2009 Ruling 2008-0300051R3 - Reorg of REIT to eliminate Holdco

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: 1. Will the proposed transactions affect the status of the Fund as a mutual fund trust or the status of the Amalco as a mutual fund corporation? 2. Will the proposed revisions to the Declaration of Trust result in a resettling of the trust or a disposition of XXXXXXXXXX by the XXXXXXXXXX ? 3. Will the proposed transactions constitute a "qualifying exchange"? 4. Will GAAR apply to the proposed transaction?

Position: 1. No. 2. No. 3. Yes. 4. No

Reasons: 1. The transactions will not cause the requirements of 132(6) and 131(8) to cease to be met. 2. See Officer's analysis. 3. Requirements of 132.2 will be met. 4. The GAAR Committee has considered the issue in similar restructurings and determined that GAAR does not apply.

XXXXXXXXXX 									2008-030005

XXXXXXXXXX , 2009

Dear XXXXXXXXXX :

Re: Advance Income Tax Ruling
XXXXXXXXXX ("Fund") (Account No. XXXXXXXXXX )

This is in response to your submission of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-referenced taxpayer. We also acknowledge the information provided in your subsequent submissions and during several telephone conversations.

We understand that, to the best of your knowledge and that of the taxpayer, none of the issues described herein are:

i) in an earlier tax return of the Fund 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 Fund or a related person;
iii) under objection by the Fund or a related person;
iv) the subject of a ruling previously issued by the Income Tax Rulings Directorate of the Canada Revenue Agency ("CRA") to the Fund or a related person, or;
v) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired.

Except as otherwise noted, all statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.

Definitions

In this letter, the following terms have the meanings specified below:

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

(b) "Amalco MFC" means the corporation to be formed on the amalgamation of MFC and Holdco under the BCA, as described in paragraphs 16 and 17 below;

(c) "Amalco MFC Class A Shares" means the Class A shares in the capital of Amalco MFC with the same terms and conditions as the MFC Class A Shares described in subparagraph 8(b) below;

(d) "Amalco MFC Class B Shares" means the Class B shares in the capital of Amalco MFC with the same terms and conditions as the MFC Class B Shares described in subparagraph 8(c) below;

(e) "Amalco MFC Common Shares" means the common shares in the capital of Amalco MFC with the same terms and conditions as the MFC Common Shares described in subparagraph 8(a) below;

(f) "BCA" means the Business Corporations Act (XXXXXXXXXX );

(g) "Class A Redemption Price" means the fair market value of any consideration for which the MFC Class A Shares were issued plus any declared and unpaid dividends on such shares at the date of redemption or retraction;

(h) "Class B Redemption Price" means the fair market value of any consideration for which the MFC Class B Shares were issued plus any declared and unpaid dividends on such shares at the date of redemption or retraction;

(i) "Combination, Transfer and Assumption Agreement" means the agreement to be entered into by Amalco MFC and the Fund as described in paragraph 20 below;

(j) "Declaration of Trust" means the declaration of trust establishing and governing the Fund, as amended and restated, dated XXXXXXXXXX , as it may be further amended and restated from time to time;

(k) "FMV" means fair market value;

(l) "Fund" means XXXXXXXXXX , an open-ended trust formed under the laws of the Province of XXXXXXXXXX pursuant to the Declaration of Trust;

(m) XXXXXXXXXX

(n) "Fund XXXXXXXXXX " means a trust unit of the Fund, described in paragraph 4 below;

(o) "Fund XXXXXXXXXX " means a trust unit of the Fund described in paragraph 4 below;

(p) "Fund XXXXXXXXXX " means a holder of a XXXXXXXXXX ;

(q) "Holdco" means XXXXXXXXXX ., a wholly owned XXXXXXXXXX subsidiary of Partnership, which holds the Fund's indirect limited partnership interest in LP;

(r) "Holdco Common Shares" means all of the issued and outstanding common shares of Holdco;

(s) "Holdco Note" means a demand, interest-bearing note issued by Holdco to Partnership in respect of Holdco's obligation to repay monies borrowed from Partnership to fund Holdco's acquisition of LP Units;

