2011 Ruling 2009-0335251R3 - Subsection 87(11) and paragraphs 88(1)(c) and (d)

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 properties of Amalco1 that became properties of Amalco2 on the Second Amalgamation would be eligible for a subsection 88(1) "bump"?

Position: No.

Reasons: Certain pre-acquisition of control transactions caused the "bumped" properties to be ineligible property by virtue of subparagraph 88(1)(c)(vi). However, if the recommended amendment described in a comfort letter (dated February 23, 2007) that the Department of Finance issued and subparagraph 88(1)(c.3)(vi) as proposed in the Income Tax Amendments Act, 2010 are enacted, those pre-acquisition of control transactions would not, in and of themselves, cause the "bumped" properties to be ineligible property.

XXXXXXXXXX 						2009-033525

XXXXXXXXXX , 2011

Dear XXXXXXXXXX :

Re: XXXXXXXXXX (corporate account number XXXXXXXXXX )
XXXXXXXXXX (corporate account number XXXXXXXXXX )
XXXXXXXXXX (corporate account number XXXXXXXXXX )
Amalco1 (corporate account number XXXXXXXXXX )
Amalco2 (corporate account number XXXXXXXXXX )
Advance Income Tax Ruling Request

This is in reply to your letter dated XXXXXXXXXX , in which you requested an advance income tax ruling on behalf of the taxpayers referred to above. We also acknowledge the information provided during our telephone conversations (XXXXXXXXXX ) and correspondence concerning your request. The information or documents submitted with your request are part of this letter only to the extent described herein.

To the best of your knowledge, and that of the taxpayers involved, none of the issues involved in this ruling request is:

(i) in a return of the taxpayers or a related person;

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

(iii) under objection by the taxpayers or a related person;

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

(v) the subject of a ruling previously issued by the Income Tax Rulings Directorate of the CRA.

DEFINITIONS

In this letter, the following terms have the meanings specified and, where the circumstances so require, words importing the singular include the plural and vice versa and words importing any gender or the neuter include all genders and the neuter.

Unless otherwise noted, all references herein to a currency are a reference to Canadian dollars.

"Act" means the Income Tax Act, R.S.C. 1985, c.1, (5th Suppl.), as amended to the date hereof, and unless otherwise stated, a reference herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;

"adjusted cost base" or "ACB" has the meaning assigned by section 54;

"Adjustment Obligation Right" or "AOR" refers to the shortfall owed by XXXXXXXXXX [USCo5] to XXXXXXXXXX [USCo4] (or vice versa) that arose as a result of a price adjustment clause relating to the redemption of the XXXXXXXXXX [USCo5] Class B common shares as described in Paragraph 32;

"agreed amount" means the amount that a transferor and transferee have agreed upon in a joint election under subsection 85(1) in respect of a transfer of an eligible property;

"XXXXXXXXXX ULC [Canco1]" means XXXXXXXXXX , a company with unlimited liability governed by the laws of the Province of XXXXXXXXXX . XXXXXXXXXX ULC [Canco1] was incorporated on XXXXXXXXXX under the BCA, was a resident of Canada and a taxable Canadian corporation. The authorized share capital of XXXXXXXXXX ULC [Canco1] consisted of one class of common shares. The corporate account number of XXXXXXXXXX ULC [Canco1] was XXXXXXXXXX ;

"Amalco1" means the company formed on the amalgamation of New ULC [Canco2] and XXXXXXXXXX [Canco3] as described in Paragraph 33. Amalco1 was a resident of Canada and a taxable Canadian corporation. The legal name of Amalco1 was XXXXXXXXXX and its corporate account number was XXXXXXXXXX . Amalco1 dealt with the XXXXXXXXXX Tax Services Office and filed its federal corporate tax returns at the XXXXXXXXXX Taxation Centre;

"Amalco2" means the company formed on the amalgamation of XXXXXXXXXX ULC [Canco1] and Amalco1 as described in Paragraph 34. Amalco2 is a resident of Canada and a taxable Canadian corporation. The legal name of Amalco2 was XXXXXXXXXX and its corporate account number was XXXXXXXXXX . Amalco2 dealt with the XXXXXXXXXX Tax Services Office and filed its federal corporate tax returns at the XXXXXXXXXX Taxation Centre;

"arm's length" has the meaning assigned by subsection 251(1);

"BCA" means the Business Corporations Act XXXXXXXXXX ;

"CBCA" means the Canada Business Corporations Act R.S., 1985, c. C-44;

"CRA" means the Canada Revenue Agency;

"Canada-US Treaty" means the Canada-United States Tax Convention (1980), as amended;

"Completed Transactions" means the completed transactions described in Paragraphs 7 through 32;

"Contingent Payments" means the contingent payments as described in Paragraph 25;

"disregarded entity" means, for US federal tax purposes, an entity that is disregarded as separate from its owner. If a disregarded entity is owned by an individual, it is treated as a sole proprietor. If a disregarded entity is owned by any other entity, it is treated as a branch or division of its owner;

"fair market value" or "FMV" means the highest price available in an open and unrestricted market, between informed, prudent parties, acting at arm's length and under no compulsion to act and contracting for a taxable purchase and sale expressed in terms of cash;

"foreign affiliate" has the meaning assigned by subsection 95(1);

"XXXXXXXXXX [UKCo1]" means XXXXXXXXXX , a public company incorporated under the laws of the UK and a resident of the UK for the purposes of the Act. There are approximately XXXXXXXXXX shares of XXXXXXXXXX [UKCo1] issued and outstanding. These shares trade on XXXXXXXXXX Exchange;

"XXXXXXXXXX [UKCo2]" means XXXXXXXXXX , a company incorporated under the laws of the UK and a resident of the UK for purposes of the Act;

"XXXXXXXXXX [USCo2]" means XXXXXXXXXX , a company incorporated under the laws of XXXXXXXXXX and a resident of the US for purposes of the Act;

"XXXXXXXXXX [UKCo3]" means XXXXXXXXXX , a company incorporated on XXXXXXXXXX under the laws of the UK and a resident of the UK for purposes of the Act;

"ineligible property" has the meaning assigned by paragraph 88(1)(c);

"legal stated capital" or "LSC" means the amount included in the stated capital account of a corporation, in respect of the issuance of its shares, under applicable corporate law;

"LIBOR" means the London Interbank Offered Rate, which is a daily reference rate based on the interest rates at which banks borrow unsecured funds from other banks in the London wholesale market (or interbank market);

