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: whether certain amendments to the proposed transaction will affect the rulings given.
Position: No
Reasons: They do not affect the exemption under 55(3)(a)
XXXXXXXXXX
XXXXXXXXXX 993081
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1999
Dear Sirs:
Re: XXXXXXXXXX
XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX, wherein you requested an amendment to the advance income tax ruling issued on XXXXXXXXXX, 1999 (our reference 990852)(the "Ruling").
All capitalized terms have the meaning assigned in the Ruling.
Additional Proposed Transaction
Before Transaction Date, Parent and Distributing will make an offer to the holders of the approximately XXXXXXXXXX (stated value of approximately $XXXXXXXXXX) outstanding Distributing XXXXXXXXXX Preferred Shares (the "XXXXXXXXXX Shares") of the following options:
(a) Parent will offer to acquire the XXXXXXXXXX Shares in return for the issue by Parent of preferred shares with a fair market value equal to the fair market value of XXXXXXXXXX Shares tendered under this option (such fair market value to include recognition of the increased dividend available under option(c)). Parent will require that any XXXXXXXXXX shareholder who tenders XXXXXXXXXX Shares under this option jointly elect with Parent pursuant to subsection 85(1) electing an agreed amount equal to the fair market value of such shares.
(b) Parent will offer to acquire a percentage, not exceeding XXXXXXXXXX% of the XXXXXXXXXX Shares in return for a payment of cash equal to the fair market value of the XXXXXXXXXX Shares tendered under this option.
(c) Parent will vote its common shares in support of a resolution to increase the dividend rate on the XXXXXXXXXX Shares by some amount not exceeding XXXXXXXXXX% per annum with effect from Transaction Date.
In respect of option (b), Parent will use its own resources and new borrowings from unrelated persons to fund the cash payment.
OTHER TRANSACTION
Parent is not subject to XXXXXXXXXX constraints as far as the amount of debt it may incur. However, depending upon the amount of borrowings required, if any, to fund the cash payment in respect of option (b), upon interest rates, and upon other business exigencies, Parent may at some point refinance the borrowings through an issue of debt instruments or undertake a new issue of preferred shares or common shares to existing shareholders or to the public to raise new capital with which to repay the borrowings. It is anticipated that any such refinancing or share issue would not occur within the first three months following the acquisition of theXXXXXXXXXX Shares.
RULING
Provided that the above statements together with the statements of facts, purposes of proposed transactions and the proposed transactions contained in the Ruling constitute a complete and accurate disclosure of all the relevant facts, purposes of the proposed transactions and the proposed transactions, we rule that:
* The carrying value of Parent's investment in shares or long-term debt of Newco at the end of the taxation year of Parent that includes the Transaction Date will be deductible by Parent in calculating its taxable capital for that taxation year in accordance with subsection 181.3(2) and section 190.12.
Amendments to rulings given in the Ruling
* Ruling (f)(iv) will be amended by deleting "subsection 112(2.1)" after "in the case of Newco" and replacing it with "subsection 112(1)"
* Ruling (h) of the Ruling will be amended by adding the following sentence:
For greater certainty, the Proposed Transactions, including the additional Proposed Transaction described herein, in and by themselves, will not be considered to result in a disposition or increase in interest described in subparagraphs 55(3)(a)(i) to (v) with respect to the deemed dividends referred to in ruling (f).
This rulings and the rulings given in the Ruling as amended are subject to the limitations set forth in Information Circular issued on December 30, 1996, and are binding provided that the proposed transactions are completed before XXXXXXXXXX.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1999
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1999