2012 Ruling 2011-0429611R3 - Variation of Trust Indenture

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.

Principal Issues: Whether the variation of a trust indenture to create and issue a new class of preferred units would result in: 1. a disposition by existing unitholders of their units. 2. a disposition by the trust of its property or in a resettlement of the trust for purposes of the Act. 3. the application of subsection 104(7.1) so as to deny the deduction by the trust of any amount it is otherwise entitled to deduct under paragraph 104(6)(b).

Position: 1. No. 2. No. 3. No.

Reasons: 1. No cash consideration or other proceeds of disposition will be received by the unitholders in respect of the removal of the redemption right or the issuance of the preferred units. Moreover, the changes to the trust indenture in this case, as a whole, are not viewed as sufficiently material to take the position that the amended units would be proceeds of disposition. 2. The changes are not so extensive so as to result in a resettlement of trust and it is submitted that there will be no resettlement as a matter of provincial law. 3. Consistent with previous rulings.

XXXXXXXXXX
2011-042961

XXXXXXXXXX, 2012

Attention: XXXXXXXXXX

Dear XXXXXXXXXX

Re: XXXXXXXXXX ("Trust")
Advance Income Tax Ruling Request

This is in reply to your letter XXXXXXXXXX, requesting an advance income tax ruling on behalf of the above named taxpayer. We also acknowledge the information provided in various conversations and emails.

We understand that, to the best of your knowledge and that of the taxpayer, none of the issues involved in this ruling request is:

(a) in an earlier return of the taxpayer or a related person;
(b) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person;
(c) under objection by the taxpayer or a related person;
(d) before the courts; or
(e) the subject of a ruling previously issued by the CRA (other than in document XXXXXXXXXX).

This document is based solely on the facts and proposed transactions described below. The documentation submitted with your request does not form part of the facts and proposed transactions except as expressly referred to herein, and any references thereto are otherwise provided solely for the convenience of the reader.

Definitions

In this letter, unless expressly stated, the following terms have the meanings specified:

"ACo" means XXXXXXXXXX;

"Act" means the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.), c.1, as amended; unless otherwise indicated, all references herein to statutory provisions are references to the Act;

"Available Funds" means, at any particular time, the amounts determined by the Trustees to be available for distribution to the Preferred Unitholders at such time;

"CRA" means the Canada Revenue Agency;

XXXXXXXXXX;

"closed-end trust" means a trust that qualifies as a unit trust under paragraph 108(2)(b) of the Act;

"Declaration of Trust" means the declaration of trust dated XXXXXXXXXX pursuant to which Trust was formed under the laws of the XXXXXXXXXX, as may be amended, supplemented and/or restated from time to time;

"Deferred Income Plans" means trusts governed by any of registered retirement savings plans, registered education savings plans, registered retirement income funds, deferred profit sharing plans, registered disability savings plans or tax-free savings accounts;

"Exchangeable Securities" means any securities of any trust, limited partnership or corporation other than Trust that are convertible or exchangeable directly for Units without the payment of additional consideration therefor;

"General Partner" means XXXXXXXXXX, a corporation incorporated under the laws of Canada by Articles of Incorporation dated XXXXXXXXXX, and which acts as the general partner of Limited Partnership;

"General Partner 2" means XXXXXXXXXX which acts as the general partner of Limited Partnership 2;"Limited Partnership" means XXXXXXXXXX, a limited partnership established under the laws of the XXXXXXXXXX on XXXXXXXXXX;

"Limited Partnership 2" means XXXXXXXXXX;

"mutual fund trust" has the meaning ascribed thereto in subsection 132(6) of the Act;

"open-end trust" means a trust that qualifies as a unit trust under paragraph 108(2)(a) of the Act;

"Permitted Income Percentage" means in respect of the income derived from the Class A LP Units of Limited Partnership owned by Trust, the amount determined by multiplying 100 by a fraction the numerator of which is the income derived from, or from the disposition of, the Permitted Investments of Limited Partnership and the denominator of which is all of the income of Limited Partnership;

"Permitted Investment" means any property described in clauses 108(2)(b)(iii)(A) to (G) of the Act;

"Permitted Investment Percentage" means in respect of the Class A LP Units of Limited Partnership owned by Trust, the amount determined by multiplying 100 by a fraction the numerator of which is the fair market value of the Permitted Investments owned by Limited Partnership and the denominator of which is the fair market value of all of the property owned by Limited Partnership;