"Merger Agreement" means the XXXXXXXXXX , dated XXXXXXXXXX , by and among XXXXXXXXXX US [USCo1], XXXXXXXXXX [USCo3], XXXXXXXXXX [UKCo1] and XXXXXXXXXX [USCo6] as described in Paragraph 24, pursuant to which XXXXXXXXXX [USCo6] merged with XXXXXXXXXX US [USCo1] effective XXXXXXXXXX , with XXXXXXXXXX US [USCo1] surviving the merger;

"Merger Consideration" means cash consideration in the amount of US$XXXXXXXXXX plus the rights to receive additional payments up to an aggregate amount of US$XXXXXXXXXX as described in Paragraph 24;

"New ULC [Canco2]" means XXXXXXXXXX , a company with unlimited liability governed by the laws of the Province of XXXXXXXXXX . New ULC [Canco2] was formed on XXXXXXXXXX under the BCA, was a resident of Canada and a taxable Canadian corporation. New ULC's [Canco2] authorized share capital consisted of one class of common shares. New ULC [Canco2] dealt with the XXXXXXXXXX Tax Services Office and filed its federal corporate tax returns at the XXXXXXXXXX taxation centre. New ULC's [Canco2] corporate account number was XXXXXXXXXX ;

"non-resident" has the meaning assigned by subsection 248(1);

"paid-up capital" or "PUC" has the meaning assigned by subsection 89(1);

"Paragraph" means a numbered paragraph in this letter;

"principal amount" has the meaning assigned by subsection 248(1);

"private corporation" has the meaning assigned by subsection 89(1);

"proceeds of disposition" has the meaning assigned by section 54;

"related persons" or "persons related to each other" has the meaning assigned by subsection 251(2);

"Regulations" means the Income Tax Regulations, C.R.C. 1978, c. 945, as amended;

"XXXXXXXXXX [Canco3]" means XXXXXXXXXX , a company incorporated XXXXXXXXXX under the CBCA, which was a resident of Canada and a taxable Canadian corporation. XXXXXXXXXX [Canco3] had a XXXXXXXXXX taxation year-end prior to the transaction described in Paragraph 24. XXXXXXXXXX [Canco3] corporate Account number was XXXXXXXXXX . XXXXXXXXXX [Canco3] dealt with the XXXXXXXXXX Tax Services Office and filed its federal corporate tax returns at the XXXXXXXXXX taxation centre. XXXXXXXXXX [Canco3] issued share capital consisted of XXXXXXXXXX common shares;

"series of transactions or events" means "series of transactions or events" for purposes of the Act as modified by subsection 248(10);

"XXXXXXXXXX [UKCo4]" means XXXXXXXXXX , a company incorporated on XXXXXXXXXX under the laws of the UK and a resident of the UK for purposes of the Act;

"XXXXXXXXXX [USCo3]" means XXXXXXXXXX , a company that was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX and which was a resident of the US for purposes of the Act;

"XXXXXXXXXX [USCo4]" means XXXXXXXXXX , a company that was incorporated on XXXXXXXXXX , under the laws of XXXXXXXXXX and which was a resident of the US for purposes of the Act;

"XXXXXXXXXX [USCo5]" means XXXXXXXXXX , a limited liability company that was formed on XXXXXXXXXX under the laws of XXXXXXXXXX and which was a resident of the US for purposes of the Act. The capital of XXXXXXXXXX [USCo5] consisted of voting Class A common shares and non-voting Class B common shares;

"XXXXXXXXXX [USCo5] Liability" means XXXXXXXXXX [USCo5] liability as described in Paragraph 32;

"XXXXXXXXXX [USCo6]" means XXXXXXXXXX , a company which was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX and which was a resident of the US for purposes of the Act;

"specified shareholder" has the meaning assigned by subsection 248(1) and, where applicable, as modified by subparagraph 88(1)(c.2)(iii);

"XXXXXXXXXX US [USCo1]" means XXXXXXXXXX , a private company XXXXXXXXXX . XXXXXXXXXX US [USCo1] is a resident of the US for purposes of the Act;

"XXXXXXXXXX US [USCo1] Vending Shareholders" means the shareholders of XXXXXXXXXX US [USCo1] immediately before the merger of XXXXXXXXXX US [USCo1] and XXXXXXXXXX [USCo6] as described in Paragraph 24;

"Subco1" means XXXXXXXXXX , a company incorporated XXXXXXXXXX under the laws of XXXXXXXXXX and a resident of XXXXXXXXXX for purposes of the Act;

"Subject Transactions" means the transactions described in Paragraphs 33 to 35;

"taxable Canadian corporation" has the meaning assigned by subsection 89(1);

"taxable Canadian property" has the meaning assigned by subsection 248(1);

"taxable dividend" has the meaning assigned by subsection 89(1);

"UK" means the United Kingdom of Great Britain and Northern Ireland; and

"US" means the United States of America.

STATEMENT OF FACTS

Background Facts

XXXXXXXXXX US [USCo1] corporate group

1. XXXXXXXXXX US [USCo1] was a privately-owned US corporation. XXXXXXXXXX US [USCo1] and its subsidiaries, including XXXXXXXXXX [Canco3], and affiliates were in the business of XXXXXXXXXX .

2. XXXXXXXXXX US [USCo1] had three classes of common shares and one class of preferred shares outstanding. The three classes of XXXXXXXXXX US [USCo1] common shares were Class A, Class B and Class C common shares.

(a) XXXXXXXXXX US [USCo1] Class A, Class B and Class C common shares

The XXXXXXXXXX US [USCo1] Class A common shares were voting shares and its holders were able to elect XXXXXXXXXX directors of XXXXXXXXXX US [USCo1]. The XXXXXXXXXX US [USCo1] Class B common shares were voting shares and its holders were able to elect XXXXXXXXXX directors of XXXXXXXXXX US [USCo1]. The XXXXXXXXXX US [USCo1] Class C common shares were non-voting shares.

XXXXXXXXXX [Individual A] owned a majority of the XXXXXXXXXX US [USCo1] Class XXXXXXXXXX common shares and controlled XXXXXXXXXX US [USCo1]. He was a specified shareholder of XXXXXXXXXX US [USCo1]. In addition, XXXXXXXXXX also owned shares of XXXXXXXXXX US [USCo1] and therefore, they were also specified shareholders of XXXXXXXXXX US [USCo1].

The remaining XXXXXXXXXX US [USCo1] Class A, Class B and Class C common shares were owned by persons unrelated to XXXXXXXXXX US [USCo1], including the employees of XXXXXXXXXX US [USCo1].