(t) "Holdco GP" means XXXXXXXXXX ., a wholly owned XXXXXXXXXX subsidiary of Partnership, which holds a general partnership interest in LP;

(u) "Holdco Transfer Agreement" means the agreement of purchase and sale to be entered into by Partnership and MFC as described in paragraph 14 below;

(v) "Investor" means XXXXXXXXXX general partnership, that beneficially owns approximately XXXXXXXXXX % of the issued and outstanding XXXXXXXXXX ;

(w) "LP" means XXXXXXXXXX limited partnership formed under an agreement dated XXXXXXXXXX between Holdco GP, Holdco, XXXXXXXXXX;

(x) "LP Units" means the all of the limited partnership units in the capital of LP owned by Holdco;

(y) "MFC" means a taxable Canadian corporation to be formed under the BCA, as described in paragraphs 7 and 8 below;

(z) "MFC Class A Shares" means the Class A shares in the capital of MFC described in subparagraph 8(b) below;

(aa) "MFC Class B Shares" means the Class B shares in the capital of MFC described in subparagraph 8(c) below;

(bb) "MFC Common Shares" means the common shares in the capital of MFC described in subparagraph 8(a) below;

(cc) "Partnership" means XXXXXXXXXX , a limited partnership formed under the laws of XXXXXXXXXX and established pursuant to the terms of a limited partnership agreement, as amended and restated, dated XXXXXXXXXX , as it may be amended and restated from time to time;

(dd) "Partnership A" means XXXXXXXXXX , a limited partnership formed under the laws of the Province of XXXXXXXXXX , all of the limited partnership units of which are owned by the Fund;

(ee) "Partnership B" means XXXXXXXXXX , a limited partnership formed under the laws of the Province of XXXXXXXXXX , all of the limited partnership units of which are owned by the Fund;

(ff) "Partnership Units" mean limited partnership units of Partnership;

(gg) "Proposed Amendments" means the legislative proposals tabled in
Bill C-10 in respect of subsection 131(8), subsection 132(6) and section 132.2, which received second reading in the Senate on December 4, 2007 and which subsequently expired on the Order Paper;

(hh) "Regulations" means the Income Tax Regulations (Canada), as amended;

(ii) "Right of Renunciation" means the right of a Fund XXXXXXXXXX that is a Subsidiary of the Fund to renounce, release and surrender, for no consideration, all rights and benefits in and to the XXXXXXXXXX specified in a delivered written notice of renunciation;

(jj) "Special Trust Unit" means a trust unit of the Fund described in paragraph XXXXXXXXXX of the Declaration of Trust;

(kk) "Subsidiary" of the Fund means any entity, corporation, trust, or partnership in which the Fund holds, either directly or indirectly (through one or more Subsidiaries), XXXXXXXXXX % or more of the beneficial interest therein, including, without limitation, in respect of a corporation, XXXXXXXXXX % or more of the shares of each class of the corporation, in respect of a trust, XXXXXXXXXX % or more of the beneficial interest in the trust, and in respect of a partnership, XXXXXXXXXX % or more of the partnership units or interest in the partnership; and

(ll) XXXXXXXXXX

Our understanding of the Facts and Proposed Transactions is as follows:

Facts

1. The Fund is a mutual fund trust, as defined in subsection 132(6), which was established to, among other things, invest directly or indirectly in real properties in Canada and XXXXXXXXXX and other investments. The Fund was not established and has not been maintained primarily for the benefit of non-residents. The XXXXXXXXXX are traded on the XXXXXXXXXX Stock Exchange and the Fund has a XXXXXXXXXX year end for purposes of the Act.

2. The Partnership is the Fund's operating subsidiary which owns the investments of the Fund. The Fund holds its Partnership Units through its interests in Partnership A and Partnership B.

3. The principal office of the Fund is located at XXXXXXXXXX , and it deals with the XXXXXXXXXX Tax Services Office and files its returns with the XXXXXXXXXX Tax Centre. The Fund's account number is XXXXXXXXXX .