"Preferred Distribution" means, in respect of each series of Preferred Units, the amount determined by multiplying the Preferred Unit Rate of Return for such series of Preferred Units by, if the Preferred Unit Rate of Return is a percentage, the aggregate of the subscription prices for such Preferred Units and, if the Preferred Unit Rate of Return is an amount, the number of then issued and outstanding Preferred Units, and then multiplying the result by the Preferred Distribution Ratio;

"Preferred Distribution Period" means each calendar month (or such other calendar period as selected by the Trustees);

"Preferred Distribution Ratio" means the number of months in a Preferred Distribution Period divided by 12;

"Preferred Unit" means a participating unit of Trust, XXXXXXXXXX;

"Preferred Unitholder" means a holder of Preferred Units;

"Preferred Unit Rate of Return" means the specified amount or rate of return in respect of a particular series of Preferred Units as determined by the Trustees and set out in the Certificate of Preferred Unit Terms respecting that particular series of Preferred Units;

"Proposed Transactions" means the transactions described in paragraphs 21 to 30 inclusive herein;

"real estate investment trust" has the meaning ascribed to the term "real estate investment trust" in subsection 122.1(1) of the Act;

"Redemption Right" means a feature of the Units which provides a Unitholder with the option to require Trust to redeem the Units;

"Special Voting Unit" means a non-participating, voting interest in Trust as described in paragraph 5 herein;

"Trust" means XXXXXXXXXX, a trust established under the laws of the XXXXXXXXXX on XXXXXXXXXX;
XXXXXXXXXX;

"Trustees" means the individuals that act as trustees of Trust in accordance with and subject to the provisions of the Declaration of Trust, and which as of XXXXXXXXXX consist of XXXXXXXXXX Canadian residents;

"Trust Units" means the Preferred Units and the Units;
XXXXXXXXXX;

"Unit" means a participating, voting unit of Trust, as described in paragraph 4 herein;

"Unitholder" means a holder of Units; and

"USCo" means XXXXXXXXXX described in paragraph 16 herein.
Schedule XXXXXXXXXX contains the office address, Business Number and relevant Tax Services Office for Aco, General Partner, General Partner 2, Limited Partnership, Limited Partnership 2, Trust and USCo.

Our understanding of the facts, the Proposed Transactions, and the purpose of the Proposed Transactions is as follows:

Facts

1. Trust is currently an open-end mutual fund trust that was established pursuant to the Declaration of Trust for the principal purpose of investing in income producing real property in Canada.

2. Trust is governed by a board of trustees consisting of the Trustees, which hold Trust property and conduct and manage the affairs of Trust in accordance with and subject to the terms of the Declaration of Trust.

3. Trust's capital consists of Units and Special Voting Units.

4. Currently, the Declaration of Trust provides that each Unit has the following rights:

(a) the right to one vote;

(b) the right to participate pro rata in any distributions of income and/or net realized capital gains (as defined therein) declared by the Trustees;

(c) the right, unless otherwise determined, to be allocated: (i) the net income of Trust determined in accordance with the provisions of the Act other than paragraph 82(1)(b) and subsection 104(6); and (ii) net realized capital

gains, in the same proportion as the total distributions made or declared payable in respect of the Unit;

(d) the right to require that Trust redeem such Unit at the price and in accordance with the conditions set forth in Article XXXXXXXXXX of the Declaration of Trust; and

(e) the right, following the discharge of all liabilities, to participate pro rata in the distribution of the net assets of Trust upon the termination or winding-up thereof.

5. The Special Voting Units carry the right to one vote, but are not entitled to any distributions of income or capital of Trust and do not have any legal or beneficial interest in the assets of Trust. The Special Voting Units can only be issued in connection or relation with the issuance of Exchangeable Securities and are automatically cancelled upon the issuance of Units in connection with the exercise of the exchange right attaching to Exchangeable Securities. There are no Special Voting Units currently issued.

6. The Units are listed on the XXXXXXXXXX under the symbol "XXXXXXXXXX" and are widely held by the public. As of XXXXXXXXXX there were XXXXXXXXXX Units issued and outstanding. To the knowledge of the Trustees, no person beneficially owns, directly or indirectly, or exercises control over, more than XXXXXXXXXX% of the issued and outstanding Units.

