2011 Ruling 2011-0394671R3 - Charitable Donation of Publicly Listed Shares

Unedited CRA Tags

110.1

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Text of Severed Letter

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.

PURPOSES OF THE PROPOSED TRANSACTIONS

PROPOSED TRANSACTIONS

ADDITIONAL INFORMATION

RULINGS GIVEN

COMMENTS

Principal Issues: Whether the donation of publicly listed shares can give rise to a deduction for gift under 110.1(1) of ITA?

Position: Yes.

Reasons: Previous position

XXXXXXXXXX

XXXXXXXXXX , 2011

Dear XXXXXXXXXX :

Re: Advance Income Tax Ruling Request
XXXXXXXXXX

We are writing in response to your letter of XXXXXXXXXX , wherein you requested an advance income tax ruling on behalf of XXXXXXXXXX and four new corporations described in paragraph 57 below. We also acknowledge receipt of additional information you provided to us in your emails dated XXXXXXXXXX as well as additional information you provided to us during various telephone conversations (XXXXXXXXXX) in connection with your ruling request.

In this letter, unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.), c.1, as amended (hereinafter the "Act").

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

(i) is in an earlier return of the taxpayer(s) or a related person;

(ii) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer(s) or a related person;

(iii) is under objection by the taxpayer(s) or a related person;

(iv) is before the courts or, if a judgement has been issued, the time limit for appeal to a higher court has expired; and

(v) is the subject of a ruling previously issued by the Income Tax Rulings Directorate (other than in the previously issued ruling and supplementary ruling number XXXXXXXXXX and XXXXXXXXXX , respectively).

In this letter, except in paragraph 95, the names of the taxpayers will be referred to as follows:

```
XXXXXXXXXX
									"Parent"
```
```
XXXXXXXXXX 							      "Child1" 
```
```
XXXXXXXXXX 							      "Child2"
```
```
XXXXXXXXXX 						      	"Child3"
```
```
XXXXXXXXXX 						      	"Child4"
```

Collectively, Child1, Child2, Child3 and Child4.
									"Children"

Collectively, Parent and the Children.
									"Family"

```
XXXXXXXXXX 							      "Holdco1"
```
```
XXXXXXXXXX  							"Holdco2"
```
```
XXXXXXXXXX
									"Holdco3"
```
```
XXXXXXXXXX 							      "Foreignco1"
```
```
XXXXXXXXXX 							      "Foreignco2"
```
```
XXXXXXXXXX
									"Foreignco3"
```
```
XXXXXXXXXX								"Foundation"
```
```
XXXXXXXXXX
									"Group"
```
```
XXXXXXXXXX
									"Individual1"
```
```
XXXXXXXXXX
									"Individual2"
```
```
XXXXXXXXXX
									"Individual3"
```
```
XXXXXXXXXX
									"Individual4"
```
```
XXXXXXXXXX								"Trust"
```
```
XXXXXXXXXX
									"Bank"
```

XXXXXXXXXX
									"Canadian Legal Advisors"

DEFINITIONS

In this letter, unless otherwise expressly stated, the following terms and expressions have the meanings specified and are replaced as follows:

"Adjusted Cost Base" has the meaning assigned
 to the expression in section 54;					"ACB"

"Agreed Amount" has the meaning assigned
by subsection 85(1);							"Agreed Amount"

"Capital Dividend Account" has the meaning
assigned by subsection 89(1);						"CDA"

"Capital Property" has the meaning assigned
by section 54;								"Capital Property"

Canada Business Corporations Act, R.S.C. 1985,
c. C-44 and, where applicable, its predecessor statutes; "CBCA"
```
Canada Revenue Agency;							"CRA"
```

"Controlled Foreign Affiliate" has the meaning assigned
 by subsection 95(1);							"Controlled Foreign 										Affiliate"

"Designated Stock Exchange" has the meaning
assigned by subsection 248(1);					"Designated Stock 										Exchange"

```
Fair market value;							"FMV"
```

"Inter vivos trust" has the meaning assigned
by subsection 108(1);
										"Inter Vivos Trust"

```
XXXXXXXXXX;
										"FC"
											
```

"Personal trust" has the meaning assigned
by subsection 248(1);
										"Personal Trust"

"Private Corporation" has the meaning
assigned by subsection 89(1);						"Private 												Corporation"

"Proceeds of Disposition" has the meaning
 assigned by section 54;						"Proceeds of 											Disposition"

"Paid-up Capital" has the meaning assigned
 to the expression in subsection 89(1);				"PUC"

"Public Foundation" has the meaning assigned
to the expression in subsection 149.1(1);				"Public Foundation"

"Refundable Dividend Tax On Hand" as the
expression is defined in subsection 129(3);			"RDTOH"

"Registered charity" has the meaning
assigned by subsection 248(1);					"Registered Charity"

"Taxable Canadian Corporation" has the
meaning assigned by subsection 89(1); 				"Taxable Canadian 										Corporation"

"Taxable Canadian Property" has the meaning
assigned by subsection 248(1);
										"Taxable Canadian 										Property"

"Taxation year" has the meaning assigned by
 subsection 249(1).							"Taxation Year"

Unless otherwise indicated in this letter, all dollar amounts referred to herein are in Canadian dollars.