(b) XXXXXXXXXX US [USCo1] preferred shares

The XXXXXXXXXX US [USCo1] preferred shares were Series A convertible participating preferred stock (the "XXXXXXXXXX US [USCo1] Preferred Stock"). The XXXXXXXXXX US [USCo1] Preferred Stock was issued by XXXXXXXXXX US [USCo1] to XXXXXXXXXX ("XXXXXXXXXX [PECo]") in XXXXXXXXXX for US$XXXXXXXXXX to raise capital. The XXXXXXXXXX US [USCo1] Preferred Stock was convertible into XXXXXXXXXX XXXXXXXXXX US [USCo1] Class C common shares. The conversion ratio into XXXXXXXXXX US [USCo1] Class C common shares was based on the value of the XXXXXXXXXX US [USCo1] Class C common shares at the time the XXXXXXXXXX US [USCo1] Preferred Stock was issued.

XXXXXXXXXX [PECo] is an entity that is part of the XXXXXXXXXX . XXXXXXXXXX has been a publicly-traded partnership on the XXXXXXXXXX Exchange since XXXXXXXXXX . Before it went public, XXXXXXXXXX was a private equity fund. After the date it went public, XXXXXXXXXX operated on similar basis as it did before that time.

XXXXXXXXXX [PECo] was also a specified shareholder of XXXXXXXXXX US [USCo1].

3. The assets of XXXXXXXXXX US [USCo1] included

(a) all of the issued and outstanding shares of XXXXXXXXXX [Canco3];

(b) the non-Canadian operating assets related to the XXXXXXXXXX of XXXXXXXXXX US [USCo1];

(c) shares of US and non-US subsidiaries; and

(d) XXXXXXXXXX .

4. XXXXXXXXXX [Canco3] was mainly a XXXXXXXXXX . The assets of XXXXXXXXXX [Canco3] consisted of:

(a) all of the issued and outstanding shares of Subco1; and

(b) shares of approximately XXXXXXXXXX other foreign affiliates.

XXXXXXXXXX [Canco3] had owned all of the shares of Subco1 since its incorporation. XXXXXXXXXX [Canco3] ACB of its Subco1 shares was nominal.

XXXXXXXXXX [Canco3] had owned most of the other foreign subsidiaries since their formation. These other foreign affiliates were in the same business as XXXXXXXXXX US [USCo1] and its subsidiaries and affiliates.

5. On XXXXXXXXXX XXXXXXXXXX US [USCo1] incorporated New ULC [Canco2], a company with unlimited liability under the laws of the Province of XXXXXXXXXX . On XXXXXXXXXX XXXXXXXXXX US [USCo1] transferred all of its common shares of XXXXXXXXXX [Canco3], with LSC and PUC equal to $XXXXXXXXXX , at FMV to New ULC [Canco2] in exchange for XXXXXXXXXX common shares of New ULC [Canco2] with LSC and PUC equal to $XXXXXXXXXX .

An election under subsection 85(1) will be filed (but has not yet been filed) in respect of the transfer transaction described above. The agreed amount will be an amount equal to the FMV of the XXXXXXXXXX [Canco3] shares at the time of the transfer.

The provisions of section 116 were complied with in respect of the transfer transaction described above. Form T2062C (Notification of an Acquisition of Treaty-Protected Property from a Non-Resident Vendor) was filed by New ULC [Canco2] with the CRA within XXXXXXXXXX days of the acquisition, as the gain that resulted on the transfer was a treaty-exempt gain under the Canada-US Treaty.

XXXXXXXXXX [UKCo1] corporate group

6. XXXXXXXXXX [UKCo1] and its subsidiaries and affiliates constitute a XXXXXXXXXX .

XXXXXXXXXX [UKCo1] indirectly owns XXXXXXXXXX % of the issued and outstanding shares of XXXXXXXXXX [UKCo2]. XXXXXXXXXX [UKCo2] is the indirect parent of subsidiaries which own XXXXXXXXXX % of the issued and outstanding shares of XXXXXXXXXX [UKCo4]. XXXXXXXXXX [UKCo4] owns XXXXXXXXXX % of the shares of XXXXXXXXXX [UKCo3].

Completed Transactions

The following completed transactions were undertaken in the order in which they are described.

Formation of entities for the acquisition of XXXXXXXXXX US [USCo1]

7. On XXXXXXXXXX , XXXXXXXXXX [UKCo4] formed XXXXXXXXXX [USCo3] under the laws of XXXXXXXXXX and subscribed for XXXXXXXXXX common shares of XXXXXXXXXX [USCo3] for cash consideration of US$XXXXXXXXXX . These XXXXXXXXXX common shares were subsequently consolidated into XXXXXXXXXX common share of XXXXXXXXXX [USCo3].

XXXXXXXXXX [USCo3] was a party to the Merger Agreement and was the entity under the Merger Agreement that was required to make Contingent Payments, if any, to the XXXXXXXXXX US [USCo1] Vending Shareholders as described in Paragraph 25.

8. On XXXXXXXXXX , XXXXXXXXXX [USCo3] incorporated XXXXXXXXXX [USCo6] and subscribed for XXXXXXXXXX common shares of XXXXXXXXXX [USCo6] for cash consideration of US$XXXXXXXXXX . These XXXXXXXXXX common shares were subsequently consolidated into XXXXXXXXXX common share of XXXXXXXXXX [USCo6].

9. On XXXXXXXXXX , XXXXXXXXXX [UKCo4] incorporated XXXXXXXXXX [USCo2] and subscribed for XXXXXXXXXX common share of XXXXXXXXXX [USCo2] in exchange for US$XXXXXXXXXX cash and XXXXXXXXXX common share of XXXXXXXXXX [USCo3] that XXXXXXXXXX [UKCo4] owned.

10. On XXXXXXXXXX , XXXXXXXXXX [USCo2] incorporated XXXXXXXXXX [USCo4] under the laws of XXXXXXXXXX and subscribed for XXXXXXXXXX common share of XXXXXXXXXX [USCo4] in exchange for US$XXXXXXXXXX cash and XXXXXXXXXX common share of XXXXXXXXXX [USCo3] that XXXXXXXXXX [USCo2] owned.

11. On XXXXXXXXXX , XXXXXXXXXX [USCo4] incorporated XXXXXXXXXX ULC [Canco1] and contributed XXXXXXXXXX common share of XXXXXXXXXX [USCo3] for 1 XXXXXXXXXX ULC [Canco1] common share. XXXXXXXXXX [USCo4] subscribed for XXXXXXXXXX common shares of XXXXXXXXXX ULC [Canco1] for US$XXXXXXXXXX .

12. On XXXXXXXXXX , XXXXXXXXXX ULC [Canco1] incorporated XXXXXXXXXX [USCo5] and contributed XXXXXXXXXX common share of XXXXXXXXXX [USCo3] and US$XXXXXXXXXX cash in exchange for XXXXXXXXXX Class A Common share of XXXXXXXXXX [USCo5].