7. Trust has established a Unit option plan and an equity incentive plan pursuant to which it is able to grant options to purchase Units, as well as restricted, deferred and instalment Units. The number of Units to be issued pursuant to the plans cannot exceed XXXXXXXXXX% of the issued and outstanding Units from time to time. As of XXXXXXXXXX there were options outstanding entitling the holders thereof to acquire an aggregate of XXXXXXXXXX Units.

8. Trust currently has XXXXXXXXXX series of debentures (Series XXXXXXXXXX) listed on the XXXXXXXXXX, and XXXXXXXXXX series of non-listed debentures (Series XXXXXXXXXX), the details of which are as follows:

(a) Series XXXXXXXXXX debentures, being unsecured XXXXXXXXXX% XXXXXXXXXX-year convertible (at the option of the holder at a price of $XXXXXXXXXX per Unit), redeemable debentures, issued on XXXXXXXXXX in the aggregate amount of $XXXXXXXXXX;

(b) Series XXXXXXXXXX debentures, being unsecured XXXXXXXXXX% XXXXXXXXXX-year convertible (at the option of the holder after the XXXXXXXXXX anniversary of the issued date at a price of $XXXXXXXXXX per Unit), redeemable debentures, issued on XXXXXXXXXX in the aggregate amount of $XXXXXXXXXX;

(c) Series XXXXXXXXXX debentures, being unsecured XXXXXXXXXX% XXXXXXXXXX-year convertible (at the option of the holder at a price of $XXXXXXXXXX per Unit), redeemable debentures, issued on XXXXXXXXXX in the aggregate amount of $XXXXXXXXXX;

(d) Series XXXXXXXXXX debentures, being unsecured XXXXXXXXXX% XXXXXXXXXX-year convertible (at the option of the holder at a price of $XXXXXXXXXX per Unit), redeemable debentures, issued on XXXXXXXXXX in the aggregate amount of $XXXXXXXXXX; and

(e) Series XXXXXXXXXX debentures, being unsecured XXXXXXXXXX% XXXXXXXXXX-year convertible (at the option of the holder at a price of $XXXXXXXXXX per Unit), redeemable USD debentures, issued on XXXXXXXXXX in the aggregate amount of $XXXXXXXXXX USD.

9. Trust has adopted a distribution reinvestment plan, which provides eligible Unitholders with an opportunity to reinvest the cash distributions to which they are entitled in additional Units. Participants may also make additional investments in Units at the weighted average closing price of the Units for the XXXXXXXXXX trading days immediately preceding the relevant distribution payment date.

10. The Trustees are permitted under the Declaration of Trust to create and issue convertible securities and rights, warrants or options to subscribe for fully paid Units which securities, or rights, warrants or options may be convertible or exercisable, as the case may be, into Units at such prices and at such time or times as the Trustees may determine.

11. Trust is currently the sole limited partner in Limited Partnership. Trust owns directly or indirectly various XXXXXXXXXX. Approximately XXXXXXXXXX% of the gross leasable area of the XXXXXXXXXX is located in XXXXXXXXXX provinces, and XXXXXXXXXX% of the gross leasable area is located in XXXXXXXXXX. The XXXXXXXXXX are owned directly (through various bare trustee corporations) or indirectly through Trust's interest in Limited Partnership and USCo.

12. Trust owns the following property:
XXXXXXXXXX.

13. Limited Partnership owns the following property:
XXXXXXXXXX.

14. Interests in Limited Partnership are divided into the interest of the General Partner and two classes of limited partnership units, described and designated as Class A LP units and Class B LP units. The class A LP units are issuable solely to Trust or an affiliate of Trust. The class B LP units are intended to be issued to persons other than Trust who transfer properties to Limited Partnership on a tax deferred basis from time to time. The class B LP units are Exchangeable Securities and, subject to adjustment, exchangeable into Units on a one for one basis.

15. Limited Partnership 2 is a limited partnership, the general partner of which is General Partner 2 and the sole limited partner of which is Trust. All or substantially all of the gross revenue of Limited Partnership 2 is from maintaining, improving, leasing, or managing real or immovable properties that are capital properties of Trust or of an entity in which Trust holds a share or interest.