Our understanding of the facts, proposed transactions and purposes of the proposed transactions is as follows:

FACTS

The Family

1. XXXXXXXXXX

2. Parent is a XXXXXXXXXX who founded and heads the Group. Parent is actively involved with all major and strategic issues pertaining to Holdco1 and Holdco2 as well as their day to day management.

3. XXXXXXXXXX

4. Parent is the father of the Children. All the Children are adults.

5. XXXXXXXXXX

The Trust

6. Trust was settled on XXXXXXXXXX by Child4 transferring, in trust, as a donation "inter vivos" unto the trustee of Trust a $ XXXXXXXXXX dollar bill and the class A common shares of the capital stock of Holdco1, Child4 owned. These transfers were made pursuant to the provisions of subsection 73(1) and subparagraph 73(1.01)(c)(ii).

7. For the purpose of the Act, Trust is an Inter Vivos Trust and a Personal Trust. Trust is also a so-called "self-benefit trust" in that the sole capital and income beneficiary of Trust is Child4.

8. The trustee of Trust is Parent.

The Foundation

9. The Foundation was incorporated under XXXXXXXXXX .

10. The Foundation is a Registered Charity XXXXXXXXXX a Public Foundation.

11. The directors of the Foundation are XXXXXXXXXX . The capital of the Foundation currently amounts to approximately $XXXXXXXXXX .

The Group

12. XXXXXXXXXX

Holdco1

13. Holdco1 was incorporated under the laws of XXXXXXXXXX on XXXXXXXXXX and continued under the CBCA on XXXXXXXXXX .

14. Holdco1 is a Private Corporation and a Taxable Canadian Corporation and its Taxation Year ends on XXXXXXXXXX .

15. Holdco1 is a holding company; its sole asset consists of all the issued and outstanding shares of Holdco2.

16. The share capital of Holdco1 consists of an unlimited number of classes A and B common shares, and an unlimited number of classes A, B, C and D preferred shares.

17. Among other rights, privileges and restrictions, the class A common shares of the capital stock of Holdco1 are voting and participating, the class A preferred shares of the capital stock of Holdco1 are voting, non-participating and redeemable and the class D preferred shares are non-voting, non-participating and redeemable and retractable at their redemption price.

18. The redemption price of each class D preferred share of the capital stock of Holdco1 will be an amount equal to (i) the monetary consideration received by the corporation upon the issuance of such share (denominated in the currency in which such consideration was paid to the corporation), if such share has been issued for money, less any amount distributed in respect of such share on a reduction of the stated capital account maintained in respect of the class D preferred shares; or (ii) the FMV of the consideration received by the corporation (including, without limitation, shares of another class of the corporation) upon the issuance of such share, if such share has been issued for a consideration other than money, less any amount distributed in respect of such share on a reduction of the stated capital account maintained in respect of the class D preferred shares.

19. The statutes of Holdco1 provides for a price adjustment clause in respect of the FMV of the consideration received by the corporation upon the issuance of its class D preferred shares.

20. There are XXXXXXXXXX class A common shares and XXXXXXXXXX class A preferred shares issued and outstanding of the capital stock of Holdco1.

21. The owners of the issued and outstanding shares of the capital stock of Holdco1 and the shares' tax characteristics are as follows:

Shareholders	Shares		ACB		PUC 		FMV (approximately)

			XXXXX
			class A
Parent		preferred shares	$ XXXXX 	$ XXXXX 	$   XXXXX
			XXXXX
			class A
			common shares	$ XXXXX 	$ XXXXX 	$   XXXXX 

			XXXXX
			class A
Child1		common shares	$ XXXXX 	$ XXXXX 	$   XXXXX

			XXXXX
			class A
Child2		common shares	$ XXXXX 	$ XXXXX 	$   XXXXX

			XXXXX
			class A
Child3		common shares	$ XXXXX 	$ XXXXX 	$   XXXXX

			XXXXX
			class A
Trust			common shares	$ XXXXX 	$ XXXXX 	$   XXXXX

Approximate Total FMV of the XXXXXXXXXX class A common shares $ XXXXX

22. From XXXXXXXXXX to sometime in XXXXXXXXXX , Parent owned all XXXXXXXXXX issued and outstanding class A common shares of the capital stock of Holdco1 (XXXXXXXXXX ).