XXXXXXXXXX [USCo5] and XXXXXXXXXX ULC [Canco1] were disregarded entities for US tax purposes.

13. On XXXXXXXXXX , XXXXXXXXXX [USCo5] made an interest bearing loan of US$XXXXXXXXXX in cash to XXXXXXXXXX [UKCo4]. The short term loan agreement states that the loan shall be repaid in XXXXXXXXXX months or less, as mutually agreed, with the interest payable monthly at the rate of LIBOR plus XXXXXXXXXX %. XXXXXXXXXX .

Internal funding for the acquisition of SLI US [USCo1]

14. On XXXXXXXXXX , XXXXXXXXXX [UKCo4] subscribed for XXXXXXXXXX common shares of XXXXXXXXXX [USCo2] for cash consideration of US$XXXXXXXXXX .

15. On XXXXXXXXXX , XXXXXXXXXX [UKCo4] subscribed for additional shares of XXXXXXXXXX [UKCo3] for cash consideration of US$XXXXXXXXXX .

16. On XXXXXXXXXX , XXXXXXXXXX [UKCo3] loaned US$XXXXXXXXXX to XXXXXXXXXX [USCo2] in exchange for XXXXXXXXXX US$XXXXXXXXXX notes.

17. On XXXXXXXXXX , XXXXXXXXXX [USCo2] loaned US$XXXXXXXXXX to XXXXXXXXXX [USCo4] in exchange for XXXXXXXXXX US$XXXXXXXXXX notes and subscribed for XXXXXXXXXX common shares of XXXXXXXXXX [USCo4] for cash consideration of US$XXXXXXXXXX .

18. On XXXXXXXXXX , XXXXXXXXXX [USCo4] subscribed for XXXXXXXXXX common shares in XXXXXXXXXX ULC [Canco1] for cash consideration of US$XXXXXXXXXX .

19. On XXXXXXXXXX , XXXXXXXXXX ULC [Canco1] subscribed for XXXXXXXXXX Class A common shares in XXXXXXXXXX [USCo5] for cash consideration of US$XXXXXXXXXX .

20. On XXXXXXXXXX , XXXXXXXXXX [USCo4] subscribed for XXXXXXXXXX Class B non-voting common shares in XXXXXXXXXX [USCo5] for cash consideration of US$XXXXXXXXXX .

21. On XXXXXXXXXX , XXXXXXXXXX [USCo5] subscribed for XXXXXXXXXX common shares in XXXXXXXXXX [USCo3] for cash consideration of US$XXXXXXXXXX .

22. On XXXXXXXXXX , XXXXXXXXXX [USCo3] subscribed for XXXXXXXXXX common shares in XXXXXXXXXX [USCo6] for cash consideration of US$XXXXXXXXXX .

Acquisition of XXXXXXXXXX US [USCo1] by the XXXXXXXXXX [UKCo1] corporate group

23. On XXXXXXXXXX , XXXXXXXXXX [UKCo1], XXXXXXXXXX [USCo3], XXXXXXXXXX [USCo6] and XXXXXXXXXX US [USCo1] entered into the Merger Agreement. The parties to the Merger Agreement agreed to the merger of XXXXXXXXXX [USCo6] and XXXXXXXXXX US [USCo1].

24. On XXXXXXXXXX , pursuant to the Merger Agreement, XXXXXXXXXX [USCo6] merged with and into XXXXXXXXXX US [USCo1]. XXXXXXXXXX US [USCo1] continued its corporate existence as the surviving corporation of the merger pursuant to XXXXXXXXXX law.

Pursuant to the Merger Agreement, XXXXXXXXXX [USCo6] paid US$XXXXXXXXXX cash consideration to the XXXXXXXXXX US [USCo1] Vending Shareholders and US$XXXXXXXXXX of XXXXXXXXXX [USCo6] was used to pay existing debt of XXXXXXXXXX US [USCo1] and for working capital purposes.

In particular, by virtue of the Merger Agreement, the following transactions occurred:

(a) The XXXXXXXXXX US [USCo1] Preferred Stock held by XXXXXXXXXX [PECo] immediately before the merger was converted into XXXXXXXXXX XXXXXXXXXX US [USCo1] Class C common shares;

(b) Each common share of XXXXXXXXXX US [USCo1] outstanding immediately prior to the merger was exchanged for the right to receive the Merger Consideration; and

(c) Each common share of XXXXXXXXXX [USCo6] issued and outstanding immediately prior to the merger was converted into and became one fully paid and non-assessable common share of XXXXXXXXXX US [USCo1], the surviving entity.

At the time of the merger, XXXXXXXXXX US [USCo1] had only Class A, B and C common shares outstanding. The FMV of a XXXXXXXXXX US [USCo1] Class A, B or C common share was equivalent as agreed to by the XXXXXXXXXX US [USCo1] Vending Shareholders in the context of the Merger Agreement.

Pursuant to (b) described above, XXXXXXXXXX [USCo6] acquired all of the shares of XXXXXXXXXX US [USCo1] and, therefore, acquired control of XXXXXXXXXX US [USCo1] (and consequently, New ULC [Canco2] and XXXXXXXXXX [Canco3]). All of the shares of XXXXXXXXXX US [USCo1] that XXXXXXXXXX [USCo6] acquired were cancelled as part of the Merger Agreement.

After the merger, XXXXXXXXXX US [USCo1], the surviving entity, had common shares outstanding equal in number to those that XXXXXXXXXX [USCo6] had outstanding before the merger, which were held by XXXXXXXXXX [USCo3].

25. Pursuant to the Merger Agreement, on the occurrence of certain events, additional payments of up to an aggregate amount of US$XXXXXXXXXX may be made to the XXXXXXXXXX US [USCo1] Vending Shareholders by XXXXXXXXXX [USCo3] or its successors.

The contingent payments ("Contingent Payments") are categorized into three groups: XXXXXXXXXX Contingent Payments, XXXXXXXXXX Contingent Payments, and XXXXXXXXXX Contingent Payments. The Contingent Payments are to be paid by XXXXXXXXXX [USCo3] or its successor.

XXXXXXXXXX Contingent Payments

The XXXXXXXXXX Contingent Payments were payable if

(a) XXXXXXXXXX US [USCo1] filed a lawsuit against a third-party XXXXXXXXXX XXXXXXXXXX company to obtain a XXXXXXXXXX ; and

(b) at least XXXXXXXXXX XXXXXXXXXX [UKCo1] recommended counsel was named in such lawsuit.

If both conditions were met, the entire US$XXXXXXXXXX was due and payable.

XXXXXXXXXX

XXXXXXXXXX Contingent Payments

XXXXXXXXXX Contingent Payments of US$XXXXXXXXXX were to be made on XXXXXXXXXX , provided that XXXXXXXXXX .

XXXXXXXXXX Contingent Payments of US$XXXXXXXXXX were paid to the XXXXXXXXXX US [USCo1] Vending Shareholders on XXXXXXXXXX . The funding for these payments was composed of property of XXXXXXXXXX [UKCo1] or other US entities within the XXXXXXXXXX [UKCo1] corporate group, which did not include

(c) any of the property of Amalco1 which became property of Amalco2 on the Second Amalgamation as described in Paragraph 34; or

(d) property the value of which was derived from any property described in (c) above.

XXXXXXXXXX Contingent Payments

The XXXXXXXXXX Contingent Payments are based on the XXXXXXXXXX of which is owned by XXXXXXXXXX US [USCo1]. If the XXXXXXXXXX net sales for XXXXXXXXXX are less than US$XXXXXXXXXX , XXXXXXXXXX Contingent Payments are not payable. If the XXXXXXXXXX net sales for XXXXXXXXXX are US$XXXXXXXXXX or more, then the full US$XXXXXXXXXX is payable (less any XXXXXXXXXX Contingent Payments made). At points between these two amounts, a pro-rata portion of the remaining unpaid contingent consideration is payable.

The Contingent Payments will be treated as additional purchase price of SLI US [USCo1] for US tax purposes.

Post-closing Transactions

26. On XXXXXXXXXX , XXXXXXXXXX [USCo3] merged with and into XXXXXXXXXX US [USCo1] with XXXXXXXXXX US [USCo1] as the surviving corporation pursuant to the laws of XXXXXXXXXX .

Under US corporate law, the merger of XXXXXXXXXX [USCo3] with and into XXXXXXXXXX US [USCo1] did not result in the disposition of property of XXXXXXXXXX US [USCo1], the surviving corporation. As a result, there was no disposition of the New ULC [Canco2] shares owned by XXXXXXXXXX US [USCo1] on the merger.

27. On XXXXXXXXXX , XXXXXXXXXX US [USCo1] transferred all of its shares of New ULC [Canco2] to XXXXXXXXXX [USCo5] as a dividend-in-kind.

The provisions of section 116 were complied with in respect of this transaction. Form T2062 [Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property] was filed with the CRA within XXXXXXXXXX days of the disposition.

No gain was reported with respect to this disposition.

28. On XXXXXXXXXX , XXXXXXXXXX [USCo5] redeemed all of the XXXXXXXXXX [USCo5] Class B common shares held by XXXXXXXXXX [USCo4] by transferring all of its shares of XXXXXXXXXX US [USCo1] to XXXXXXXXXX [USCo4] as consideration for the redemption of the XXXXXXXXXX [USCo5] Class B common shares.

29. On XXXXXXXXXX , XXXXXXXXXX [USCo5] was liquidated into XXXXXXXXXX ULC [Canco1] and as a consequence of the liquidation, XXXXXXXXXX [USCo5] distributed all of its shares of New ULC [Canco2] to XXXXXXXXXX ULC [Canco1].

The provisions of section 116 were complied with in respect of this transaction. Form T2062 [Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property] was filed with the CRA within XXXXXXXXXX days of the disposition by XXXXXXXXXX [USCo5] of the shares of New ULC [Canco2].

No gain was reported with respect to the disposition by XXXXXXXXXX [USCo5] of its shares of New ULC [Canco2] to XXXXXXXXXX ULC [Canco1].

No gain or loss was realized or incurred by XXXXXXXXXX ULC [Canco1] on the disposition of its XXXXXXXXXX [USCo5] Class A common shares on the liquidation of XXXXXXXXXX [USCo5].

30. On XXXXXXXXXX , XXXXXXXXXX [USCo4] merged with and into XXXXXXXXXX US [USCo1], with XXXXXXXXXX US [USCo1] surviving. The provisions of section 116 were complied with in respect of this transaction.

Form T2062 [Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property] was filed with the CRA within XXXXXXXXXX days of the disposition by XXXXXXXXXX [USCo4] of the shares of XXXXXXXXXX ULC [Canco1] to XXXXXXXXXX US [USCo1] on the merger. No gain was reported with respect to the disposition by XXXXXXXXXX [USCo4] of the shares of XXXXXXXXXX ULC [Canco1].

FMV revision/ XXXXXXXXXX [USCo5] Liability

31. After the merger of XXXXXXXXXX [USCo6] and XXXXXXXXXX US [USCo1] as described in Paragraph 24, detailed financial information was available to XXXXXXXXXX [UKCo1] (XXXXXXXXXX ) for all the entities in the XXXXXXXXXX US [USCo1] corporate group. Valuation analysis of the detailed financial information resulted in XXXXXXXXXX [UKCo1] revising, inter alia,

(a) the FMV of the XXXXXXXXXX [Canco3] shares (that XXXXXXXXXX US [USCo1] owned), at the time XXXXXXXXXX US [USCo1] transferred those shares to New ULC [Canco2] as described in Paragraph 5, from the previous estimated FMV of US$XXXXXXXXXX to the revised FMV of US$XXXXXXXXXX ;

(b) the FMV of both the New ULC [Canco2] shares (that XXXXXXXXXX US [USCo1] owned) and the XXXXXXXXXX [Canco3] shares (that New ULC [Canco2] owned), at the time of the merger of XXXXXXXXXX [USCo6] and XXXXXXXXXX US [USCo1] as described in Paragraph 24, from the previous estimated FMV of US$XXXXXXXXXX to the revised FMV of US$XXXXXXXXXX ; and

(c) the FMV of the XXXXXXXXXX US [USCo1] shares (that XXXXXXXXXX [USCo5] owned), at the time of the transfer by XXXXXXXXXX [USCo5] of those shares to XXXXXXXXXX [USCo4] (as consideration for the redemption of XXXXXXXXXX [USCo4] XXXXXXXXXX [USCo5] Class B common shares) as described in Paragraph 28, from the previous estimated FMV of US$XXXXXXXXXX to the revised FMV of US$XXXXXXXXXX .

As a result of the FMV revision as described above, the XXXXXXXXXX [UKCo1] corporate group revised the forms T2062C and T2062 as described in Paragraphs 5, 27, 29 and 30 and re-filed the revised forms T2062C and T2062 with the CRA so as to reflect the revised FMV of the respective shares as described above. No certificate of compliance from the CRA with respect to the revised forms T2062C and T2062 has been received.

32. There was a purchase price agreement between XXXXXXXXXX [USCo5] and XXXXXXXXXX [USCo4] with respect to the redemption of the XXXXXXXXXX [USCo5] Class B common shares held by XXXXXXXXXX [USCo4], which provided that the FMV of the consideration to be received by XXXXXXXXXX [USCo4] on the redemption of the XXXXXXXXXX [USCo5] Class B common shares was to be equal in value to the FMV, at the time of the redemption, of the XXXXXXXXXX [USCo5] Class B common shares, and that if the FMV of the consideration was

(a) less than the FMV, at the time of the redemption, of the XXXXXXXXXX [USCo5] Class B common shares, then XXXXXXXXXX [USCo5] and its successors would owe such difference to XXXXXXXXXX XXXXXXXXXX [USCo4] and its successors, or

(b) more than the FMV, at the time of the redemption, of the XXXXXXXXXX [USCo5] Class B common shares, then XXXXXXXXXX [USCo4] and its successors would owe such difference to XXXXXXXXXX [USCo5] and its successors.

Any amounts arising under (a) or (b) above constitute the Adjustment Obligation Right or AOR under the purchase price agreement.

The revised FMV of the XXXXXXXXXX US [USCo1] shares as described in Paragraph 31(c) resulted in a shortfall (or inadequate consideration) of US$XXXXXXXXXX given by XXXXXXXXXX [USCo5] to XXXXXXXXXX [USCo4] for the redemption of the XXXXXXXXXX [USCo5] Class B common shares held by XXXXXXXXXX [USCo4]. The shortfall of US$XXXXXXXXXX was the AOR and was a liability of XXXXXXXXXX [USCo5] owing to XXXXXXXXXX [USCo4] ("XXXXXXXXXX [USCo5] Liability").

XXXXXXXXXX ULC [Canco1] assumed the XXXXXXXXXX [USCo5] Liability on the liquidation of XXXXXXXXXX [USCo5] into XXXXXXXXXX ULC [Canco1] as described in Paragraph 29.

Subject Transactions

33. On XXXXXXXXXX , New ULC [Canco2] was continued under the CBCA and, after the continuance, was amalgamated ("First Amalgamation") with XXXXXXXXXX [Canco3] to form Amalco1. This amalgamation was completed as a vertical short-form amalgamation under the CBCA.

On the First Amalgamation, all of the property of New ULC [Canco2] and XXXXXXXXXX [Canco3] and all of the liabilities of New ULC [Canco2] and XXXXXXXXXX [Canco3], immediately before the amalgamation, became property and liabilities of Amalco1 by virtue of the First Amalgamation.

34. On XXXXXXXXXX , XXXXXXXXXX ULC [Canco1] was continued under the CBCA and, after the continuance, was amalgamated ("Second Amalgamation") with Amalco1 to form Amalco2. This amalgamation was completed as a vertical short-form amalgamation under the CBCA.

On the Second Amalgamation, all of the property of XXXXXXXXXX ULC [Canco1] and Amalco1 and all of the liabilities of XXXXXXXXXX ULC [Canco1] (including the XXXXXXXXXX [USCo5] Liability described in Paragraph 32) and Amalco1, immediately before the amalgamation, became property and liabilities of Amalco2 by virtue of the Second Amalgamation.

Prior to the Second Amalgamation, XXXXXXXXXX ULC [Canco1] had XXXXXXXXXX common shares outstanding and had LSC and PUC of $XXXXXXXXXX . After the Second Amalgamation, Amalco2 had XXXXXXXXXX common shares outstanding and LSC and PUC of $XXXXXXXXXX . All of the shares of Amalco2 were received by XXXXXXXXXX US [USCo1] on the Second Amalgamation.

35. In connection with the First Amalgamation described in Paragraph 33, Amalco1 did not file a designation under paragraph 88(1)(d) in its federal return of income for its taxation year that commenced at the time of the First Amalgamation and ended immediately before the Second Amalgamation.

In connection with the Second Amalgamation described in Paragraph 34, in Amalco2's federal return of income for its taxation year that commenced at the time of the Second Amalgamation and ended on XXXXXXXXXX , Amalco2 filed a designation pursuant to paragraph 88(1)(d) to increase, within the limits described in paragraph 88(1)(d), the cost to Amalco2 of the Subco1 shares first, then the shares of other foreign affiliates and finally, other capital property (other than any ineligible property as described in paragraph 88(1)(c)) that Amalco1 owned without interruption at and since the time XXXXXXXXXX ULC [Canco1] last acquired control of Amalco1 and that became property of Amalco2 by virtue of the Second Amalgamation as described in Paragraph 34.

ADDITIONAL INFORMATION

36. The Subco1 shares and other foreign affiliate shares of XXXXXXXXXX [Canco3] were capital property of XXXXXXXXXX [Canco3] at the time of the merger of XXXXXXXXXX [USCo6] and XXXXXXXXXX US [USCo1] as described in Paragraph 24.

37. At the time New ULC [Canco2] acquired all of the shares of XXXXXXXXXX [Canco3] from XXXXXXXXXX US [USCo1], as described in Paragraph 5, XXXXXXXXXX US [USCo1] was dealing at arm's length with XXXXXXXXXX ULC [Canco1].

38. New ULC [Canco2] and XXXXXXXXXX [Canco3] have both filed an election under subsection 256(9) not to have subsection 256(9) apply when filing their federal income tax returns for their taxation years ending immediately before the merger of XXXXXXXXXX [USCo6] and XXXXXXXXXX US [USCo1] on XXXXXXXXXX as described in Paragraph 24.

39. Amalco2 does not intend to sell any of its shares of Subco1 or any other foreign affiliates to any third party unrelated to Amalco2. However, it is intended that all the shares of Subco1 will be transferred to a controlled subsidiary of XXXXXXXXXX [UKCo1]. The intended transfer will be part of a global restructuring plan to simplify and combine the XXXXXXXXXX US [USCo1] structure with that of the current XXXXXXXXXX [UKCo1] organization in a tax efficient manner.

40. XXXXXXXXXX [UKCo1] has sworn a statutory declaration that declares that, inter alia,

XXXXXXXXXX

41. The funding for the remaining Contingent Payments as described in Paragraph 25 will not include:

(a) any of the property of Amalco1 which became property of Amalco2 on the Second Amalgamation as described in Paragraph 34; or

(b) property the value of which was derived from any property described in (a) above.

42. The XXXXXXXXXX US [USCo1] Vending Shareholders' rights to receive the Contingent Payments described in Paragraph 25 were not a mechanism to distribute additional amounts based on the future earnings of XXXXXXXXXX [Canco3] foreign affiliates to the XXXXXXXXXX US [USCo1] Vending Shareholders. Rather, as mentioned, they were granted solely for the purpose of determining the FMV, at the time XXXXXXXXXX [USCo6] acquired control of XXXXXXXXXX US [USCo1] as described in Paragraph 24, of the shares of XXXXXXXXXX US [USCo1].