16. USCo is a US corporation, the sole common shareholder of which is Limited Partnership. XXXXXXXXXX. The general partner of each such US limited partnership is another US corporation or limited liability corporation that is wholly owned by USCo. USCo will be electing in its XXXXXXXXXX US tax return to be a XXXXXXXXXX for US tax purposes effective from XXXXXXXXXX and in connection therewith USCo has issued preferred shares of which XXXXXXXXXX% were issued to XXXXXXXXXX or more US residents and the balance were issued to Limited Partnership.

17. The only undertaking of Trust is and will be XXXXXXXXXX.

18. From and after the completion of the Proposed Transactions, the aggregate of the fair market value of the properties XXXXXXXXXX multiplied by the Permitted Investment Percentage, will at all times be equal to or greater than XXXXXXXXXX% of the fair market value of the property directly owned by Trust.

19 .The aggregate of the income derived from or from the disposition of the properties XXXXXXXXXX, and the income derived from or from the disposition of the property XXXXXXXXXX multiplied by the Permitted Income Percentage, will exceed XXXXXXXXXX% of the income of XXXXXXXXXX for the period commencing from the implementation of the Proposed Transactions to the end of the current taxation year and for each subsequent taxation year.

20. The fair market value of Trust's investment (directly or indirectly through Limited Partnership or Limited Partnership 2) in any one corporation or debtor does not exceed XXXXXXXXXX% of the fair market value of Trust's property. However, the fair market value of Trust's Class A Units of Limited Partnership will exceed XXXXXXXXXX% of the fair market value of Trust's property, and from time to time Trust loans funds to Limited Partnership. The amount of such loans does not and will not exceed XXXXXXXXXX% of the fair market value of Trust's property.

Proposed Transactions

21. XXXXXXXXXX. The Trust Amendments will not result in a resettlement of Trust or the creation of a new trust under the laws of the XXXXXXXXXX.

22. The Declaration of Trust will be amended as follows:

XXXXXXXXXX.

23. Amendments to the Declaration of Trust substantially in the form of the Trust Amendments were approved by requisite vote of the Unitholders on XXXXXXXXXX. Upon receipt of this advance income tax ruling, the Trustees will execute an amended and restated Declaration of Trust implementing the Trust Amendments.

24. Following the implementation of the Trust Amendments the Trustees will authorize the issuance of two series of Preferred Units designated as Series A Preferred Units and Series B Preferred Units the terms of which will be set out in Certificates of Preferred Unit Terms.

25. The rights, privileges, restrictions and conditions attaching to the Series A Preferred Units will be based on current market conditions at the time of the offering. The terms of the Series A Preferred Units will be set out in a Certificate of Preferred Unit Terms and shall provide that, without restricting the Trustees' discretion in respect of determining the rights, privileges, restrictions and conditions at the time of the issuance of the Preferred Units, the series A Preferred Units may have the following attributes:

(a) A subscription price of $XXXXXXXXXX per Series A Preferred Unit;

(b) Fixed, cumulative, preferential cash distributions payable quarterly at a fixed annual market rate of return (the rate will be reset on the XXXXXXXXXX anniversary of the issue date to an amount equal to the interest rate payable on Government of Canada XXXXXXXXXX year bonds at such time plus a specified percentage), such distributions to be paid in priority to any amounts being paid to the Unitholders (other than distributions paid solely through the issuance of additional Units);

(c) A right by the holder on the XXXXXXXXXX anniversary of issuance and on each XXXXXXXXXX anniversary thereafter to exchange or reclassify any or all of the Series A Preferred Units held by such holder as an equal number of Series B Preferred Units, as described in 26 below;

(d) The right to be paid, upon the termination of Trust, an amount per Series A Preferred Unit equal to the subscription price of such unit plus any accumulated and unpaid distributions thereon, before any amount will be paid or any assets of Trust distributed to the Unitholders or any holder of a series of Preferred Unit ranking junior to the Series A Preferred Units;

(e) Redeemable at the option of Trust on the XXXXXXXXXX anniversary of issuance (and on each XXXXXXXXXX anniversary thereafter) upon payment in cash of an amount equal to the subscription price of such unit plus any accumulated and unpaid distributions thereon; and

(f) No voting rights unless and until Trust has failed to pay distributions on the Series A Preferred Units for a specified number of distribution periods, whether or not consecutive, in which event the holders of Series A Preferred Units shall be entitled to one vote for each Series A Preferred Unit held for so long as such distributions remain in arrears.

