2009 Ruling 2009-0344191R3 - Loss Consolidation

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: Is the loss utilization arrangement acceptable?

Position: Yes

Reasons: meets our published position

XXXXXXXXXX 2009-034419
XXXXXXXXXX , 2009

Dear XXXXXXXXXX :

Re: XXXXXXXXXX ("Holdco")
XXXXXXXXXX ("Opco 1")
XXXXXXXXXX ("Opco 2")
Lossco 1, Lossco 2, and Newco

This is in reply to your letter of XXXXXXXXXX wherein you request an advance income tax ruling on behalf of the above-named taxpayers. We acknowledge information provided during telephone conversations from XXXXXXXXXX

In very general terms, the transactions described herein involve a loss utilization transaction within an affiliated group of companies which will permit certain affiliated corporations to deduct the losses that would otherwise be incurred by Holdco in respect of the use of tax attributes and of interest payable on borrowed money, the proceeds of which has or will be used by Holdco to finance the acquisition of the shares of a Targetco (as defined below) and to capitalize certain affiliated corporations. Holdco files its corporate income tax returns at the XXXXXXXXXX Taxation Centre and deals with the XXXXXXXXXX Tax Services Office.

The address and business number of the various companies in the affiliated group described herein are as follows:

Name
Address
Business Number

Holdco
XXXXXXXXXX
XXXXXXXXXX

Opco 1
XXXXXXXXXX
XXXXXXXXXX

Opco 2
XXXXXXXXXX
XXXXXXXXXX

Opco 3
XXXXXXXXXX
XXXXXXXXXX

Lossco 1
XXXXXXXXXX

To be determined (New corporation)

Lossco 2
XXXXXXXXXX

To be determined (New corporation)
Newco
XXXXXXXXXX

To be determined (New corporation)

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

(i) dealt with in an earlier return of Holdco, Opco 1, Opco 2, Lossco 1, Lossco 2, Newco or a related person;

(ii) being considered by a tax services office or a taxation centre in connection with a tax return already filed by Holdco, Opco 1, Opco 2, Lossco 1, Lossco 2, Newco or a related person;

(iii) under objection by Holdco, Opco 1, Opco 2, Lossco 1, Lossco 2, Newco or a related person;

(iv) the subject of a previous ruling issued by the Income Tax Rulings Directorate to the taxpayers or a related person; nor,

(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 advance income tax ruling are references to the provisions of the Act. Unless otherwise noted, all references to currency are to Canadian dollars.

This letter is based solely on the facts and Proposed Transactions described below. The documentation submitted with your request does not form part of the facts and Proposed Transactions and any references thereto are provided solely for the convenience of the reader.

Definitions:

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

(b) "ACB" has the meaning assigned to "adjusted cost base" by section 54 of the Act;

(c) "Affiliated Person" has the meaning of affiliated person assigned by subsection 69(11) of the Act;

(d) "Arm's Length" has the meaning assigned to arm's length by subsection 251(1) of the Act;

(e) "Canadian Corporation" has the meaning assigned by subsection 89(1) of the Act;

(f) "CBCA" means the Canada Business Corporations Act;

(g) "CRA" means the Canada Revenue Agency;

(h) "Daylight Loan" means the loan described in 14 below;

(i) "FMV" means fair market value;

(j) "Holdco" means XXXXXXXXXX an amalgamated corporation governed by the CBCA. Holdco is a holding company that is a TCC XXXXXXXXXX . The shares of Holdco are publically traded on the XXXXXXXXXX Stock Exchange under the symbol XXXXXXXXXX ;

(k) "Holdco Affiliate" means Opco 1 or Opco 2;

(l) "Holdco Loan" means the loan made to Holdco as described in 18 below;

(m) "Holdco Tax Attributes" means certain deductions from income that have not been claimed by Holdco, including capital cost allowance not claimed, amounts deductible under paragraph 20(1)(e) of the Act and Non-capital Losses as described in 2 below;

(n) "Issued Public Debt" means the issued public debt described in 4 below;

(o) "Lossco 1" means a Subsidiary Wholly-owned Corporation to be formed by Holdco. Lossco 1 will be incorporated under the CBCA as part of the Proposed Transactions. Lossco 1 will be a TCC;