43. None of the XXXXXXXXXX US [USCo1] Vending Shareholders had the intention to acquire or cause a person over which it has influence to acquire, either directly or indirectly, any shares, warrants, debt instruments or other securities of XXXXXXXXXX [UKCo1] or any of its subsidiaries until the end of the XXXXXXXXXX period beginning immediately following the merger of XXXXXXXXXX [USCo6] and XXXXXXXXXX US [USCo1] as described in Paragraph 24. The XXXXXXXXXX period was the longest period of time that the XXXXXXXXXX US [USCo1] Vending Shareholders would agree to during the negotiation of the sale transaction.

44. Neither XXXXXXXXXX [Canco3] nor its successor Amalco1 received any dividends from any of its foreign affiliates at any time after XXXXXXXXXX [USCo6] acquired all of the shares of XXXXXXXXXX US [USCo1] as described in Paragraph 24 and before the amalgamation of XXXXXXXXXX ULC [Canco1] and Amalco1 to form Amalco2 on the Second Amalgamation as described in Paragraph 34.

45. The shares of New ULC [Canco2] and XXXXXXXXXX [Canco3] did not derive their value principally from real or immovable property situated in Canada for purposes of the Canada-US Treaty.

46. Between XXXXXXXXXX and XXXXXXXXXX , the Amalco2 common shares described in Paragraph 34 and the AOR described in Paragraph 32 were transferred between various related persons in the XXXXXXXXXX [UKCo1] corporate group. Currently, all of the Amalco2 common shares and the AOR are owned by XXXXXXXXXX [UKCo4]. The AOR is to be ultimately settled by the issuance of common shares by Amalco2 to XXXXXXXXXX XXXXXXXXXX [UKCo4].

PURPOSES OF THE COMPLETED AND SUBJECT TRANSACTIONS

47. On acquisition of XXXXXXXXXX US [USCo1] by XXXXXXXXXX [UKCo1], it was determined that there were various inherited organizational and tax inefficiencies within the structure of XXXXXXXXXX US [USCo1]. The Subject Transactions were part of a global restructuring plan to simplify and combine the XXXXXXXXXX US [USCo1] structure with that of the current XXXXXXXXXX [UKCo1] organization in a tax efficient manner. The Subject Transactions would permit XXXXXXXXXX [UKCo1] to reflect, for the purposes of the Act, an appropriate proportion of its actual arm's length cost of its indirect acquisition of XXXXXXXXXX US [USCo1] in the capital property (other than any ineligible property as described in paragraph 88(1)(c)) owned by XXXXXXXXXX [Canco3] at the time of the acquisition of control of XXXXXXXXXX US [USCo1], New ULC [Canco2] and XXXXXXXXXX [Canco3] by XXXXXXXXXX [UKCo1] and XXXXXXXXXX ULC [Canco1].

48. The purpose of the disposition by XXXXXXXXXX US [USCo1] of its XXXXXXXXXX [Canco3] shares to New ULC [Canco2] at FMV as described in Paragraph 5 was to increase the ACB to XXXXXXXXXX US [USCo1] of the New ULC [Canco2] shares (and also the ACB to New ULC [Canco2] of the XXXXXXXXXX [Canco3] shares) to an amount equal to the FMV, at the time of the disposition, of the XXXXXXXXXX [Canco3] shares at a time that XXXXXXXXXX US [USCo1] was a qualifying person under the Canada-US Treaty such that the gain that XXXXXXXXXX US [USCo1] realized on such disposition would be an exempt gain under the Canada-US Treaty.

Before the acquisition of control of XXXXXXXXXX US [USCo1] by XXXXXXXXXX [UKCo1], XXXXXXXXXX US [USCo1] was a qualifying person under the Canada-US Treaty because more than 50% of the aggregate votes and value of its shares were owned by qualifying persons (i.e. XXXXXXXXXX . After the acquisition of control of XXXXXXXXXX US [USCo1] by XXXXXXXXXX [UKCo1], XXXXXXXXXX US [USCo1] would not be a qualifying person because it was then ultimately owned by a corporation (i.e. XXXXXXXXXX [UKCo1]) that was not a resident of the US or Canada.

49. The reason that the shares were consolidated into fractional shares or the shares issued were fractional shares as described in Paragraphs 8 through 12 rather than whole shares was to ensure that the FMV of the subsequent shares that were issued following incorporations (of XXXXXXXXXX [USCo3], XXXXXXXXXX [USCo6], XXXXXXXXXX [USCo2], XXXXXXXXXX [USCo4], XXXXXXXXXX ULC [Canco1] and XXXXXXXXXX [USCo5]) as part of the capitalization and funding for the acquisition of XXXXXXXXXX US [USCo1] had an equivalent FMV on a per share basis.

50. The status of XXXXXXXXXX [USCo5] and XXXXXXXXXX ULC [Canco1] as disregarded entities described in Paragraph 12 was necessary so that certain Completed Transactions would be considered disregarded transactions from a US tax perspective (e.g. the liquidation of XXXXXXXXXX [USCo5] into XXXXXXXXXX ULC [Canco1] as described in Paragraph 29).

51. The purpose of the Completed Transactions described in Paragraphs 14 through 17 was to provide XXXXXXXXXX [USCo4] with the US$XXXXXXXXXX required funding for the acquisition of XXXXXXXXXX US [USCo1] by XXXXXXXXXX [USCo6]. The source of the US$XXXXXXXXXX was from XXXXXXXXXX [UKCo1] and its affiliates and the funds were advanced partly as equity and partly as debt, the interest on which would be deductible to the borrower for US income tax purposes.

52. The New ULC [Canco2] shares were distributed by XXXXXXXXXX US [USCo1] as a dividend rather than on a redemption of the shares of XXXXXXXXXX US [USCo1] described in Paragraph 27 because there was uncertainty at that time as to the FMV of the New ULC [Canco2] shares that were to be distributed and, as such, there was uncertainty as to the number of XXXXXXXXXX US [USCo1] shares that should be redeemed.

53. The purpose of XXXXXXXXXX [USCo5] transferring all of its shares in XXXXXXXXXX US [USCo1] to XXXXXXXXXX [USCo4] as described in Paragraph 28 was to align XXXXXXXXXX US's [USCo1] US and other international holdings with those of the XXXXXXXXXX [UKCo1] corporate group.

54. The purpose of liquidating XXXXXXXXXX [USCo5] into XXXXXXXXXX ULC [Canco1] as described in Paragraph 29 was to cause XXXXXXXXXX ULC [Canco1] to become the direct owner of New ULC [Canco2] so that the amalgamation of XXXXXXXXXX ULC [Canco1] and Amalco1 (a successor to New ULC [Canco2] and XXXXXXXXXX [Canco3]) to form Amalco2 as described in Paragraph 34 would be a subsection 87(11) vertical amalgamation.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, transactions, and the purposes of the Completed and Subject Transactions, our rulings are set forth below:

A. For the purposes of determining the cost to Amalco2 of each property of Amalco1 that became property of Amalco2 on the Second Amalgamation, as described in Paragraph 34, each such property will be, for the purposes of paragraph 88(1)(c), "ineligible property."

However, without considering

(a) the share subscriptions

(i) by XXXXXXXXXX [UKCo4] in XXXXXXXXXX [USCo3] as described in Paragraph 7;

(ii) by XXXXXXXXXX [USCo3] in XXXXXXXXXX [USCo6] as described in Paragraph 8;

(iii) by XXXXXXXXXX [UKCo4] in XXXXXXXXXX [USCo2] as described in Paragraph 9;

(iv) by XXXXXXXXXX [USCo2] in XXXXXXXXXX [USCo4] as described in Paragraph 10;

(b) the acquisition by XXXXXXXXXX US [USCo1] of the New ULC [Canco2] shares as described in Paragraph 5; and

(c) the acquisition by New ULC [Canco2] of the XXXXXXXXXX [Canco3] shares as described in Paragraph 5,

the provisions of subsections 87(11) and 88(1) will apply to the Second Amalgamation as described in Paragraph 34 such that, provided that

(d) no property that became property of Amalco 2 on the Second Amalgamation or "any other property acquired by any person in substitution therefor" (within the meaning of that phrase for the purpose of clause 88(1)(c)(vi)(B)) is acquired by any person described in subclauses 88(1)(c)(vi)(B)(I), (II) or (III) (on the assumption that the "subsidiary" referred to in those subclauses is Amalco1 and the "parent" is XXXXXXXXXX ULC [Canco1]) as part of a series of transactions or events that includes the Second Amalgamation, for purposes of the Act, the cost, pursuant to paragraphs 88(1)(c) and (d), to Amalco2 of each Subco1 share and any other capital property that did not constitute ineligible property that Amalco1 owned without interruption at and since the time XXXXXXXXXX ULC [Canco1] last acquired control of Amalco1 and that became property of Amalco2 on the Second Amalgamation ("Bumped Properties"), will be deemed to be the cost amount of such property to Amalco1 immediately before such amalgamation, plus the amount designated by Amalco2 under paragraph 88(1)(d) in respect of the property in its return of income under Part I for the taxation year in which the Second Amalgamation occurred.

For greater certainty, for the purpose only of applying paragraph 88(1)(c) to determine the cost to Amalco2, following the Second Amalgamation, of the shares of Subco1 and any other capital property that did not constitute ineligible property that were owned by XXXXXXXXXX [Canco3] at the time XXXXXXXXXX [USCo6] acquired control of XXXXXXXXXX US [USCo1] as described in Paragraph 24, pursuant to paragraph 88(4)(b), XXXXXXXXXX ULC [Canco1] will be deemed to have last acquired control of Amalco1 (and, consequently, New ULC [Canco2] and XXXXXXXXXX [Canco3]) at the time XXXXXXXXXX [USCo6] acquired control of XXXXXXXXXX US [USCo1] as described in Paragraph 24.

B. Subsection 245(2) will not be applied as a result of the Completed and Subject Transactions, in and by themselves, to redetermine the tax consequences confirmed in Ruling A above.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 issued by the CRA on May 17, 2002 and are binding on the CRA.

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

OPINION

The share subscriptions by XXXXXXXXXX [UKCo4], XXXXXXXXXX [USCo3] and XXXXXXXXXX [USCo2] as described in Ruling A(a), the share acquisition by XXXXXXXXXX US [USCo1] as described in Ruling A(b) and the share acquisition by New ULC [Canco2] as described in Ruling A(c), would not, in and of themselves, cause the Bumped Properties to be ineligible property, provided that

(a) with respect to the share subscriptions described in Ruling A(a), the recommended amendment described in a letter issued by the Department of Finance dated February 23, 2007 (the "Comfort Letter") as described below, is enacted and is effective for the period in which the share subscriptions described in Ruling A(a) occurred; and

(b) with respect to the share acquisitions described in Rulings A(b) and (c), subparagraph 88(1)(c.3)(vi) as proposed in the Income Tax Amendments Act, 2010 (dated July 16, 2010) is enacted and is effective for the period in which the share acquisitions described in Rulings A(b) and (c) occurred.

Comfort Letter

We understand that the Department of Finance indicated in the Comfort Letter that the Related Corporation in the situations described therein (i.e. essentially the Related Corporation acquired "substituted property" as defined in paragraph 88(1)(c.3) at the time Parent had not yet been incorporated) should not be excluded from being a "specified person" (as defined in subparagraph 88(1)(c.2)(i)) before the incorporation of Parent solely because the Related Corporation and Parent did not co-exist during that time. Accordingly, the Department of Finance was prepared to recommend to the Minister of Finance that the definition "specified person" in subparagraph 88(1)(c.2)(i) be amended, applicable to windings-up that begin after 2006, so that, in respect of property acquired before the beginning of the winding-up of the subsidiary, a specified person would include a person that is related to the parent (within the meaning of subparagraph 88(1)(c.2)(i)) from the time the parent was incorporated until the beginning of the winding-up of the subsidiary.

The foregoing opinion is not ruling and, as noted in Information Circular 70-6R5, is not binding on the CRA.

COMMENTS

1. The fact that any of the property described in Paragraph 43 is acquired by any of the XXXXXXXXXX US [USCo1] Vending Shareholders after the end of the XXXXXXXXXX period (described in Paragraph 43) would not necessarily mean that such acquisition would not be part of a series of transactions or events that includes the Second Amalgamation.

2. Nothing in this letter should be construed as implying that the CRA has confirmed, reviewed, made any determination, or accepted any method for the determination in respect of:

(a) the PUC of any share or the ACB or FMV of any property referred to herein, in particular, the revised FMV of those shares described in Paragraph 31; or

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

For greater certainty, we are not commenting on whether the gain arising on the disposition by XXXXXXXXXX US [USCo1] of all of its XXXXXXXXXX [Canco3] shares to New ULC [Canco2] as described in Paragraph 5 would be an exempt gain under the Canada-US Treaty.

Yours truly,

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