26. The terms of the Series B Preferred Units will also be set out in a Certificate of Preferred Unit Terms and shall provide that the rights, privileges, restrictions and conditions attaching to each of the Series B Preferred Units will be identical to the rights, privileges, restrictions and conditions attaching to the Series A Preferred Units except as set out below:

(a) Rather than an entitlement to receive preferential cash distributions based on a fixed rate, holders of Series B Preferred Units will be entitled to receive preferential cash distributions based on a floating rate equal to the XXXXXXXXXX-day Canadian treasury bill rate plus a specified percentage;

(b) On the XXXXXXXXXX anniversary of the issuance of the Series A Preferred Units and on each XXXXXXXXXX anniversary thereafter, a holder of Series A Preferred Units will have the right to exchange or reclassify any or all of the Series A Preferred Units held by such holder as an equal number of Series B Preferred Units;

(c) On each XXXXXXXXXX anniversary of the issuance of the Series A Preferred Units (other than the initial XXXXXXXXXX anniversary thereof), a holder of Series B Preferred Units will have the right to exchange or reclassify any or all of the Series B Preferred Units held by such holder as an equal number of Series A Preferred Units; and

(d) Redeemable at the option of Trust at any time upon payment in cash of an amount equal to the subscription price of such unit and a premium not exceeding XXXXXXXXXX%, plus any accumulated and unpaid distributions thereon.

27. The Series A Preferred Units and Series B Preferred Units will rank on parity with each other with respect to the payment of distributions and the payment of any proceeds on a termination of Trust.

28. The Series A Preferred Units will be qualified for listing on the XXXXXXXXXX, and will be sold to the public by way of prospectus or private placement. It is intended that the Series A Preferred Units will be an institutional and retail product, marketed by investment bankers engaged by Trust primarily to institutional investors and those retail clients seeking a specified yield and limited risk. It is expected that the minimum aggregate subscription price of the Series A Preferred Units offering shall be $XXXXXXXXXX and the maximum aggregate subscription price shall be $XXXXXXXXXX.

29. It is expected that the Series B Preferred Units will be conditionally approved for listing on the XXXXXXXXXX (subject to Trust satisfying the requirements of the XXXXXXXXXX, including any minimum public distribution requirements) prior to any issuance of the Series B Preferred Units on a conversion or reclassification of the Class A Preferred Units.

30.The proceeds from the offering of the Series A Preferred Units are intended to be used to make additional property acquisitions, to reduce indebtedness, and/or for general trust purposes. Neither the Series A or Series B Preferred Units will be targeted for or restricted to any specific market, industry or investor except as noted in XXXXXXXXXX 28 above.

Purpose of Proposed Transactions

31.The purpose of creating the Preferred Units is to access additional capital by means of creating a security that is marketable in current or future economic conditions. The Trustees believe, based on consultations with market analysts and investment bankers and the terms of other current successful offerings, that a security bearing a priority return will attract investors which will result in the availability of additional capital.

32.The purpose of removing the Redemption Right from the Units is to ensure that the liquidity rights attaching thereto are the same as those attaching to the Preferred Units, which are not redeemable at the option of the holder.

33.The purpose of removing the Special Voting Units is to ensure that Trust can satisfy the criteria under subparagraph 108(2)(b)(vi) of the Act.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions and the purpose of the proposed transactions, the proposed transactions are completed in the manner described above, and there are no other transactions that may be relevant to the rulings given, our rulings are as follows:

(A) The Trust Amendments, will not in and by themselves, result in a disposition by any Unitholder of all or part of his, her or its beneficial interest in Trust at the time the Declaration of Trust is amended.

(B) The issuance of the initial series of Preferred Units designated as Series A Preferred Units will not result in a disposition by any Unitholder of all or part of his, her or its beneficial interest in Trust, provided the rights, privileges, restrictions and conditions attaching to the Series A Preferred Units are based on current market conditions at the time of the offering, as described in 25 above.

(C) The Trust Amendments will not, in and by themselves, result in a disposition by Trust of its property or in a resettlement of Trust for purposes of the Act.

