2010 Ruling 2009-0330511R3 - Charitable Donation of Publicly Listed Shares

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 donations to registered charities of shares listed on a designated stock exchange constitute gifts for the purpose of the deduction for gifts under subsection 110.1(1) of ITA?

Position: Yes.

Reasons: Meet the requirements of subsection 110.1(1) of ITA.

XXXXXXXXXX

XXXXXXXXXX , 2010

Dear XXXXXXXXXX :

Re: Advance Income Tax Ruling Request
XXXXXXXXXX

We are writing in response to your letter of XXXXXXXXXX , wherein you requested an advance income tax ruling on behalf of XXXXXXXXXX and a new corporation described in paragraph 43 below. We also acknowledge receipt of additional information you provided to us in your letters dated XXXXXXXXXX as well as additional information you provided to us during various telephone conversations (XXXXXXXXXX ) in connection with your ruling request.

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

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

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

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

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

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

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

In this letter, except in paragraph 66, the names of the taxpayers will be referred to as follows:

XXXXXXXXXX

"Parent"
XXXXXXXXXX

"Child1"
XXXXXXXXXX

"Child2"
XXXXXXXXXX

"Child3"
XXXXXXXXXX

"Child4"

• Collectively, Child1, Child2, Child3 and Child4.

"Children"

• Collectively, Parent and the Children.

"Family"

XXXXXXXXXX

"Holdco1"
XXXXXXXXXX

"Holdco2"
XXXXXXXXXX
"Holdco3"

XXXXXXXXXX

"Foreignco1"
XXXXXXXXXX

"Foreignco2"
XXXXXXXXXX
"Foreignco3"

XXXXXXXXXX
"Group"

XXXXXXXXXX
XXXXXXXXXX

DEFINITIONS

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

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

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

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

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

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

Canada Revenue Agency; "CRA"

"Designated Stock Exchange" has the meaning assigned by subsection 248(1), one of which is the XXXXXXXXXX Stock Exchange; "Stock Exchange"

Fair market value; "FMV"

XXXXXXXXXX "FC"

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

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

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

"Qualified Donee" has the meaning assigned by subsection 149.1(1); "Qualified Donee"

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

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

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

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

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

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

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

FACTS

The Family

1. XXXXXXXXXX

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

3. XXXXXXXXXX

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

5. XXXXXXXXXX

The Group

6. XXXXXXXXXX

Holdco1

7. Holdco1, which is governed by the CBCA, was incorporated under the laws of XXXXXXXXXX on XXXXXXXXXX and continued under the CBCA on XXXXXXXXXX .

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

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

10. The share capital of Holdco1 consists of an unlimited number of class A and B common shares, and an unlimited number of class A, B, C and D preferred shares. There are XXXXXXXXXX class A common shares and XXXXXXXXXX class A preferred shares issued and outstanding of the capital stock of Holdco1. Among other rights, privileges and restrictions, the class A common shares of the capital stock of Holdco1 are voting and participating and the class A preferred shares of the capital stock of Holdco1 are voting, non-participating and redeemable.

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

Shareholders

Shares
ACB
PUC
FMV
(approximately)
Parent
XXXXXXXX class A preferred shares
XXXXXXX

XXXXX

XXXXXXXX

XXXXXXXX class A common shares
XXXXXXX
XXXXX
XXXXXXXX

Child1
XXXXXXXX class A common shares
XXXXXXX
XXXXX
XXXXXXXX

Child2
XXXXXXXX class A common shares
XXXXXXX
XXXXX
XXXXXXXX

Child3
XXXXXXXX class A common shares
XXXXXXX
XXXXX
XXXXXXXX

Child4
XXXXXXXXX class A common shares
XXXXXXXX
XXXXXX
XXXXXXXX

Approximate Total FMV of the XXXXXXXXX class A common shares

$ XXXXXX 1

1 For the purposes hereof, it will be assumed that the total FMV of all the class A common shares of the capital stock of Holdco1 is $XXXXXXXXXX . The actual approximate total FVM of all the issued and outstanding class A common shares of the capital stock of Hodco1 is estimated to be in the range of $ XXXXXXXXXX and $ XXXXXXXXXX .

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

13. In XXXXXXXXXX , the Children acquired from Parent the class A common shares of the capital stock of Holdco1 they own.