23. In XXXXXXXXXX , each of the Children acquired from Parent XXXXXXXXXX class A common shares of the capital stock of Holdco1. On XXXXXXXXXX , Trust acquired from Child4 the XXXXXXXXXX class A common shares of the capital stock of Holdco1 it owns.

24. Parent has owned the XXXXXXXXXX class A preferred shares of the capital stock of Holdco1 since sometime in XXXXXXXXXX . At that time, Parent subscribed to XXXXXXXXXX class A preferred shares of the capital stock of Holdco1, for which XXXXXXXXXX paid $XXXXXXXXXX cash, and received from Holdco1 XXXXXXXXXX class A preferred shares of the capital stock of Holdco1 as consideration for transferring to Holdco1 the XXXXXXXXXX issued and outstanding class A common shares of the capital stock of Holdco2 XXXXXXXXXX owned. XXXXXXXXXX .

25. Parent controls Holdco1 for the purposes of the Act.

26. Parent, Child1, Child2, Child3 and Trust hold their shares of the capital stock of Holdco1 as Capital Property. For Child1, the shares of the capital stock of Holdco1 it owns are not Taxable Canadian Property.

27. As of XXXXXXXXXX , Holdco1 does not have a CDA or RDTOH.

Holdco2

28. Holdco2 was incorporated under the laws of XXXXXXXXXX on XXXXXXXXXX and continued under the CBCA on XXXXXXXXXX .

29. Holdco2 is a Private Corporation and a Taxable Canadian Corporation and its Taxation Year ends on XXXXXXXXXX .

30. Holdco2 is a holding company. Holdco2's main asset consists of approximately XXXXXXXXXX % of the issued and outstanding shares of the capital stock of Foreignco1. Holdco2 also owns all the issued and outstanding shares of the capital stock of Holdco3 (XXXXXXXXXX ) as well as loans receivable of approximately $ XXXXXXXXXX . Holdco2 has liabilities of approximately $ XXXXXXXXXX .

31. The share capital of Holdco2 consists of an unlimited number of classes A and B common shares, and an unlimited number of classes A, B, C, D and E preferred shares.

32. Holdco2 has had the same XXXXXXXXXX class A common shares of its capital stock issued and outstanding.

33. Holdco1 owns the XXXXXXXXXX issued and outstanding class A common shares of the capital stock of Holdco2 since sometime in XXXXXXXXXX for having acquired them from Parent the only previous owner of the said shares. The XXXXXXXXXX class A common shares of the capital stock of Holdco2 have an ACB and a PUC of $ XXXXXXXXXX and an approximate FMV of $ XXXXXXXXXX .

34. Holdco1 holds the shares of the capital stock of Holdco2 as Capital Property.

35. As of XXXXXXXXXX , Holdco2 does not have a CDA or RDTOH.

Foreignco1

36. Foreignco1 was incorporated under the laws of XXXXXXXXXX on XXXXXXXXXX .
Foreignco1 is XXXXXXXXXX public company. As part of its initial public offering (hereinafter "IPO"), the common shares of the capital stock of Foreignco1 were listed for trade on the XXXXXXXXXX (a Designated Stock Exchange) XXXXXXXXXX .

37. Foreignco1 is a holding corporation as well as a XXXXXXXXXX . Among other holdings, Foreignco1 owns XXXXXXXXXX % of the shares of the capital stock of Foreignco2. XXXXXXXXXX .

38. The capital stock of Foreignco1 consists of one class of shares ("common shares") having a par value of FC XXXXXXXXXX per share. There are XXXXXXXXXX common shares of the capital stock of Foreignco1 issued and outstanding (having an aggregate approximate FMV of $ XXXXXXXXXX ) of which Holdco2 owns approximately XXXXXXXXXX % and the public owns approximately XXXXXXXXXX %.

39. In the context of its IPO, Foreignco1 issued to the public a total of XXXXXXXXXX of its common shares at a price of FC XXXXXXXXXX per share as follows: XXXXXXXXXX

40. Since Foreignco1's IPO, Holdco2 owns XXXXXXXXXX of the issued and outstanding common shares of the capital stock of Foreignco1. The aggregate ACB of the XXXXXXXXXX common shares of capital stock of Foreignco1 for Holdco2 is $ XXXXXXXXXX (or $ XXXXXXXXXX per share) having an estimated FMV of $ XXXXXXXXXX .

41. At the time of its incorporation, Foreignco1 had issued to Holdco2 XXXXXXXXXX class A common shares and XXXXXXXXXX common shares for a consideration of $ XXXXXXXXXX and $ XXXXXXXXXX , respectively. At the same time, XXXXXXXXXX common shares had been issued to XXXXXXXXXX . On XXXXXXXXXX , XXXXXXXXXX acquired the XXXXXXXXXX common shares held by XXXXXXXXXX and, on XXXXXXXXXX , XXXXXXXXXX sold to Holdco2 the XXXXXXXXXX common shares of the capital stock of ForeignCo1, it owned, for a price of $ XXXXXXXXXX .

42. On XXXXXXXXXX , Foreignco1 had issued to Holdco2 XXXXXXXXXX class A common shares and XXXXXXXXXX common shares, as consideration for the transfer of the shares of capital stock of Foreignco2 it owned. The transfer of the shares of the capital stock of Foreignco2 by Holdco2 to Foreignco1 was made pursuant to the provisions of subsection 85.1(3) and the aggregate cost of the shares of Foreignco1 issued as a result thereof was $XXXXXXXXXX .

43. After the share issue described in paragraph 42 above, the issued and outstanding shares of the capital stock of Foreignco1 consisted of XXXXXXXXXX class A (non-voting, participating, non-redeemable and non-retractable) common shares and XXXXXXXXXX (voting and participating) common shares.

44. Prior to its IPO, the following transactions were carried out by Foreignco1:

(i) The XXXXXXXXXX class A common shares and the XXXXXXXXXX common shares of the capital stock of Foreignco1 were consolidated on a XXXXXXXXXX basis, reducing the number of class A common shares and of common shares of the capital stock of Foreignco1 to XXXXXXXXXX and XXXXXXXXXX , respectively;

(ii) The XXXXXXXXXX class A common shares of the capital stock of Foreignco1 were converted into XXXXXXXXXX common shares of the capital stock of ForeignCo1. The exchange was made pursuant to the provisions of section 51; and,

(iii) On XXXXXXXXXX , Foreignco1 paid to Holdco2 stock dividends of XXXXXXXXXX in additional common shares of its capital stock, respectively, bringing the number of Foreignco1 common shares owned by Holdco2 to XXXXXXXXXX . Pursuant to subsection 95(7), for the purpose of subdivision i of Division B of Part I of the Act and subsection 52(3), the amount of each of the XXXXXXXXXX stock dividends paid by Foreignco1 to Holdco2 is deemed to be nil.

45. Holdco2 holds the common shares of the capital stock of Foreignco1 as Capital Property.

46. Foreignco1 is to Holdco2 a Controlled Foreign Affiliate.

47. The common shares of ForeignCo1 now being publicly traded, Foreignco1 intends to pay dividends on its common shares on a regular basis.

Foreignco2

48. Foreignco2 is a corporation governed by the laws of XXXXXXXXXX .

49. Foreignco2 is a holding corporation as well as XXXXXXXXXX . Foreignco2 owns a controlling interest in Foreignco3.

50. Foreignco1 has owned XXXXXXXXXX % of the shares of the capital stock of Foreignco2 since XXXXXXXXXX , when it acquired them from Holdco2 in order to better consolidate the XXXXXXXXXX corporate operations. XXXXXXXXXX .

Foreignco3

51. XXXXXXXXXX

52. The shares of Foreignco3 are listed on XXXXXXXXXX .

53. In XXXXXXXXXX , Foreignco2 acquired approximately XXXXXXXXXX % of the shares of the capital stock of Foreignco3.

PURPOSES OF THE PROPOSED TRANSACTIONS

54. The purposes of the proposed transactions is for each of the Canadian resident shareholders of Holdco1 to hold their shares through a personal holding corporation, for Holdco2 to gift a portion of the shares of ForeignCo1 to the Foundation, and for Child4 to thereafter gift a portion of XXXXXXXXXX indirect interest in Holdco1 to Parent, Child1, Child2 and Child3.

PROPOSED TRANSACTIONS

55. Holdco1 will undertake a share split whereby each of the XXXXXXXXXX class A common shares and XXXXXXXXXX class A preferred shares of its outstanding capital stock will be increased by way of a XXXXXXXXXX for 1 share split, without any payment, purchase or cancellation of shares, or any other change to the share capital of Holdco1.

56. Following the stock split, the issued and outstanding shares of the capital stock of Holdco1 will consist of XXXXXXXXXX class A common shares and XXXXXXXXXX class A preferred shares, such that each of Chidl1, Child2, Child3 and Trust will own XXXXXXXXXX class A common shares of the capital stock of Holdco1 while Parent will own XXXXXXXXXX class A common shares and XXXXXXXXXX class A preferred shares of the capital stock of Holdco1.

57. Parent will cause the incorporation of four new corporations under the CBCA (hereinafter "Parentco", "Newco2", "Newco3", and "Newco4", collectively, "New Corporations") each of which will be a Taxable Canadian Corporation and a Private Corporation. None of the New Corporations will issue shares of its capital stock on incorporation.

58. The authorized share capital of each of the New Corporations will consist of an unlimited number of classes A and B common shares, and an unlimited number of classes A, B, C and D preferred shares. Among other rights and privileges, the class A common shares will be voting and participating, and, the class D preferred shares will be non-voting, entitled to a non cumulative fixed monthly dividend, non-participating, redeemable and retractable.

59. [Intentionally omitted]

60. Parent will transfer to Parentco XXXXXXXXXX class A common shares of the capital stock of Holdco1 XXXXXXXXXX owns at their FMV (approximately $ XXXXXXXXXX ) in exchange for XXXXXXXXXX class A common shares of the capital stock of Parentco. Immediately after the transfer, the FMV of the XXXXXXXXXX class A common shares of the capital stock of Parentco will be equal to the FMV, immediately before the transfer, of the transferred XXXXXXXXXX class A common shares of the capital stock of Holdco1.

61. Parent and Parentco will jointly elect, in prescribed form and within the time limits prescribed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX class A common shares of the capital stock of Holdco1. The Agreed Amount in respect of the XXXXXXXXXX class A common shares of the capital stock of Holdco1 so transferred by Parent to Parentco will be equal to the ACB of such shares to Parent immediately before the exchange (that is, $ XXXXXXXXXX ). The Agreed Amount will be limited to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii).

62. For the purposes of the CBCA, Parentco will add to the stated capital account maintained in respect of the class A common shares of its capital stock an amount equal to the aggregate PUC of the exchanged XXXXXXXXXX class A common shares of the capital stock of Holdco1 immediately before the exchange (that is, $ XXXXXXXXXX ).

63. [Intentionally omitted]

64. [Intentionally omitted]

65. [Intentionally omitted]

66. Child2 will transfer to Newco2 XXXXXXXXXX class A common shares of the capital stock of Holdco1 XXXXXXXXXX owns at their FMV (approximately $ XXXXXXXXXX ) in exchange for XXXXXXXXXX class A common shares of the capital stock of Newco2. Immediately after the transfer, the FMV of the XXXXXXXXXX class A common shares of the capital stock of Newco2 will be equal to the FMV, immediately before the transfer, of the transferred XXXXXXXXXX class A common shares of the capital stock of Holdco1.

67. Child2 and Newco2 will jointly elect, in prescribed form and within the time limits prescribed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX class A common shares of the capital stock of Holdco1. The Agreed Amount in respect of the XXXXXXXXXX class A common shares of the capital stock of Holdco1 so transferred by Child2 to Newco2 will be equal to the ACB of such shares to Child2 immediately before the exchange (that is, $ XXXXXXXXXX ). The Agreed Amount will be limited to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii).

68. For the purposes of the CBCA, Newco2 will add to the stated capital account maintained in respect of the class A common shares of its capital stock an amount equal to the aggregate PUC of the exchanged XXXXXXXXXX class A common shares of the capital stock of Holdco1 immediately before the exchange (that is, $ XXXXXXXXXX ).

69. Child3 will transfer to Newco3 XXXXXXXXXX class A common shares of the capital stock of Holdco1 XXXXXXXXXX owns at their FMV (approximately $ XXXXXXXXXX ) in exchange for XXXXXXXXXX class A common shares of the capital stock of Newco3. Immediately after the transfer, the FMV of the XXXXXXXXXX class A common shares of the capital stock of Newco3 will be equal to the FMV, immediately before the transfer, of the transferred XXXXXXXXXX class A common shares of the capital stock of Holdco1.

70. Child3 and Newco3 will jointly elect, in prescribed form and within the time limits prescribed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX class A common shares of the capital stock of Holdco1. The Agreed Amount in respect of the XXXXXXXXXX class A common shares of the capital stock of Holdco1 so transferred by Child3 to Newco3 will be equal to the ACB of such shares to Child3 immediately before the exchange (that is, $ XXXXXXXXXX ). The Agreed Amount will be limited to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii).

71. For the purposes of the CBCA, Newco3 will add to the stated capital account maintained in respect of the class A common shares of its capital stock an amount equal to the aggregate PUC of the exchanged XXXXXXXXXX class A common shares of the capital stock of Holdco1 immediately before the exchange (that is, $ XXXXXXXXXX ).