4. Under the terms of the Declaration of Trust, the Fund may issue an unlimited number of Fund XXXXXXXXXX , Fund XXXXXXXXXX and Special Trust Units. Each Fund XXXXXXXXXX and Fund XXXXXXXXXX represents an undivided beneficial interest in the Fund and distributions by the Fund, whether of income, net realized capital gains or other amounts, and in the event of termination of winding-up of the Fund, in the net assets of the Fund remaining after satisfaction of all liabilities. Each Fund XXXXXXXXXX and Fund XXXXXXXXXX is redeemable at the option of the holder and entitles the holder thereof to one vote at all meetings of Fund XXXXXXXXXX . Fund XXXXXXXXXX are issued in accordance with the terms of an Exchange and Support Agreement, amended and restated as of XXXXXXXXXX , as may be further amended and restated, between the Fund and certain affiliates, upon the surrender or exchange of Partnership Units which are designated as Class B Units XXXXXXXXXX . Fund XXXXXXXXXX are convertible into Fund XXXXXXXXXX at the option of the holder of the Fund XXXXXXXXXX .

5. XXXXXXXXXX of the Fund's XXXXXXXXXX trustees are individuals who are resident in Canada. Pursuant to the Declaration of Trust, the Fund XXXXXXXXXX are entitled to vote with respect to the election or removal of the trustees of the Fund.

6. Fund XXXXXXXXXX are widely held by the public, and to the knowledge of the trustees of the Fund, no person beneficially owns, directly or indirectly, or exercises control or direction over, more than 10% of the issued and outstanding Fund XXXXXXXXXX . Fund XXXXXXXXXX are listed and traded on the XXXXXXXXXX Stock Exchange under the symbol XXXXXXXXXX . The Fund XXXXXXXXXX and Special Trust Units are not listed on any stock exchange. The Investor owns all of the issued and outstanding Fund XXXXXXXXXX .

Proposed Transactions

7. The Fund will incorporate MFC. The articles of incorporation of MFC will provide that its only undertaking will be activities described in paragraph 131(8)(b). The Fund will subscribe for XXXXXXXXXX MFC Common Shares and XXXXXXXXXX MFC Class A Shares at a price of $XXXXXXXXXX per share on incorporation for nominal cash consideration of $XXXXXXXXXX .

8. The authorized share capital of MFC will consist of an unlimited number of MFC Common Shares, MFC Class A Shares and MFC Class B Shares with the following terms and conditions:

a) The MFC Common Shares will, subject to the BCA:

i. entitle the holder to one vote in respect of each MFC Common Share on all matters to be voted on at all meetings of shareholders;

ii. entitle the holder thereof to receive dividends if, as and when declared by the board of directors of MFC, to the exclusion of holders of MFC Class A Shares or MFC Class B Shares; and

iii. on the liquidation, dissolution or winding-up of MFC, subject to the rights of holders of any other class of shares of MFC entitled to receive assets of MFC upon such a distribution in priority to or rateably with the holders of the MFC Common Shares, entitle the holder thereof to share rateably in any remaining assets of MFC.

b) The MFC Class A Shares will, subject to the BCA:

i. be non-voting;

ii. entitle the holder thereof to receive dividends if, as and when declared by the board of directors of MFC, to the exclusion of holders of MFC Common Shares or MFC Class B Shares;

iii. be redeemable at the option of MFC at the Class A Redemption Price. The Class A Redemption Price will be payable in cash, or satisfied by the transfer of XXXXXXXXXX ;

iv. be retractable at the option of the holder at the Class A Redemption Price. The Class A Redemption Price will be payable in cash, or satisfied by the transfer of XXXXXXXXXX ; and

v. on the liquidation, dissolution or winding-up of MFC, entitle the holder thereof to receive the Class A Redemption Price pari passu with the holders of MFC Class B Shares before any amount will be paid or any assets of MFC will be distributed to the holders of MFC Common Shares, or any shares ranking junior to the MFC Common Shares.