(p) "Lossco 1 Loan" means the loan made to Lossco 1 as described in 15 below;

(q) "Lossco 2" means a Subsidiary Wholly-owned Corporation to be formed by Holdco. Lossco 2 will be incorporated under the CBCA as part of the Proposed Transactions. Lossco 2 will be a TCC;

(r) "Lossco 2 Loan" means the loan made to Lossco 2 as described in 15 below;

(s) "Newco" means a Subsidiary Wholly-owned Corporation to be formed by Holdco. Newco will be incorporated under the CBCA as part of the Proposed Transactions. Newco will be a TCC;

(t) "Newco Preferred Shares" means the preferred shares described in 8 below;

(u) "Non-capital Loss" has the meaning assigned by subsection 111(8) of the Act;

(v) "Opco 1" means XXXXXXXXXX corporation that is a TCC;

(w) "Opco 2" means XXXXXXXXXX corporation that is a TCC;

(x) "Opco 3" means XXXXXXXXXX corporation that is a TCC;

(y) "Other Debt" means the debt described in the "Additional Information" section below;

(z) XXXXXXXXXX ;

(aa) "Proposed Transactions" means the transactions described in 8 to 29 below;

(bb) "PUC" means "paid-up capital" and has the meaning assigned to that term by subsection 89(1) of the Act;

(cc) "Subsidiary Wholly-owned Corporation" has the meaning assigned by subsection 248(1) of the Act;

(dd) "Targetco" means a current competitor of Holdco that Holdco is interested in acquiring. Targetco will be a XXXXXXXXXX corporation that is a TCC; and

(ee) "TCC" means taxable Canadian corporation as defined by subsection 89(1) of the Act.

Facts

1. Holdco is a holding company that holds XXXXXXXXXX . Holdco is a XXXXXXXXXX entity that generally does not have any taxable income, as it does not have any significant activity aside from performing certain centralized functions for the corporate group such as information technology, human resources, finance, XXXXXXXXXX services, etc. While Holdco does recover most of its costs from its subsidiaries, it does not mark up these costs and it does not have any significant independent sources of income, other than dividends from subsidiaries.

2. As at XXXXXXXXXX , Holdco has significant amounts of unclaimed capital cost allowance ($XXXXXXXXXX), amounts that are deductible under paragraph 20(1)(e) of the Act ($XXXXXXXXXX) and a Non-capital Losses carry-forward balance ($XXXXXXXXXX). Generally, Holdco has used these discretionary deductions only to the extent that they were required to reduce any taxable income to nil.

3. The subsidiaries of Holdco do generate taxable income. XXXXXXXXXX

4. Holdco intends to grow through either acquisitions or by internal "organic growth". While no formal negotiations have yet started with any specific targets, Holdco nevertheless hopes to complete an acquisition before XXXXXXXXXX . Moreover, Holdco intends to contribute additional capital to Opco 1, Opco 2 and Opco 3 to finance their internal "organic growth". In this regard and for that specific purpose, Holdco issued public debt for $XXXXXXXXXX on XXXXXXXXXX ("Issued Public Debt").

5. Holdco's current leverage ratio is approximately XXXXXXXXXX %. As the markets are currently favourable, Holdco intends to increase its leverage ratio to approximately XXXXXXXXXX %.

6. Holdco has permanent establishments in XXXXXXXXXX . The provincial allocation to each of these provinces in the XXXXXXXXXX taxation year was approximately XXXXXXXXXX respectively.

7. The Holdco Affiliates have permanent establishments in XXXXXXXXXX The allocation to XXXXXXXXXX in the XXXXXXXXXX taxation year was approximately XXXXXXXXXX respectively. The allocation to the other provinces and territories was minimal.

Proposed Transactions:

8. Holdco will incorporate Newco. The taxation year-end of Newco will be XXXXXXXXXX . The activities of Newco will essentially be limited to the activities described in the Proposed Transactions, including the investing of the proceeds received upon the issuance of its preferred shares to Lossco 1 and Lossco 2, as described in 16 and 17 below. Such proceeds will be loaned on a non-interest bearing basis to Holdco as described in 18 below.