72. Trust will transfer to Newco4 approximately XXXXXXXXXX class A common shares of the capital stock of Holdco1 it owns at their FMV (approximately $ XXXXXXXXXX ) in exchange for XXXXXXXXXX class A common shares of the capital stock of Newco4. Immediately after the transfer, the FMV of the XXXXXXXXXX class A common shares of the capital stock of Newco4 will be equal to the FMV, immediately before the transfer, class A common shares of the capital stock of Holdco1 so transferred.

73. Trust and Newco4 will jointly elect, in prescribed form and within the time limits prescribed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of approximately XXXXXXXXXX class A common shares of the capital stock of Holdco1. The Agreed Amount in respect of the class A common shares of the capital stock of Holdco1 so transferred by Trust to Newco4 will be equal to the ACB of such shares to Trust immediately before the exchange (that is, approximately $ XXXXXXXXXX ). The Agreed Amount will be limited to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii).

74. For the purposes of the CBCA, Newco4 will add to the stated capital account maintained in respect of the class A common shares of its capital stock an amount equal to the aggregate PUC of the exchanged class A common shares of the capital stock of Holdco1 immediately before the exchange (that is, approximately $ XXXXXXXXXX ).

75. Trust will transfer to Holdco1 approximately XXXXXXXXXX class A common shares of the capital stock of Holdco1 it owns at their FMV (approximately $ XXXXXXXXXX ) in exchange for approximately XXXXXXXXXX class D preferred shares of the capital stock of Holdco1 (XXXXXXXXXX ). Immediately after the transfer, the redemption value and the FMV of the class D preferred shares of the capital stock of Holdco1 will be equal to the FMV, immediately before the transfer, of the class A common shares of the capital stock of Holdco1 so transferred.

76. Trust and Holdco1 will jointly elect, in prescribed form and within the time limits prescribed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of approximately XXXXXXXXXX class A common shares of the capital stock of Holdco1. The Agreed Amount in respect of the class A common shares of the capital stock of Holdco1 so transferred by Trust to Holdco1 will be equal to the ACB of such shares to Trust immediately before the exchange (that is, approximately $ XXXXXXXXXX ). The Agreed Amount will be limited to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii).

77. For the purposes of the CBCA, Holdco1 will add to the stated capital account maintained in respect of the class D preferred shares of its capital stock an amount equal to the aggregate PUC of the exchanged class A common shares of the capital stock of Holdco1 immediately before the exchange (that is, approximately $ XXXXXXXXXX ).

78. Holdco2 will dispose to Foundation, by way of gift, of approximately XXXXXXXXXX % of the common shares of the capital stock of Foreignco1 (hereinafter "Gifted Shares") it owns. Holdco2 expects that the FMV of the Gifted Shares, at the time of the gift, will be approximately $ XXXXXXXXXX .

79. Pursuant to paragraph 69(1)(b), as it relates to the gift described in paragraph 78 above, Holdco2 will be deemed to have received Proceeds of Disposition for the Foreignco1 shares disposed of equal to the FMV of the said shares immediately before the gift (approximately $ XXXXXXXXXX ).

80. Holdco2 will not designate an amount under subsection 110.1(3) (or proposed subsections 110.1(2.1) and (3) if enacted at the time of implementation of the proposed transactions) in respect of the gift described in paragraph 78 above.

81. Holdco2 will realize a capital gain (of approximately $ XXXXXXXXXX ) for a taxation year from the disposition of the Gifted Shares equal to the amount of the Proceeds of Disposition (approximately $ XXXXXXXXXX ) that exceeds the total ACB to Holdco2 of the Gifted Shares immediately before the disposition (approximately $ XXXXXXXXXX ).

82. Holdco2 will pay a dividend on its class A common shares equal to the aggregate redemption price of the class D preferred shares of the capital stock of Holdco1 owned by Trust which is intended to be equal to the amount of the capital gain to be added to the CDA of Holdco2 as a result of the gift of the Gifted Shares (approximately $ XXXXXXXXXX ).

83. The dividend will be paid in full by Holdco2 issuing to Holdco1 five non-interest bearing promissory notes payable on demand having an aggregate principal amount and FMV equal to the amount of the dividend (hereinafter "Holdco2 Notes"). Holdco1 will accept the Holdco2 Notes as full payment of the dividend described in paragraph 82.