14. Parent has owned the XXXXXXXXXX class A preferred shares of the capital stock of Holdco1 since sometime in XXXXXXXXXX . At that time, Parent subscribed to XXXXXXXXXX class A preferred shares of the capital stock of Holdco1, for which he paid $XXXXXXXXXX cash, and received from Holdco1 XXXXXXXXXX class A preferred shares of the capital stock of Holdco1 as consideration for transferring to Holdco1 the XXXXXXXXXX issued and outstanding class A common shares of the capital stock of Holdco2 he owned. At that time, the FMV of the XXXXXXXXXX issued and outstanding class A common shares of capital stock of Holdco2 was nominal as the FMV of Holdco2's sole asset (consisting of shares of the capital stock of Foreignco1) was equal to its liabilities.

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

16. Parent and the Children hold their shares of the capital stock of Holdco1 as Capital Property. For Child1, the shares of the capital stock of Holdco1 it owns are Taxable Canadian Property.

17. Holdco1 does not have a CDA or RDTOH.

Holdco2

18. Holdco2, which is governed by the CBCA, was incorporated under the laws of XXXXXXXXXX on XXXXXXXXXX and continued under the CBCA on XXXXXXXXXX .

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

20. Holdco2 is a holding company. Holdco2's main asset consists of all the issued and outstanding shares of the capital stock of Foreignco1. Holdco2 also owns all the issued and outstanding shares of the capital stock of Holdco3 (XXXXXXXXXX ) and other assets valued at approximately $ XXXXXXXXXX . Holdco2 has liabilities of approximately $ XXXXXXXXXX .

21. The share capital of Holdco2 consists of an unlimited number of class A and B common shares, and an unlimited number of class A, B, C and D preferred shares.

22. Since its incorporation, Holdco2 has had the same XXXXXXXXXX class A common shares of its capital stock issued and outstanding.

23. Holdco1 owns the XXXXXXXXXX issued and outstanding class A common shares of the capital stock of Holdco2 since sometime in XXXXXXXXXX for having acquired them from Parent the only previous owner of the said shares. The XXXXXXXXXX class A common shares of the capital stock of Holdco2 have an ACB and a PUC of $ XXXXXXXXXX and an approximate FMV in the range of $XXXXXXXXXX and $ XXXXXXXXXX . For the purposes hereof, it will be assumed that the FMV of the issued and outstanding shares of the capital stock of Holdco2 is $XXXXXXXXXX

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

25. As of XXXXXXXXXX , Holdco2 had a CDA of $XXXXXXXXXX and no RDTOH.

Foreignco1

26. Foreignco1 was incorporated on XXXXXXXXXX and is governed by the laws of XXXXXXXXXX .

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

28. The issued and outstanding shares of the capital stock of Foreignco1 has been the same since XXXXXXXXXX at which time Foreignco1 issued XXXXXXXXXX class A (participating, non-voting, non-redeemable and non-retractable) common shares and XXXXXXXXXX (participating and voting) common shares of its capital stock. The approximate total FMV of the issued and outstanding class A common shares and common shares of the capital stock of Foreignco1 is in the range of $ XXXXXXXXXX and $ XXXXXXXXXX . For the purposes hereof, it will be assumed that the FMV of all the issued and outstanding shares of the capital stock of Foreignco1 is $XXXXXXXXXX . The FMV per share of the class A common shares and the common shares of the capital stock of Foreignco1 is identical.

29. Holdco2 has always owned all the issued and outstanding class A common shares of the capital stock of Foreignco1 having an ACB of $XXXXXXXXXX and a par value of XXXXXXXXXX per share. Since XXXXXXXXXX , Holdco2 owns all the issued and outstanding common shares of the capital stock of Foreignco1 having an ACB of $ XXXXXXXXXX and a par value of XXXXXXXXXX per share.

30. From XXXXXXXXXX to XXXXXXXXXX , Holdco2 and an XXXXXXXXXX resident owned respectively XXXXXXXXXX and XXXXXXXXXX of the issued and outstanding common shares of the capital stock of Foreignco1. Holdco2 subscribed for the XXXXXXXXXX common shares of the capital stock of Foreignco1 for $XXXXXXXXXX .