The authorized share capital of Newco will consist of an unlimited number of common shares and preferred shares (the "Newco Preferred Shares").

The common shares of Newco will be without par value and voting (1 vote per share). The holders of common shares will be entitled to dividends at the discretion of the directors, and will be entitled to receive the remaining property of the corporation upon its winding-up or dissolution.

The Newco Preferred Shares will be without par value and non-voting. The Newco Preferred Shares will be redeemable and retractable for a redemption price equal to the FMV of the consideration for which the shares are issued, plus any accrued but unpaid dividends. The holders of Newco Preferred Shares will be entitled to cumulative dividends, calculated daily by reference to the redemption/retraction price of the Newco Preferred Shares at a rate equal to the interest rate on Lossco 1 Loan and Lossco 2 Loan plus a small spread. The interest rate on the Lossco 1 Loan and the Lossco 2 Loan will be identical. The dividends on the Newco Preferred Shares will be payable annually.

9. Newco will issue common shares of its capital stock to Holdco for nominal consideration.

10. Holdco will incorporate Lossco 1. The taxation year-end of Lossco 1 will be XXXXXXXXXX . The activities of Lossco 1 will be essentially limited to the activities described in the Proposed Transactions, including the investing of the proceeds received from the Lossco 1 Loan from Holdco (as described in 15 below). Such Lossco 1 Loan proceeds will be invested in the Newco Preferred Shares, as described in 16 below.
The authorized share capital of Lossco 1 will consist of an unlimited number of common shares.
The common shares of Lossco 1 will be without par value and voting (1 vote per share). The holders of common shares will be entitled to dividends at the discretion of the directors, and will be entitled to receive the remaining property of the corporation upon its winding-up or dissolution.

11. Lossco 1 will issue common shares of its capital stock to Holdco for nominal consideration.

12. Holdco will incorporate Lossco 2. The taxation year-end of Lossco 2 will be XXXXXXXXXX . The activities of Lossco 2 will be essentially limited to the activities described in the Proposed Transactions, including the investing of the proceeds received from the Lossco 2 Loan from Holdco (as described in 15 below). Such Lossco 2 Loan proceeds will be invested in the Newco Preferred Shares, as described in 17 below.
The authorized share capital of Lossco 2 will consist of an unlimited number of common shares.
The common shares of Lossco 2 will be without par value and voting (1 vote per share). The holders of common shares will be entitled to dividends at the discretion of the directors, and will be entitled to receive the remaining property of the corporation upon its winding-up or dissolution.

13. Lossco 2 will issue common shares of its capital stock to Holdco for nominal consideration.

14. Holdco will borrow an amount of $XXXXXXXXXX on a "daylight loan" basis from an Arm's-Length financial institution (the "Daylight Loan"). The interest rate on the Daylight Loan will be a commercial Arm's Length rate. Based on financial projections and XXXXXXXXXX financial statements, Holdco asserts it has the financial capacity to borrow those funds and the Daylight Loan will not exceed its borrowing capacity.

15. Holdco will use the proceeds of the Daylight Loan to make a loan of $XXXXXXXXXX to Lossco 1 (the "Lossco 1 Loan") and $XXXXXXXXXX to Lossco 2 (the "Lossco 2 Loan"). Simple interest will accrue on Lossco 1 Loan and Lossco 2 Loan and will be calculated at a rate that would not exceed a reasonable rate and is expected to be approximately XXXXXXXXXX %. The interest rate will be determined at the time the Proposed Transactions are implemented. Lossco 1 Loan and Lossco 2 Loan will be payable on demand. The interest on Lossco 1 Loan and Lossco 2 Loan will be paid periodically.

16. Lossco 1 will use the proceeds of the Lossco 1 Loan to subscribe for Newco Preferred Shares having an aggregate redemption/retraction price equal to the amount contributed ($XXXXXXXXXX ). The PUC and the FMV of the Newco Preferred Shares will be $XXXXXXXXXX . Lossco 1 will be entitled to cumulative dividends on the Newco Preferred Shares, calculated daily by reference to the redemption/retraction price of the Newco Preferred Shares at a rate equal to the interest rate on Lossco 1 Loan plus a small spread.
The amount of dividends on the Newco Preferred Shares held by Lossco 1 will be sufficient to permit Lossco 1 to realize a profit on its investment activity, after the deduction of all its expenses (not only its interest expenses).

