the words "common shares with a".

In paragraph 10, third subparagraph, first line, delete the word "preferred" and replace with the word "common".

In paragraph 12, fifth line, delete the words "preferred shares, with a redemption and retraction amount and" and replace with the words "common shares with a".

In paragraph 13, third subparagraph, first line, delete the word "preferred" and replace with the word "common".

3. In paragraph 16, add the following subparagraph:

"The estimated fair market value of the partnership interest of XXXXXXXXXX Co and XXXXXXXXXX Holdco in the XXXXXXXXXX Partnership, as described herein, has been determined on the basis of the fair market value of the assets to be transferred from XXXXXXXXXX Co and XXXXXXXXXX Holdco arrived at from financial information available on XXXXXXXXXX. The actual fair market value of XXXXXXXXXX Co's and XXXXXXXXXX Holdco's partnership interest in the XXXXXXXXXX Partnership on XXXXXXXXXX may be more or less than the amounts described herein."

In paragraph 19, add the following subparagraph:

"The estimated fair market value of the partnership interest of XXXXXXXXXX Co and XXXXXXXXXX Holdco in the XXXXXXXXXX Partnership, as described herein, has been determined on the basis of the fair market value of the assets to be transferred from XXXXXXXXXX Co and XXXXXXXXXX Holdco arrived at from financial information available on XXXXXXXXXX. The actual fair market value of XXXXXXXXXX Co's and XXXXXXXXXX Holdco's partnership interest in the XXXXXXXXXX Partnership on XXXXXXXXXX may be more or less than the amounts described herein."

4. Delete paragraph 9.1. Replace with the following paragraph:

"XXXXXXXXXX will supply to XXXXXXXXXX Co all or substantially all of the assets necessary for XXXXXXXXXX Co to carry on the XXXXXXXXXX business of the XXXXXXXXXX Group, consisting of all inventory, building, equipment, land, and intangible assets. The building and land are used as the head office of the XXXXXXXXXX Group and will be supplied to XXXXXXXXXX Co by way of lease. The intangible assets will be supplied to XXXXXXXXXX Co by way of assignment."

Delete paragraph 16.1. Replace with the following paragraph:

"XXXXXXXXXX Co will supply to XXXXXXXXXX Partnership all or substantially all of the assets necessary for XXXXXXXXXX Partnership to carry on the XXXXXXXXXX business of XXXXXXXXXX Co, consisting of all inventory, building, equipment, land and intangible assets. The building and land will be supplied to XXXXXXXXXX Partnership by way of sublease. The intangible assets will be supplied to XXXXXXXXXX Partnership by way of assignment."

We confirm that the above changes and additional ruling will not affect the rulings given in the Ruling and will continue to be binding as indicated therein.

Yours truly,

Director General
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

Director General
GST/HST Rulings and Interpretations
Directorate
Policy and Legislation Branch