31. From XXXXXXXXXX to XXXXXXXXXX , XXXXXXXXXX owned the XXXXXXXXXX common shares of the capital stock of Foreignco1 for having acquired them from the XXXXXXXXXX resident on XXXXXXXXXX .

32. On XXXXXXXXXX , Holdco2 acquired from XXXXXXXXXX the XXXXXXXXXX common shares of the capital stock of Foreignco1 at a price of $XXXXXXXXXX .

33. Holdco2 holds the shares of the capital stock of Foreignco1as Capital Property.

34. XXXXXXXXXX

35. XXXXXXXXXX

36. XXXXXXXXXX

Foreignco2

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

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

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

Foreignco3

40. XXXXXXXXXX
XXXXXXXXXX

41. The shares of Foreignco3 are listed on a Stock Exchange. In XXXXXXXXXX , Foreignco2 acquired approximately XXXXXXXXXX % of the shares of the capital stock of Foreignco3.

PURPOSES OF THE PROPOSED TRANSACTIONS

42. The purpose of the proposed transactions is to gift a portion of the shares of Foreignco1 to one or more Charities and for Parent and Child4 to thereafter make a gift of a substantial part of their respective interests in Amalco to Child1, Child2 and Child3. XXXXXXXXXX .

PROPOSED TRANSACTIONS

43. Holdco1 and Holdco2 (hereinafter "Predecessor corporations") will amalgamate under the provisions of the CBCA to form Amalco.

44. The authorized share capital of Amalco will consist of an unlimited number of class A and class B common shares, and an unlimited number of class A, B, C, D and E preferred shares. Among other rights and privileges, the class A common shares will be voting and participating, the class A preferred shares will be voting, non-participating and redeemable, and, the class D preferred shares and the class E preferred shares will both be non-voting, non-participating, redeemable and retractable. Amalco's statutes will provide for a price adjustment clause in respect of its classes A, D and E preferred shares.

45. The Predecessor corporations will amalgamate under the provisions of the CBCA to form Amalco in such manner that on and by virtue of the amalgamation:

(a) all of the property (except any amounts receivable from, or shares of the capital stock of, any Predecessor corporation) of the Predecessor corporations immediately before the merger will become property of Amalco;

(b) all of the liabilities (except any amounts payable to any Predecessor corporation) of the Predecessor corporations immediately before the merger will become liabilities of Amalco;

(c) all authorized but unissued shares of the capital stock of the Predecessor corporations will be cancelled;

(d) all issued and outstanding shares in the capital stock of Holdco2 that are owned by Holdco1 immediately prior to the merger will be cancelled for no consideration; and,

(e) all of the shareholders (except any Predecessor corporation) who owned shares of the capital stock of Holdco1 immediately before the merger, will receive shares of the capital stock of Amalco because of the merger, as described in paragraph 46 below.

46. As part of the amalgamation of the Predecessor corporations mentioned in paragraph 43 above;

• Each of the Children will exchange the XXXXXXXXXX class A common shares of the capital stock of Holdco1 it owns for XXXXXXXXXX class A common shares of the capital stock of Amalco;
• Parent will exchange his XXXXXXXXXX class A common shares of the capital stock of Holdco1 he owns for XXXXXXXXXX class A common shares of the capital stock of Amalco (and no other consideration); and,
• Parent will exchange his XXXXXXXXXX class A preferred shares of the capital stock of Holdco1 he owns for XXXXXXXXXX class A preferred shares of Amalco having a FMV equal to the FMV of the XXXXXXXXXX class A preferred shares of capital stock of Holdco1 so exchanged.

47. Amalco will be a Taxable Canadian Corporation and a Private Corporation.

48. Pursuant to paragraph 87(2)(z.1), for the purposes of computing the CDA of Amalco, Amalco will be deemed to be the same corporation as, and a continuation of, Holdco1 and Holdco2, such that Amalco will include in its CDA Holdco2's CDA immediately before the amalgamation.

49. The shares of Foreignco1 will become publicly traded on a Stock Exchange.

50. Amalco will gift to one or more Charities that will be Qualified Donees approximately XXXXXXXXXX class A common shares and XXXXXXXXXX common shares of the capital stock of Foreignco1 (it is intended that the total FMV of the gifts will represent XXXXXXXXXX % of the FMV of Amalco being approximately $ XXXXXXXXXX on a total FMV of approximately $XXXXXXXXXX ).