c) The MFC Class B Shares will, subject to the BCA:

i. be non-voting;

ii. entitle the holder thereof to receive dividends if, as and when declared by the board of directors of MFC, to the exclusion of holders of MFC Common Shares or MFC Class A Shares;

iii. be redeemable at the option of MFC at the Class B Redemption Price. The Class B Redemption Price will be payable in cash, or satisfied by the transfer of XXXXXXXXXX ;

iv. be retractable at the option of the holder at the Class B Redemption Price. The Class B Redemption Price will be payable in cash, or satisfied by the transfer of XXXXXXXXXX ; and

v. on the liquidation, dissolution or winding-up of MFC, entitle the holder thereof to receive the Class B Redemption Price pari passu with the holders of MFC Class A Shares before any amount will be paid or any assets of MFC will be distributed to the holders of MFC Common Shares, or any shares ranking junior to the MFC Common Shares.

9. The MFC Class A Shares will be listed on the XXXXXXXXXX Stock Exchange, although such shares will not be posted for trading.

10. Following the listing of MFC Class A Shares in paragraph 9 above, the Fund will subscribe for a number of MFC Class A Shares equal to the number of XXXXXXXXXX owned by the Fund XXXXXXXXXX less the XXXXXXXXXX MFC Class A Shares subscribed for by the Fund in paragraph 7 for nominal cash consideration.

11. At all times following their issuance, the aggregate FMV of the MFC Class A Shares and MFC Class B Shares will at least be equal to XXXXXXXXXX % of the FMV of all of the issued shares of MFC.

12. The Fund will distribute to the Fund XXXXXXXXXX , as a return of capital, all of its MFC Class A Shares acquired in paragraphs 7 and 10 above. Each Fund XXXXXXXXXX will receive a number of MFC Class A Shares equal to the number of XXXXXXXXXX owned by such XXXXXXXXXX immediately before the distribution in this paragraph 12. The Fund will remit to the Receiver General, on behalf of each Fund XXXXXXXXXX that is a non-resident, an amount equal to the amount required by the Act to be withheld on behalf of that Fund XXXXXXXXXX in respect of the return of capital, and will remit such amount to the Receiver General of Canada on behalf of that Fund XXXXXXXXXX , pursuant to subsection 218.3(2), if applicable.

13. In its tax return for its first taxation year, MFC will elect to be deemed to have been a public corporation from the beginning of that year. Since the filing due date for this return is after the amalgamation described in paragraph 16 below, it will be filed by Amalco MFC.

14. Prior to the amalgamation described in paragraph 16 below, Partnership and MFC will enter into the Holdco Transfer Agreement pursuant to which Partnership will transfer all of its Holdco Common Shares and the Holdco Note, all of which it holds as capital property, to MFC for a purchase price equal to the aggregate FMV of each property so transferred. MFC will satisfy the purchase price by issuing XXXXXXXXXX MFC Class B Shares to Partnership with a FMV equal to the aggregate FMV of the Holdco Common Shares and the Holdco Note.

15. All members of Partnership will jointly elect with MFC, in prescribed form and within the prescribed time in subsection 85(6) or 85(7) of the Act, to have the provisions of subsection 85(1) apply to the transfer of the Holdco Common Shares and the Holdco Note as described in paragraph 14 above. The elected amount in respect of the Holdco Common Shares and the Holdco Note will be an amount not less than the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). In each case, the elected amount will not exceed the FMV of the respective property, nor will it be less than the amount permitted under paragraph 85(1)(b). The transfer value in respect of the Holdco Note will not be less than its principal amount. Since the filing due date for this election is after the amalgamation described in paragraph 16 below, it will be filed by the members of Partnership and by Amalco MFC.