84. The principal amount and FMV of each of the five Holdco2 Notes will be approximately as follows: (i) $ XXXXXXXXXX (hereinafter "Holdco2 P Note") (ii) $ XXXXXXXXXX (hereinafter "Holdco2 C1 Note") (iii) $ XXXXXXXXXX (hereinafter "Holdco2 C2 Note") (iv) $ XXXXXXXXXX (hereinafter "Holdco2 C3 Note") and (v) $ XXXXXXXXXX (for an aggregate principal amount and FMV of approximately $ XXXXXXXXXX ).

85. Holdco2 will elect in prescribed form and manner pursuant to subsection 83(2) that the full amount of the dividend, described in paragraph 82 above, will be deemed to be paid out of Holdco2's CDA.

86. Holdco1 will redeem the class D preferred shares of its share capital held by Trust as described in paragraph 87 below.

87. Holdco1 will pay to redeem the class D preferred shares of its capital stock owned by Trust an amount equal to their aggregate redemption price (approximately $ XXXXXXXXXX ). The redemption price will be paid in full by Holdco1 transferring to Trust the Holdco2 Notes. Trust will accept the Holdco2 Notes as full payment for the redemption price of the class D preferred shares of the capital stock of Holdco1 it owned.

88. As a consequence of the share redemption described in paragraph 87 above, Holdco1 will be deemed to have paid and Trust to have received a dividend (approximately $ XXXXXXXXXX ) equal to the amount by which the amount paid by Holdco1 to redeem the class D preferred shares of its capital stock exceeds their PUC.

89. [Intentionally omitted]

90. [Intentionally omitted]

91. It is intended that the aggregate deemed dividend paid by Holdco1 as a consequence of the share redemption, as described in paragraph 88 above, will be equal to the amount added to the CDA of Holdco1 as a result of the capital dividend paid by Holdco2 to Holdco1 (approximately $ XXXXXXXXXX ), as described in paragraph 85 above.

92. Holdco1 will elect in prescribed form and manner pursuant to subsection 83(2) that the full amount of the deemed dividends, described in paragraph 88 above, will be deemed to be paid out of its CDA.

93. Trust will encroach on its capital for the benefit of Child4 such that a portion of the capital of Trust, represented by Holdco2 P Note, Holdco2 C1 Note, Holdco2 C2 Note and Holdco2 C3 Note, received from Holdco1 on the share redemption described in paragraph 87 above, will be distributed to Child4, pursuant to the provisions of subsection 107(2). Trust will not make any election pursuant to subsection 107(2.001) in respect of the distribution of the Holdco2 P Note, Holdco2 C1 Note, Holdco2 C2 Note and Holdco2 C3 Note.

94. Child4 will transfer, by way of gift, to each of Parent, Child1, Child2 and Child3 the Holdco2 P Note, Holdco2 C1 Note, Holdco2 C2 Note and Holdco2 C3 Note, respectively.

ADDITIONAL INFORMATION

95. The federal business number of the parties referred to herein, the location of the tax services office and taxation centre where their returns are filed, and the address of their head office are as follows:

XXXXXXXXXX

Address:				XXXXXXXXXX

Social Insurance Number :	XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

XXXXXXXXXX

Address:				XXXXXXXXXX

Social Insurance Number :	XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

XXXXXXXXXX

Address:				XXXXXXXXXX

Social Insurance Number :	XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

XXXXXXXXXX

Address:				XXXXXXXXXX

Social Insurance Number :	XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

XXXXXXXXXX

Address:				XXXXXXXXXX

Social Insurance Number :	XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

XXXXXXXXXX

Address:				XXXXXXXXXX

Business Number :			XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

XXXXXXXXXX

Address:				XXXXXXXXXX

Business Number :			XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

XXXXXXXXXX

Address:				XXXXXXXXXX

Business Number :			XXXXXXXXXX
Tax Services Office:		XXXXXXXXXX

Taxation Centre:  		XXXXXXXXXX

RULINGS GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure of all relevant Facts, Proposed Transactions and the Purposes of the Proposed Transactions, and provided that the Proposed Transactions are completed as described above and legally effective, we confirm the following:

A. The provisions of subsection 85(1) will apply to:

(i) the transfer by Parent of the XXXXXXXXXX class A common shares of the capital stock of Holdco1 owned by Parent to Parentco as described in paragraphs 60, 61 and 62 above;

(ii) the transfer by Child2 of the XXXXXXXXXX class A common shares of the capital stock of Holdco1 owned by Child2 to Newco2 as described in paragraphs 66, 67 and 68 above;

(iii) the transfer by Child3 of the XXXXXXXXXX class A common shares of the capital stock of Holdco1 owned by Child3 to Newco3 as described in paragraphs 69, 70, 71 above;

(iv) the transfer by Trust of approximately XXXXXXXXXX class A common shares of the capital stock of Holdco1 owned by Trust to Newco4 as described in paragraphs 72, 73 and 74 above; and

(v) the transfer by Trust of approximately XXXXXXXXXX class A common shares of the capital stock of Holdco1 owned by Trust to Holdco1 as described in paragraphs 75, 76 and 77 above;

such that the agreed amount in respect of each transfer described herein will be deemed to be the transferor's Proceeds of Disposition of the particular shares and the transferee's cost thereof, and the transferor's cost of the shares received as consideration for such disposition. For greater certainty, paragraph 85(1)(e.2) will not apply in respect of either of these transfers.