51. Amalco will not designate an amount under subsection 110.1(3) (or proposed subsections 110.1(2.1) and (3) if enacted at the time of implementation of the proposed transactions) in respect of the gift(s) described paragraph 50 above.

52. Pursuant to paragraph 69(1)(b), as it relates to the gifts described in paragraph 50 above, Amalco will be deemed to have received proceeds of disposition for the Foreignco1 shares disposed by way of gift equal to the FMV of the said shares immediately before the gift (hereinafter "Proceeds of Disposition").

53. Amalco will realize a capital gain for a taxation year from the disposition of the Foreignco1 shares disposed in the year by way of gift described in paragraph 50 above (hereinafter "Gifted Shares") equal to amount of the Proceeds of Disposition that exceeds the total ACB to Amalco of the Gifted Shares immediately before the disposition.

54. Parent will transfer to Amalco the XXXXXXXXXX class A common shares of the capital stock of Amalco he owns (representing XXXXXXXXXX % of the participating shares of Amalco) at their FMV immediately before the transfer (being approximately $ XXXXXXXXXX ) in exchange for XXXXXXXXXX class D preferred shares and XXXXXXXXXX class E preferred shares of the capital stock of Amalco. Immediately after the transfer, the redemption value and the FMV of the XXXXXXXXXX class D preferred shares of the capital stock of Amalco will be equal to the FMV, immediately before the transfer, of the transferred XXXXXXXXXX class A common shares of the capital stock of Amalco minus $XXXXXXXXXX (hereinafter "Parent's-Class D Redemption Value"), and, immediately after the transfer, the redemption value and the FMV of the XXXXXXXXXX class E preferred shares of the capital stock of Amalco, will be equal to the FMV, immediately before the transfer, of the transferred XXXXXXXXXX class A common shares of the capital stock of Amalco, minus Parent's-Class D Redemption Value of the XXXXXXXXXX class D preferred shares of the capital stock of Amalco issued to Parent (hereinafter "Parent's-Class E Redemption Value").

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

56. For the purposes of the CBCA, Amalco will add to the stated capital account maintained in respect of its class D preferred shares of its capital stock an amount equal to the aggregate PUC of the exchanged XXXXXXXXXX class A common shares of its capital stock immediately before the transfer minus $ XXXXXXXXXX , and, will add to the stated capital account maintained in respect of its class E preferred shares of its capital stock an amount of $ XXXXXXXXXX .

57. In respect of the transfer described in paragraph 54 above, according to the price adjustment clause in Amalco's statutes, if the tax authorities or a court of competent jurisdiction determine at any particular time (hereinafter "Adjustment Time") that the FMV of the XXXXXXXXXX class A common shares of the capital stock of Amalco, immediately before the exchange, is greater than the FMV of the XXXXXXXXXX class D preferred shares and the XXXXXXXXXX class E preferred shares of the capital stock of Amalco, immediately after the transfer, as initially determined, then Amalco shall adjust the Parent's-Class E Redemption Value of the XXXXXXXXXX class E preferred shares of its capital stock, in order to ensure that the aggregate redemption value and FMV, immediately after the transfer, of the XXXXXXXXXX class D preferred shares and the XXXXXXXXXX class E preferred shares issued to Parent is adjusted so as to equal the FMV so determined. Furthermore, where dividends have been paid in respect of the class E preferred shares or where any class E preferred shares have been redeemed by Amalco prior to the Adjustment Time, payments shall be made by Amalco to give full effect to such adjustment.

58. Child4 will transfer to Amalco XXXXXXXXXX class A common shares of the capital stock of Amalco he owns (representing XXXXXXXXXX % of the participating shares of Amalco) at their FMV immediately before the transfer (being approximately $ XXXXXXXXXX ) in exchange for XXXXXXXXXX class D preferred shares and XXXXXXXXXX class E preferred shares of the capital stock of Amalco. Immediately after the transfer, the redemption value and the FMV of the XXXXXXXXXX class D preferred shares of the capital stock of Amalco will be equal to the FMV, immediately before the transfer, of the transferred XXXXXXXXXX class A common shares of the capital stock of Amalco minus $XXXXXXXXXX (hereinafter "Child4's-Class D Redemption Value"), and, immediately after the transfer, the redemption value and the FMV of the XXXXXXXXXX class E preferred shares of the capital stock of Amalco, will be equal to the FMV, immediately before the transfer, of the transferred XXXXXXXXXX class A common shares of the capital stock of Amalco minus Child4's-Class D Redemption Value of the XXXXXXXXXX class D preferred shares of the capital stock of Amalco issued to Child4 (hereinafter "Child4's-Class E Redemption Value").