(D) The implementation of the Proposed Transactions will, not in and by itself, cause subsection 104(7.1) to apply so as to deny the deduction by Trust of any amount it is otherwise entitled to deduct under paragraph 104(6)(b) in respect of the amount of Trust's income that was paid or payable by Trust to Unitholders or Preferred Unitholders.

Comments

Except as expressly stated, this advance income tax ruling does not imply acceptance, approval, or confirmation of any other income tax implications of the facts or proposed transactions described herein. For greater certainty the CRA has not considered, confirmed or made any determination in respect of:

(a) whether the Trust Amendments will result in the creation of a new trust under the laws of XXXXXXXXXX;

(b) whether Trust is at any particular time, a mutual fund trust within the meaning of subsection 132(6);

(c) whether Trust is at any particular time a real estate investment trust within the meaning of subsection 122.1(1);

(d) whether or not property held by Trust, at any time, would be considered Permitted Investments;

(e) whether or not an interest in Trust will, at any time, be considered a qualified investment as that term is defined in the Act for purposes of any Deferred Income Plans; and

(f) whether the attributes relating to the Series A Preferred Units, as described in 25 above, represent current market conditions.

In addition, nothing in this letter should be construed as implying that the CRA has agreed to or reviewed:

(a) the determination of the fair market value of any property referred to herein;

(b) whether or not any persons referred to in this ruling deal at arm's length; or

(c) any tax consequences relating to the facts and Proposed Transactions described herein other than those described in the rulings given above.

Furthermore, nothing in this advance income tax ruling should be construed as implying that we are confirming any income tax implications, other than the rulings given herein, related to the authorization or the issuance of the Series B Preferred Units and in particular, whether the reclassification or exchange of a Series A Preferred Unit or a Series B Preferred Unit at the XXXXXXXXXX anniversary date or any date subsequent would be a taxable disposition to the Preferred Unitholders at the time of the reclassification or exchange. However, it is our preliminary view that at the time of reclassification or an exchange of the Preferred Unit from a Series A Preferred Unit to a Series B Preferred Unit, or vice versa, the event would likely result in a taxable disposition at that time.

The above advance income tax rulings, which are based on the Act and Income Tax Regulations to the Act in their present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set forth in Information Circular 70-6R5 issued on May 17, 2002 and are binding on the Canada Revenue Agency provided that the proposed transactions are completed within XXXXXXXXXX from the date of this letter.

Opinions

Provided that our understanding of the facts and Proposed Transactions described herein is correct, it is also our opinion that, for the purpose of determining whether Trust meets the requirements in subparagraphs 108(2)(b)(iii), (iv) and (v) following the implementation of the Trust Amendments respectively:

1. for the purpose of determining whether the requirement in subparagraph 108(2)(b)(iii) is met in respect of Trust throughout the relevant periods (as defined in subparagraph 108(2)(b)(ii)), Trust's pro rata share of each property held by Limited Partnership and Limited Partnership 2 shall be treated as held by Trust; and the limited partnership interests in Limited Partnership and Limited Partnership 2 held by Trust, as well as any loans from Trust to Limited Partnership and Limited Partnership 2, shall be disregarded;

2. for the purpose of determining whether the requirement in subparagraph 108(2)(b)(iv) is met in respect of Trust for a particular year, or throughout a relevant period, Trust's income from its interest in Limited Partnership and Limited Partnership 2 shall be treated as though derived from, or from the disposition of, the partnership property treated as held by Trust by virtue of the preceding paragraph; and

3. for the purpose of determining whether the requirement in subparagraph 108(2)(b)(v) is met in respect of Trust throughout a relevant period, Trust's pro rata share of each property held by Limited Partnership and Limited Partnership 2 shall be treated as held by Trust; and the limited partnership interests in Limited Partnership and Limited Partnership 2 held by Trust, shall be disregarded. It is also our view that Trust would fail to meet the requirements of subparagraph 108(2)(b)(v) if it were to loan more than 10% of its property to Limited Partnership or Limited Partnership 2.

Given the opinions in immediately preceding paragraphs 1, 2 and 3, it is our view that none of the information included in the facts and Proposed Transactions as provided above would lead to a conclusion that Trust did not meet the requirements to be a closed-end trust following the implementation of the Proposed Transactions.

In accordance with paragraph 22 of Information Circular 70-6R5 the above opinions should not be construed as an advance income tax ruling nor are they binding on the CRA.
Yours truly,

For Division Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch