CRA issues favourable ruling on ULC-to-S Corp PUC increase and distribution

CRA has issued a ruling that the anti-hybrid rule in the Canada-US treaty does not apply where a Canadian ULC (which is "sandwiched" between its S-Corp US parent and indirect LLC and qualified S subsidiaries) increases the paid-up capital of its shares, and then makes a cash distribution of that paid-up capital - so that the dividend is eligible for the Treaty-reduced rate of 5%.

Neal Armstrong.  Summary of 2012 Ruling 2011-0430761R3 under Treaties - Art. 4.