59. Child4 and Amalco will jointly elect, in prescribed form and within the time limits prescribed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX class A common shares of the capital stock of Amalco to Amalco. The Agreed Amount in respect of the XXXXXXXXXX class A common shares of Amalco so transferred by Child4 to Amalco will be equal to the ACB of such shares to Child4 immediately before the exchange. The Agreed Amount will be limited to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii).

60. For the purposes of the CBCA, Amalco will add to the stated capital account maintained in respect of its class D preferred shares of its capital stock an amount equal to the aggregate PUC of the exchanged XXXXXXXXXX class A common shares of its capital stock immediately before the transfer minus $ XXXXXXXXXX , and will add to the stated capital account maintained in respect of its class E preferred shares of its capital stock an amount of $ XXXXXXXXXX .

61. In respect of the transfer described in paragraph 58 above, according to the price adjustment clause in Amalco's statutes, if the tax authorities or a court of competent jurisdiction determine at any particular time (hereinafter "Adjustment Time") that
the FMV of the XXXXXXXXXX class A common shares of the capital stock of Amalco immediately before the exchange is greater than the FMV of the XXXXXXXXXX class D preferred shares and the XXXXXXXXXX class E preferred shares of the capital stock of Amalco, immediately after the transfer, as initially determined, then Amalco shall adjust the Child4's-Class E Redemption Value of the XXXXXXXXXX class E preferred shares of its capital stock, in order to ensure that the aggregate redemption value and FMV, immediately after the transfer, of the XXXXXXXXXX class D preferred shares and the XXXXXXXXXX class E preferred shares issued to Child4 is adjusted so as to equal the FMV so determined. Furthermore, where dividends have been paid in respect of the class E preferred shares or where any class E preferred shares have been redeemed by Amalco prior to the Adjustment Time, payments shall be made by Amalco to give full effect to such adjustment.

62. Amalco will redeem the XXXXXXXXXX class D preferred shares of its share capital owned by Parent for an amount equal to the aggregate of Parent's-Class D Redemption Value of the class D preferred shares so redeemed. The redemption value will be paid in full by Amalco by the issuance, in favour of Parent, of a series of three non-interest bearing promissory notes payable on demand having an aggregate principal amount and FMV equal to Parent's-Class D Redemption Value of the class D preferred shares so redeemed which will be evidenced by three promissory notes having the same principal amount and FMV (hereinafter the "Amalco P Notes"). Parent will accept the Amalco P Notes as full payment for the redemption value of his class D preferred shares of the capital stock of Amalco.

63. Amalco will redeem the XXXXXXXXXX class D preferred shares of its share capital owned by Child4 for an amount equal to the aggregate of Child4's-Class D Redemption Value of the class D preferred shares so redeemed. The redemption value will be paid in full by Amalco by the issuance, in favour of Child4, of a series of three non-interest bearing promissory notes payable on demand having an aggregate principal amount and FMV equal to Child4's-Class D Redemption Value of the class D preferred shares so redeemed which will be evidenced by three promissory notes having the same principal amount and FMV (hereinafter the "Amalco C Notes"). Child4 will accept the Amalco C Notes as full payment for the redemption value of his class D preferred shares of the capital stock of Amalco.

64. Amalco will elect in prescribed form and manner pursuant to subsection 83(2) that the full amount of any dividend, resulting from the redemption of shares described in paragraphs 62 and 63 above, be deemed to be paid out of Amalco's CDA.

65. Parent will transfer by way of a gift an Amalco P Note to each of Child1, Child2 and Child3, and, Child4 will transfer by way of a gift an Amalco C Note to each of Child1, Child2 and Child3.