B. The provisions of subsection 85(2.1) will not apply to reduce the PUC of:

(i) the class A common shares issued by Parentco, Newco2, Newco3 and

		Newco4 to Parent, Child2, Child3 and Trust, respectively, on the transfers described in paragraphs 60, 66, 69 and 72 above; and

(ii) the class D preferred shares issued by Holdco1 to Trust on the transfers described in paragraph 75 above.

C. Pursuant to subsection 110.1(1), the FMV of the common shares of the capital stock of Foreignco1 gifted by Holdco2 to Foundation, as described in paragraph 78 above, will be included in determining the total charitable gifts of Holdco2 for its taxation year during which the gift is made, provided an official receipt for the gift containing the prescribed information is issued by the Foundation and filed by Holdco2 as required by subsection 110.1(2).

D. Provided that the shares of the capital stock of Foreignco1 owned by Holdco2 are Capital Property to Holdco2, no portion of the capital gain arising from the disposition by way of gift to Foundation of the Foreignco1 shares, as described in paragraph 78 above, will be included in computing Holdco2's taxable capital gain to the extent provided for in paragraph 38(a.1).

E. The full amount of the capital gain arising from the disposition by way of gift to Foundation of the shares of the capital stock of Foreignco1, as described in paragraph 78 above, will be added to the CDA of Holdco2 pursuant to the application of the provisions of clauses (a)(i)(A) and (B) of the definition of CDA in subsection 89(1).

F. Provided that Holdco2 elects pursuant to subsection 83(2), in respect of the full amount of the dividend paid, as described in paragraph 82 above, the dividend will be deemed to be a capital dividend to the extent of Holdco2's CDA, determined immediately before the time the dividend is paid.

G. On the redemption of the class D preferred shares of the capital stock of Holdco1 owned by Trust, as described in paragraphs 86 and 87 above, Holdco1 will be deemed to have paid and Trust to have received, pursuant to subsection 84(3), a dividend equal to the amount by which the amount paid by Holdco1 on the redemption exceeds the PUC of the class D preferred shares determined immediately before the purchase.

H. Provided that Holdco1 elects pursuant to subsection 83(2), in respect of the full amount of the dividend described in Ruling G above, the dividend will be deemed to be a capital dividend to the extent of Holdco1's CDA, determined immediately before the particular time the dividend is deemed to be paid pursuant to subsection 84(3).

I. The provisions of subsections 15(1), 56(2), 69(4), 69(11) and 246(1) will not apply to any of the proposed transactions described herein, in and by themselves.

J. The provisions of subsection 245(2) will not be applied as a result of the proposed transactions, in and of themselves, to redetermine the tax consequences confirmed in the rulings given.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002 and are binding on the CRA provided that the proposed transactions are completed by XXXXXXXXXX .

The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.

COMMENTS

Nothing in this ruling should be construed as implying that the CRA has agreed to, reviewed or has made any determination in respect of:

(a) the FMV or ACB of any property or the PUC of any shares referred to herein;

(b) the amount of the CDA of Holdco1 and Holdco2 and the amount available to Holdco2 as a deduction for gifts under paragraph 110.1(1)(a) referred to herein; and,

(c) any other tax consequence relating to the facts, Proposed Transactions described herein other than those specifically described in the rulings given above or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the rulings given above, including whether any of the Proposed Transactions would also be included in a series of transactions or events that include other transactions or events that are not described in this letter.

An invoice for our fees in connection with this ruling request will be forwarded to you under separate cover.

Yours truly,

XXXXXXXXXX
for Director
Corporate Reorganizations and
Resources Industry Section
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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2011 Ruling 2011-0394671R3 - Charitable Donation of Publicly Listed Shares

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DEFINITIONS

FACTS

The Family

The Trust

The Foundation

The Group

Holdco1

Holdco2

Foreignco1

Foreignco2

Foreignco3

PURPOSES OF THE PROPOSED TRANSACTIONS

PROPOSED TRANSACTIONS

ADDITIONAL INFORMATION

RULINGS GIVEN

COMMENTS