16. Following the transfer described in paragraph 14 above, MFC and Holdco (hereinafter referred to as "predecessor corporations") will amalgamate to form Amalco MFC in such a manner that:

a) all of the property (except for the Holdco Common Shares and the Holdco Note) of the predecessor corporations immediately before the amalgamation will become property of Amalco MFC by virtue of the amalgamation;

b) all of the liabilities of the predecessor corporations (except any amount payable by Holdco to MFC under the Holdco Note) immediately before the amalgamation will become liabilities of Amalco MFC by virtue of the amalgamation;

c) each MFC Common Share will be converted into an Amalco MFC Common Share with the same terms and conditions;

d) each MFC Class A Share will be converted into an Amalco MFC Class A Share with the same terms and conditions;

e) each MFC Class B Share will be converted into an Amalco MFC Class B Share with the same terms and conditions; and

f) the Holdco Common Shares and the Holdco Note will be cancelled without any repayment of capital or principal, as applicable, in respect thereof.

17. In accordance with the provisions of the BCA, the articles of amalgamation of Amalco MFC will be the same as the articles of incorporation of MFC, and Amalco MFC will not issue any securities in connection with the amalgamation described in paragraph 16 above.

18. Before the transactions described in paragraph 20 below, the Declaration of Trust of the Fund will be amended as follows:

a) The provisions in respect of the consolidation of XXXXXXXXXX will be amended to provide that the consolidation of XXXXXXXXXX described in paragraph 26 below will be automatic and not require the consent of the Fund XXXXXXXXXX ;

b) The provisions regarding in specie redemption of XXXXXXXXXX will be amended to provide that the redemption proceeds may be paid and satisfied by way of a distribution in specie of securities of a Subsidiary of the Fund;

c) The Right of Renunciation will be added for the XXXXXXXXXX held by a Subsidiary of the Fund; and

d) A class of XXXXXXXXXX will be created and authorized for issuance. Each XXXXXXXXXX will represent a beneficial interest in the Fund and will entitle the holder thereof to benefit from the subordination of the distribution entitlement of holders of XXXXXXXXXX , as described in paragraph 19 below. Each XXXXXXXXXX will entitle the holder thereof to one vote, be redeemable at the option of the holder at an amount equal to the Class B Redemption Price, and in addition thereto, will entitle the holder to exercise the Right of Renunciation in respect of such unit.

19. All holders of XXXXXXXXXX , effective upon the first issuance of the XXXXXXXXXX in paragraph 20 below, will subordinate their entitlement to receive distributions from the Fund such that they will not receive any distributions from the Fund (other than the distributions to be undertaken pursuant to paragraph 12 above) in respect of their XXXXXXXXXX until the earlier of:

a) the date on which an aggregate amount has been paid to the holder of the XXXXXXXXXX in respect of such units equal to the Class B Redemption Price; or

b) the time at which there are no XXXXXXXXXX issued and outstanding, which shall occur following paragraph 25 below.

20. At the moment that is the transfer time for the purposes of the definition of "qualifying exchange" in subsection 132.2(2) of the Act (hereinafter referred to as the "Transfer Time"), the Fund and Amalco MFC will enter into the Combination, Transfer and Assumption Agreement under the following terms and conditions:

a) Amalco MFC will transfer all of its assets to the Fund in accordance with the Combination, Transfer and Assumption Agreement; and

b) As consideration for the transfer described in subparagraph 20(a) above, the Fund will assume any outstanding liabilities of Amalco MFC and issue XXXXXXXXXX to Amalco MFC having an aggregate FMV equal to the aggregate FMV of the assets transferred to the Fund less any assumed liabilities.

21. At the Transfer Time, Amalco MFC will qualify as a mutual fund corporation and the Fund will qualify as a mutual fund trust for purposes of the Act.

22. At the Transfer Time, Amalco MFC will have no material outstanding liabilities and the only material asset of Amalco MFC will be the LP Units.

23. Within XXXXXXXXXX days after the Transfer Time, Amalco MFC will redeem all of the issued and outstanding Amalco MFC Class B Shares held by Partnership and all of the issued and outstanding Amalco MFC Class A Shares held by Fund XXXXXXXXXX at the Class B Redemption Price and the Class A Redemption Price, respectively. Amalco MFC will satisfy the Class B Redemption Price and the Class A Redemption Price by transferring the XXXXXXXXXX acquired in subparagraph 20(b) above to Partnership and the XXXXXXXXXX acquired in that subparagraph to the holders of XXXXXXXXXX . No other consideration will be received by Partnership or the holders of XXXXXXXXXX on the redemption of the Amalco MFC Class B Shares and Amalco MFC Class A Shares other than the XXXXXXXXXX , respectively.

24. Upon receipt of the XXXXXXXXXX , Partnership will, within XXXXXXXXXX days after the Transfer Time, pursuant to the Right of Renunciation, deliver a written notice of renunciation in which it will immediately renounce, release and surrender all of its interest in the Fund (income, capital or otherwise). Partnership will not renounce, release or surrender its interest in favour of any particular person, and will not receive any consideration from the Fund or any other person in respect of this renunciation and surrender.

25. As a result of the exercise of the Right of Renunciation described in paragraph 24 above, the XXXXXXXXXX held by Partnership will be cancelled and the subordination by the holders of XXXXXXXXXX to receive distributions from the Fund will terminate, as described in paragraph 19 above.

26. Immediately after the transactions described in paragraphs 24 and 25 above, the outstanding XXXXXXXXXX held by the Fund XXXXXXXXXX will be consolidated on a basis such that the number of XXXXXXXXXX outstanding following such consolidation will be equal to the number of XXXXXXXXXX outstanding immediately before the reorganization. No XXXXXXXXXX will be cancelled or redeemed and the Fund XXXXXXXXXX will not receive, and shall not be entitled to receive, any proceeds of disposition as a consequence of this consolidation.

27. Following the transactions described in paragraph 26 above, but prior to the dissolution of Amalco MFC described in paragraph 29 below, Amalco MFC will jointly elect with the Fund, in prescribed form and within the prescribed time in paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2), to have the rules in section 132.2 apply to the transactions described in paragraphs 20 and 23 above. No election will be filed in respect of the transfer of assets of Amalco MFC to the Fund pursuant to clause 132.2(1)(c)(ii)(B).

28. Amalco MFC will not be dissolved but will continue to exist, at least until the latest of:

a) the last day on which the tax return of MFC referred to in paragraph 13 above must be filed pursuant to paragraph 150(1)(a) of the Act;

b) the last day on which the election under subsection 85(1) referred to in paragraph 15 above can be filed pursuant to subsection 85(7); and

c) the last day on which the election referred to in paragraph 27 above can be filed pursuant to paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2).

29. After all of the filings described in paragraph 28 above have been completed, the Fund will, by special resolution, resolve to dissolve Amalco MFC under the applicable provisions of the BCA. The XXXXXXXXXX Amalco MFC Common Shares held by the Fund will be cancelled and any remaining properties of Amalco MFC will be distributed to the Fund on the winding-up. Articles of dissolution will be filed in due course and Amalco MFC will be dissolved.

30. The Fund and Partnership A and Partnership B will enter into a purchase agreement pursuant to which the Fund will sell all of its LP Units to Partnership A and Partnership B. The number of LP Units to be purchased by each of Partnership A and Partnership B are yet to be determined. Partnership A and Partnership B will each satisfy the purchase price by increasing the capital account maintained for the Fund in respect of the limited partnership units of Partnership A or Partnership B, respectively, by an amount equal to $XXXXXXXXXX .

31. The Fund, in its capacity as the transferor, and the general partner of each of Partnership A and Partnership B and the Fund, as partners of the transferee, will jointly elect under subsection 97(2), in prescribed form and within the prescribed time under subsection 96(4) or 96(5), with respect to the transfers described in paragraph 30 above. The elected amount for purposes of the elections will be within the limits prescribed by paragraph 97(2)(a), which provides that the provisions of paragraphs 85(1)(a) to (f) are applicable as modified by paragraph 97(2)(a).

32. Partnership A, Partnership B and Partnership will enter into a purchase agreement pursuant to which each of Partnership A and Partnership B will sell all of their respective LP Units to Partnership. Partnership will satisfy the purchase price by increasing the capital account maintained for each of Partnership A and Partnership B in respect of Partnership Units they already own by an amount equal to $XXXXXXXXXX .

33. The general partner of each of Partnership A and Partnership B, in their capacity as transferor, and the general partner of Partnership and Partnership A and Partnership B, as partners of the transferee, will jointly elect under subsection 97(2), in prescribed form and within the prescribed time under subsection 96(4) or 96(5), with respect to the transfers described in paragraph 32 above. The elected amount for purposes of the elections will be within the limits prescribed by paragraph 97(2)(a), which provides that the provisions of paragraphs 85(1)(a) to (f) are applicable as modified by paragraph 97(2)(a).

34. A meeting of Fund XXXXXXXXXX has been held to approve the proposed reorganization of the Fund by way of special resolution. Implementation will be subject to receipt of the tax rulings requested herein.

Purpose of the Proposed Transactions

35. Partnership holds its interest in LP through Holdco. This structure was created in order to obtain the exemption from Canadian withholding tax on interest paid on the mortgage owing to an arm's length non-resident lender, which exemption was provided for in subparagraph 212(1)(b)(vii) as it read prior to the enactment into law of Bill C-28. With the enactment of Bill C-28, effective January 1, 2008, the exemption in subparagraph 212(1)(b)(vii) was repealed and interest payments (other than payments of "participating debt interest") to non-resident arm's length persons are no longer subject to Canadian withholding tax. Consequently, there is no longer any need for Partnership to hold its interest in LP through Holdco.

36. As previously noted, the Fund holds its indirect interests in LP through a taxable corporation. One of the consequences of this is that Fund would be exposed to corporate taxation in the event of a sale of the LP interests or a sale by LP of its property, which would reduce the potential cash flow for distribution to Fund XXXXXXXXXX . Additionally, the proposed structure will eliminate the increased complexity of accounting, legal, reporting and income tax compliance inherent in the existing structure.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided further that the proposed transactions are completed in the manner described above, our rulings are as follows:

A. None of the proposed transactions will adversely affect the status of the Fund as a mutual fund trust within the meaning of subsection 132(6).

B. None of the proposed transactions will adversely affect the qualification of Amalco MFC as a mutual fund corporation within the meaning of subsection 131(8).

C. Provided that a joint election under subsection 85(1) is filed in prescribed form within the prescribed time in subsection 85(6) or 85(7) in respect of the transfer of the Holdco Common Shares and the Holdco Note by Partnership to MFC described in paragraph 14 above, in the manner and as described in paragraph 15 above, the rules in subsection 85(1) will apply to this transfer.

D. Paragraph 87(2)(e.1) will apply as a result of the amalgamation described in paragraph 16 above, such that Amalco MFC will be considered to be the same corporation as and a continuation of Holdco for purposes of computing the ACB to Amalco MFC of the LP Units.

E. The Fund will not be considered to have disposed of its property and resettled a new trust by virtue of the amendments to the Declaration of Trust of the Fund described in paragraph 18 above.

F. Fund XXXXXXXXXX will not be considered to have disposed of any portion of their XXXXXXXXXX by virtue of the amendments to the Declaration of Trust of the Fund described in paragraph 18 above.

G. Provided that:

a) at the Transfer Time, as defined in paragraph 20 above, Amalco MFC is a mutual fund corporation within the meaning of subsection 131(8) and the Fund is a mutual fund trust within the meaning of subsection 132(6);

b) at the Transfer Time, subsection 131(8.1) is not applicable to Amalco MFC and subsection 132(7) is not applicable to the Fund;

c) at the Transfer Time, the property transferred by Amalco MFC to the Fund has an aggregate FMV equal to at least 90% of the FMV of all property owned by Amalco MFC; and

d) Amalco MFC and the Fund jointly elect, in prescribed form within the prescribed time in paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2);

the transactions described in paragraphs 20 and 23 above will constitute a "qualifying exchange" such that the rules in subsection 132.2(1) will apply to such transactions.

H. The consolidation of the XXXXXXXXXX held by Fund XXXXXXXXXX , as described in paragraph 26 above, will not result in a disposition of XXXXXXXXXX by the Fund XXXXXXXXXX .