17. Lossco 2 will use the proceeds of the Lossco 2 Loan to subscribe for Newco Preferred Shares having an aggregate redemption/retraction price equal to the amount contributed ($XXXXXXXXXX ). The PUC and the FMV of the Newco Preferred Shares will be $XXXXXXXXXX . Lossco 2 will be entitled to cumulative dividends on the Newco Preferred Shares, calculated daily by reference to the redemption/retraction price of the Newco Preferred Shares at a rate equal to the interest rate on Lossco 2 Loan plus a small spread.
The amount of dividends on the Newco Preferred Shares held by Lossco 2 will be sufficient to permit Lossco 2 to realize a profit on its investment activity, after the deduction of all its expenses (not only its interest expenses).

18. Newco will use the proceeds ($XXXXXXXXXX ) received from the Newco Preferred Shares subscription in 16 and 17 above to make an interest-free loan to Holdco in an amount equal to $XXXXXXXXXX (the "Holdco Loan"). The Holdco Loan will be payable on demand.

19. Holdco will use the proceeds received from the Holdco Loan to repay the Daylight Loan.

20. While Lossco 1 Loan and Lossco 2 Loan are outstanding, Holdco will, at least annually, make a contribution of capital to Newco in an amount equal to the dividend payable by Newco on the Newco Preferred Shares held by Lossco 1 and Lossco 2. No shares will be issued by Newco with respect to these contributions of capital and no amount will be added to Newco's stated capital accounts. The amount of each contribution of capital will be recorded by Newco as contributed surplus for accounting purposes. The contributions of capital will not be treated as income of Newco pursuant to generally accepted accounting principles.

21. Upon receipt of the contributions of capital described in 20 above, Newco will use the amounts received to pay dividends to Lossco 1 and Lossco 2 equal to the amount of the dividends payable on the Newco Preferred Shares.

22. Lossco 1 and Lossco 2 will use most of the amounts received as dividends from Newco to pay to Holdco the interest on Lossco 1 Loan and Lossco 2 Loan.

23. The following transactions will occur prior to XXXXXXXXXX in order to unwind the loss consolidation arrangement:

(a) Holdco will make a contribution of capital to Newco in an amount equal to the amount of any accrued and unpaid dividends on the Newco Preferred Shares held by Lossco 1 and Lossco 2. No shares will be issued by Newco and no amount will be added to its stated capital account in respect of the contribution. The amount of this contribution of capital, if any, will be recorded as contributed surplus for accounting purposes. The contribution of capital, if any, will not be income of Newco pursuant to generally accepted accounting principles.

(b) Holdco will borrow $XXXXXXXXXX on a "daylight loan" basis from an Arm's-Length financial institution (the "New Daylight Loan"). Holdco will use these funds to repay the Holdco Loan to Newco.

(c) Newco will use the funds received through (a) and (b) above to redeem the issued and outstanding Newco Preferred Shares held by Lossco 1 and Lossco 2.

(d) Lossco 1 will use most of the proceeds of the redemption of the Preferred Shares received in (c) above to repay the Lossco 1 Loan and any unpaid interest thereon.

(e) Lossco 2 will use most of the proceeds of the redemption of the Preferred Shares received in (c) above to repay the Lossco 2 Loan and any unpaid interest thereon.

(f) Holdco will use the funds received from Lossco 1 and Lossco 2 on the repayment of Lossco 1 Loan and Lossco 2 Loan to repay the New Daylight Loan.

24. Immediately after the proposed transaction described in 23 above, Holdco will transfer to Opco 1 all of its common shares of Lossco 1 in exchange for one common share of Opco 1.

