2010 Ruling 2010-0369071R3 - Split-u Butterfly

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: Amendment to Ruling for change in facts.

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XXXXXXXXXX , 2010

Dear XXXXXXXXXX :

Subject: XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX Supplemental Advance Income Tax Ruling

This is in reply to your correspondence dated XXXXXXXXXX requesting a supplement to our advance income tax ruling number 2009-031398 that was issued to the above noted taxpayers on XXXXXXXXXX , 2009 (the "Ruling").

Unless otherwise stated, all capitalized terms have the same meaning as assigned to them in the Ruling.

You have advised that the Ruling did not properly identify the class of shares that are to be issued by TC1 and TC2 in consideration for the acquisition of the shares of DC. You have also advised that the property transferred from DC to TC1 and TC2 described in Paragraph 48 included depreciable property that was not required to be maintained in a separate class. You have asked that the Ruling be amended as follows:

(a) Replace Paragraph 42 under the heading "Proposed Transactions" with the following:

42. Brother2 will transfer all of his Class A shares and Class E shares in the capital stock of DC to TC2. Brother2 will jointly elect with TC2 in prescribed form and within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer. The agreed amount in respect of the shares will be an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). Consideration will consist of a debt issued by TC2 of an amount equal to the lesser of the aggregate hard ACB in respect of the Class A and Class E shares, and the aggregate of the agreed amounts in respect of the Class A and E shares, less $XXXXXXXXXX , and a number of Class E shares in the capital stock of TC2 with a FMV and redemption amount equal to the difference between the FMV of the Class A and Class E shares less the FMV of the debt issued. As a consequence of the above share transfers TC2 will own XXXXXXXXXX Class A and XXXXXXXXXX Class E shares in the capital stock of DC.

(b) Replace Paragraph 43 under the heading "Proposed Transactions" with the following:

43. Brother1 will (contemporaneously with Brother2 in Paragraph 42) transfer all of his Class A shares and Class E shares in the capital stock of DC to TC1. Brother1 will jointly elect with TC1 in prescribed form and within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer. The agreed amount in respect of the shares will be an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii). Consideration will consist of a debt issued by TC1 of an amount equal to the lesser of the aggregate hard ACB in respect of the Class A and Class E shares and the aggregate of the agreed amounts in respect of the Class A and E shares, less $XXXXXXXXXX , and a number of Class F shares in the capital stock of TC1 with a FMV and redemption amount equal to the difference between the FMV of the Class A and Class E shares less the FMV of the debt issued. As a consequence of the above share transfers TC1 will own XXXXXXXXXX Class A and XXXXXXXXXX Class E shares in the capital stock of DC.

(c) Add the following to the end of Ruling A:

For the purposes of the joint election described herein, the reference to the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition found in subparagraph 85(1)(e)(i) of the Act will be interpreted to mean that proportion of the undepreciated capital cost to the taxpayer of all the property of that class that the original cost of the assets that are transferred immediately before the disposition is of the original cost of all property of that class immediately before the disposition.
Confirmation

Provided that the preceding statements and the statements contained in the Ruling constitute a complete and accurate disclosure of all the relevant facts and proposed transactions and of the purposes of the Proposed Transactions, notwithstanding the above changes and the preceding statements, we hereby confirm that (i) the Ruling is amended in the manner set out above; and (ii) subject to the conditions, limitations, qualifications and comments set out in the Ruling, the Ruling will continue to be binding on the Canada Revenue Agency provided that the Proposed Transactions set out in the Ruling are completed by XXXXXXXXXX .

Yours truly,

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