ADDITIONAL INFORMATION

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

XXXXXXXXXX

Address:

XXXXXXXXXX
Social Insurance Number :
XXXXXXXXXX
Tax Services Office:
XXXXXXXXXX
Taxation Centre:
XXXXXXXXXX

XXXXXXXXXX

Address:

XXXXXXXXXX

Social Insurance Number :
XXXXXXXXXX
Tax Services Office:
XXXXXXXXXX
Taxation Centre:
XXXXXXXXXX

XXXXXXXXXX

Address:

XXXXXXXXXX

Social Insurance Number :
XXXXXXXXXX
Tax Services Office:
XXXXXXXXXX
Taxation Centre:
XXXXXXXXXX

XXXXXXXXXX

Address:
XXXXXXXXXX

Business Number:
XXXXXXXXXX
Tax Services Office:
XXXXXXXXXX
Taxation Centre:
XXXXXXXXXX

XXXXXXXXXX

Address:

XXXXXXXXXX

Business Number:
Tax Services Office
XXXXXXXXXX
XXXXXXXXXX
Taxation Centre:
XXXXXXXXXX

RULINGS GIVEN

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

A. The amalgamation of Hodco1 and Holdco2 referred to in paragraph 43 will be an amalgamation described in subsection 87(1) and, upon the amalgamation, provided that the shares of Holdco1 are held by a particular holder thereof as Capital Property, the provisions of subsection 87(4), other than paragraphs 87(4)(c) to (e), will apply to such holder.

B. Child1 who is not resident in Canada and who will dispose of shares of the capital stock of Holdco1 as a consequence of the amalgamation referred to in paragraph 46 will not be required to comply with the requirements of section 116 in respect of the disposition and subsection 116(5) will not apply to impose any liability on any person as a result of the amalgamation.

C. Pursuant to subsection 110.1(1), the FMV of the gift(s) of the shares of Foreignco1 to one or more Charity by Amalco, described in paragraph 50 above, will be included in determining the total charitable gifts of Amalco for its taxation year during which the gift(s) is (are) made, provided an official receipt containing the prescribed information is issued by the Charity(ies) and filed by Amalco as required by subsection 110.1(2).

D. Provided that the shares of the capital stock of Foreignco1 owned by Amalco are Capital Property to Amalco, no portion of the capital gain(s) arising from the disposition by way of gift(s) to one or more Charity of the Foreignco1 shares, as described in paragraph 50 above, will be included in computing Amalco's taxable capital gain(s) to the extent provided for in paragraph 38(a.1).

E. The full amount of the net capital gain arising from the disposition of the shares of Foreignco1 resulting from the making of the gift(s) to one or more charities as described in paragraph 50 above will be added to the CDA of Amalco pursuant to the application of the provisions of clauses (A) and (B) of the definition of CDA in subsection 89(1).

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

a) the transfer by Parent of the XXXXXXXXXX class A common shares of the capital stock of Amalco owned by Parent to Amalco as described in paragraph 54 above; and

b) the transfer by Child4 of the XXXXXXXXXX class A common shares of the capital stock of Amalco owned by Child4 to Amalco as described in paragraph 58 above;

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

G. The provisions of subsection 85(2.1) will not apply to reduce the PUC of the XXXXXXXXXX class D common shares and XXXXXXXXXX class D common shares of the capital stock of Amalco issued by Amalco to Parent and Child4, respectively, (as described in paragraphs 54 and 58 above).

H. On the redemption of the XXXXXXXXXX class D preferred shares described in paragraph 62 above, Amalco will be deemed to have paid, and Parent will be deemed to have received, pursuant to subsection 84(3), a dividend equal to the amount by which the amount paid by Amalco on the redemption exceeds the PUC of the XXXXXXXXXX class D preferred shares immediately before the purchase.

I. On the redemption of the XXXXXXXXXX class D preferred shares described in paragraph 63, Amalco will be deemed to have paid, and Child4 will be deemed to have received, pursuant to subsection 84(3), a dividend equal to the amount by which the amount paid by Amalco on the redemption exceeds the PUC of the XXXXXXXXXX class D preferred shares immediately before the purchase.

J. Provided that Amalco elects pursuant to subsection 83(2), in respect of the full amount of each dividend that it is deemed to have paid as described in Rulings H and I, each of the dividends will be deemed to be a capital dividend to the extent of Amalco's CDA, determined immediately before the time each dividend is deemed to be paid.

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

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

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

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

COMMENTS

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

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

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

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

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

Yours truly,

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