Opco 1 will add to its stated capital account in respect of the common share issued to Holdco an amount equal to the ACB to Holdco of the common shares of Lossco 1. The ACB to Holdco of the common shares of Lossco 1 should be nominal. Holdco and Opco 1 will file a joint election, in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have subsection 85(1) of the Act apply to the transfer of the common shares of Lossco 1 to Opco 1. The amount agreed in the election will be equal to the ACB to Holdco of the common shares of Lossco 1. The ACB of the common shares of Lossco 1 will be less than their FMV at the time of the disposition. The FMV of the common shares of Lossco 1 will be determined by taking into consideration the funds available in Lossco 1 (i.e., some funds will have accumulated in Lossco 1 given the spread between the yield on the Newco Preferred Shares versus the interest paid on Lossco 1 Loan), the estimated time of utilization of the Non-capital Losses of Lossco 1 and other factors.

25. Also immediately after the proposed transaction described in 23 above, Holdco will transfer to Opco 2 all of its common shares of Lossco 2 in exchange for one common share of Opco 2.

Opco 2 will add to its stated capital account in respect of the common share issued to Holdco an amount equal to the ACB to Holdco of the common shares of Lossco 2. The ACB to Holdco of the common shares of Lossco 2 should be nominal. Holdco and Opco 2 will file a joint election, in prescribed form and within the time limits referred to in subsection 85(6) of the Act, to have subsection 85(1) of the Act apply to the transfer of the common shares of Lossco 2 to Opco 2. The amount agreed in the election will be equal to the ACB to Holdco of the common shares of Lossco 2. The ACB of the common shares of Lossco 2 will be less than their FMV at the time of the disposition. The FMV of the common shares of Lossco 2 will be determined by taking into consideration the funds available in Lossco 2 (i.e., some funds will have accumulated in Lossco 2 given the spread between the yield on the Newco Preferred Shares versus the interest paid on Lossco 2 Loan), the estimated time of utilization of the Non-capital Losses of Lossco 2 and other factors.

26. Shortly after the transaction described in 24 above, Opco 1 will cause Lossco 1 to be wound-up. The assets of Lossco 1 will be distributed to Opco 1 and its liabilities, if any, will be assumed by Opco 1. Lossco 1 will be dissolved within a short period of time.

27. Shortly after the transaction described in 25 above, Opco 2 will cause Lossco 2 to be wound-up. The assets of Lossco 2 will be distributed to Opco 2 and its liabilities, if any, will be assumed by Opco 2. Lossco 2 will be dissolved within a short period of time.

28. After the wind-up of Lossco 1 and Lossco 2, the above transactions, other than the transactions described in 8 and 9 above, will be repeated until the Issued Public Debt and the Other Debt are repaid. The amount of the Daylight Loan in 14 above may be reduced, however, depending on the Holdco Tax Attributes that remain. To the extent that the Daylight Loan is reduced, the respective amounts will be reduced proportionately.

29. After repayment of the Issued Public Debt and the Other Debt which is expected to be within XXXXXXXXXX years, Holdco will cause Newco to be wound-up.

Purpose of the Proposed Transactions:

30. The purpose of the Proposed Transactions is to allow for the consolidation of the Non-capital Losses of Holdco that would have been created by the interest expense and the discretionary deduction of the Holdco Tax Attributes, if it was not for the loss utilization transaction described above, with the taxable income of the Holdco Affiliates. The loss consolidation will be achieved by a series of transactions, including the creation of Non-capital Losses in Lossco 1 and Lossco 2, and the subsequent utilization of the Non-capital Losses created in Lossco 1 and in Lossco 2 by the Holdco Affiliates. The typical loss consolidation arrangement could not be implemented because the Holdco Affiliates are regulated and severely restricted in their borrowings. (XXXXXXXXXX )

31. In a typical loss transfer arrangement, Holdco would have lent to the Holdco Affiliates at a stated rate of interest and the Holdco Affiliates would in turn have used the borrowed funds to invest in the Newco Preferred Shares. Alternatively, if it would not be for XXXXXXXXXX restrictions on borrowing, Holdco could have amalgamated with any of the Holdco Affiliates, in order to have the interest deductions offset the relevant taxable income.

Additional Information

32. All the Non-capital Losses of Holdco were incurred while Holdco was affiliated with Opco1, Opco 2 and Opco 3. Newco will not be used for any other purposes than those described in the Proposed Transactions. Holdco will not claim, at any time, a capital loss in respect of its investment in Newco. Also, as Newco will not have any debt, it should never be insolvent.