I. Provided that Partnership A and Partnership B are Canadian partnerships, as defined in subsection 102(1) of the Act, immediately after the transfers of LP Units as described in 30 above, and provided that joint elections under subsection 97(2) are filed in prescribed form within the prescribed time in subsection 96(4) or 96(5) in respect of the transfers of the LP Units, as described in paragraphs 30 to 33 above, in the manner and as described in paragraphs 31 and 33 above, the rules in subsection 97(2) will apply to these transfers.

J. The provisions of subsections 15(1), 56(2), 56(4), 69(1), 69(4), 105(1) or 246(1)
will not apply in respect of the renunciation described in paragraph 24 above. For greater certainty, Partnership will not be considered to have received, or deemed to have received, proceeds of disposition, and the Fund and Amalco MFC will not be considered to have received, or deemed to have received an amount or benefit as a result of the renunciation described in paragraph 24 above.

K. Subsection 245(2) will not be applied to redetermine any of the tax consequences confirmed in rulings given above solely as a result of the transactions described herein.

The above rulings, which are based on the Act in its present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the CRA provided that proposed transactions are completed within six months of the date of this letter.

OPINIONS

Provided that our understanding of the facts and proposed transactions described herein is correct, and provided that the Proposed Amendments are enacted in substantially the same form as proposed, it is our opinion that:

37. Provided that subsection 132(7) is not applicable to the Fund at the transfer time for purposes of the definition of "qualifying exchange" in subsection 132.2(1), as that subsection is proposed to be amended by the Proposed Amendments, Amalco MFC will, at that time, qualify as a mutual fund corporation within the meaning of subsection 131(8), as that subsection is proposed to be amended by the Proposed Amendments, and subsection 131(8.1) will not apply to Amalco MFC at that time.

38. Provided that:

a) at the moment that is the transfer time for purposes of the definition of "qualifying exchange" in subsection 132.2(1), as that subsection is proposed to be amended by the Proposed Amendments, Amalco MFC is a mutual fund corporation within the meaning of subsection 131(8), as that subsection is proposed to be amended by the Proposed Amendments, and the Fund is a mutual fund trust within the meaning of subsection 132(6), as that subsection is proposed to be amended by the Proposed Amendments;

b) at the moment that is the transfer time for purposes of the definition of "qualifying exchange" in subsection 132.2(1), as that subsection is proposed to be amended by the Proposed Amendments, subsection 131(8.1) is not applicable to Amalco MFC and subsection 132(7) is not applicable to the Fund;

c) at the moment that is the transfer time for purposes of the definition of "qualifying exchange" in subsection 132.2(1), as that subsection is proposed to be amended by the Proposed Amendments, the property transferred by Amalco MFC to the Fund has an aggregate FMV equal to at least 90% of the FMV of all property owned by Amalco MFC; and

d) Amalco MFC and the Fund jointly elect, in prescribed form within the prescribed time in paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(1), as that subsection is proposed to be amended by Proposed Amendments,

the transactions described in paragraphs 20 and 23 will constitute a "qualifying exchange" within the meaning of subsection 132.2(1), as that subsection is proposed to be amended by the Proposed Amendments, such that the rules in subsections 132.2(2) through (4) and subsections 132.2(6) and (7), as those subsections are proposed to be amended or introduced by the Proposed Amendments, will apply to such transactions.

39. Partnership will not realize any gains (or losses) on the disposition of its XXXXXXXXXX because the proceeds of disposition of such units should be equal to their ACB pursuant to subclause 132.2(3)(g)(iv)(C)(I) as proposed to be introduced by the Proposed Amendments, and consequently, will not result in an adjustment under subparagraph 53(2)(c)(i) to the ACB of the Partnership Units owned by the Fund.

In accordance with paragraph 22 of Information Circular 70-6R5, the comments in the immediately preceding paragraphs 37 to 39 are only an expression of opinion, and as such should not be construed as an advance income tax ruling, nor are they binding on the CRA.

Yours truly,

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