33. Holdco intends to purchase Targetco by XXXXXXXXXX for an amount which is expected to be between $XXXXXXXXXX and $XXXXXXXXXX. After the acquisition, Holdco will own all of the common shares of Targetco.

34. Holdco intends to borrow XXXXXXXXXX from the public ("Other Debt") in order to finance the above acquisition and to contribute additional capital to Opco 1, Opco 2 and Opco 3. The loss utilization transaction will be adjusted accordingly based on the above. Specifically, the Proposed Transactions described in 14 to 29 above will be repeated for the additional amount. The amounts referred to in this ruling will be adjusted accordingly and the amount referred to in 23(b) above will be increased for the additional amount.

Rulings Given

Provided that the preceding statements constitute complete and accurate disclosure of all the relevant facts, Proposed Transactions and purpose of the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, we rule as follows:

A. Provided Lossco 1 has a legal obligation to pay interest on the Lossco 1 Loan and that the Newco Preferred Shares continue to be held by Lossco 1 for the purpose of gaining or producing income from property, Lossco 1 will be entitled to deduct the interest paid or payable, pursuant to paragraph 20(1)(c) of the Act, on the Lossco 1 Loan in respect of a taxation year to the extent such amount does not exceed a reasonable amount in respect thereof.

B. Provided Lossco 2 has a legal obligation to pay interest on the Lossco 2 Loan and that the Newco Preferred Shares continue to be held by Lossco 2 for the purpose of gaining or producing income from property, Lossco 2 will be entitled to deduct the interest paid or payable, pursuant to paragraph 20(1)(c) of the Act, on the Lossco 2 Loan in respect of a taxation year to the extent such amount does not exceed a reasonable amount in respect thereof.

C. No amount will be included in the income of Newco pursuant to section 9 or paragraphs 12(1)(c) or 12(1)(x) of the Act in respect of the contributions of capital made by Holdco as described in 20 and 23(a) above.

D. The dividends (or deemed dividends, if any) received by Lossco 1 and Lossco 2 on the Newco Preferred Shares, as described in 21 above (or 23(c) above), will be taxable dividends that will be deductible pursuant to subsection 112(1) of the Act in computing the taxable income of Lossco 1 and Lossco 2 for the taxation year in which the dividends are received, and, for greater certainty, such deduction will not be precluded by any of subsections 112(2.1), 112(2.2) or 112(2.4) of the Act.

E. After the winding-up of Lossco 1 into Opco 1 is completed, as described in 26 above, the provisions of subsection 88(1.1) of the Act will apply to permit Opco 1 to deduct the Non-capital Losses of Lossco 1 in computing its taxable income for any taxation year commencing after the commencement of the winding-up, to the extent that the requirements in paragraph 88(1.1)(a) and (b) of the Act are satisfied and subject to the limitations in paragraph 88(1.1)(e) and section 111 of the Act.

F. After the winding-up of Lossco 2 into Opco 2 is completed, as described in 27 above, the provisions of subsection 88(1.1) of the Act will apply to permit Opco 2 to deduct the Non-capital Losses of Lossco 2 in computing its taxable income for any taxation year commencing after the commencement of the winding-up, to the extent that the requirements in paragraph 88(1.1)(a) and (b) of the Act are satisfied and subject to the limitations in paragraph 88(1.1)(e) and section 111 of the Act.

G. The provisions of subsections 15(1), 56(2), and 246(1) of the Act, in and by themselves, will not apply to the Proposed Transactions.

H. Subsection 245(2) of the Act will not be applicable as a result of the Proposed Transactions to redetermine the tax consequences confirmed in the rulings given above.

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, excluding 26 to 29 above, are completed by XXXXXXXXXX

The above rulings are restricted to the first loss application indicated in Proposed Transactions 8 to 27.

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 fair market value or adjusted cost base of any property or the paid-up capital of any shares referred to herein;

(b) the amount of any non-capital loss, net capital loss or any other amount of any corporation referred to herein;

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

Yours truly,

XXXXXXXXXX
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch