2009 Ruling 2009-0330881R3 - Foreign Mergers

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. Whether each of the mergers being undertaken qualifies as a "foreign merger" within the meaning thereof in subsection 87(8.1) of the Act. 2. Whether each of the foreign mergers is an "amalgamation" for purposes of subsection 80.01(3) of the Act. 3. Do paragraphs 95(2)(d) and/or 95(2)(d.1) apply to the foreign mergers.

Position: 1. Yes. 2. Yes. 3. Question of fact.

Reasons: 1. The foreign mergers meet all of the requirements of subsection 87(8.1). 2. The foreign mergers are amalgamations for purposes of subsection 80.01(3) of the Act. 3. See rulings given.

XXXXXXXXXX 									2009-033088

XXXXXXXXXX , 2009

Dear XXXXXXXXXX :

Re: Advance Income Tax Ruling
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

This is in response to your XXXXXXXXXX request for an advance income tax ruling on behalf of the above. XXXXXXXXXX We acknowledge receipt of the additional information provided to us on XXXXXXXXXX and in our various telephone conversations (XXXXXXXXXX ).

Unless otherwise stated, all statutory references herein are to the Income Tax Act, R.S.C. 1985, c.1 (5th Supplement) (the "Act"), as amended to the date of this advance income tax ruling.

The rulings and opinions given herein are based solely on the facts, proposed transactions and the purposes of the proposed transactions described below. The documents submitted with your request do not form part of the facts and proposed transactions on which this ruling is based and any reference to these documents is provided solely for the convenience of the reader.

Definitions for Corporations

(a) "Finco" means XXXXXXXXXX ;

(b) "Foreign Country Opcos" means all of Opco 1, Opco 2, Opco 3, Opco 4, Opco 5, Opco 6, Opco 7, Opco 8, Opco 9, Opco 10, Opco 11, Opco 12, Opco 13 and Opco 14, all of the corporations in Opco Group 1, Opco Group 2, Opco Group 3, Opco Group 4, Opco Group 5, Opco Group 6, Opco Group 7, Opco Group 8, Opco Group 9, Opco Group 10 and Opco Group 11 and Subsidiary Corporation 1, Subsidiary Corporation 2, Subsidiary Corporation 3, Subsidiary Corporation 4 and Subsidiary Corporation 5;

(c) "Holdco" means XXXXXXXXXX ;

(d) "Newco 1", "Newco 2", "Newco 3" and "Newco 4" will each be a limited liability company formed in the Foreign Jurisdiction pursuant to the Foreign Legislation as described in paragraphs 21, 27 and 38 below;

(e) "Opco 1" means XXXXXXXXXX .;

(f) "Opco 2" means XXXXXXXXXX .;

(g) "Opco 3" means XXXXXXXXXX .;

(h) "Opco 4" means XXXXXXXXXX .;

(i) "Opco 5" means XXXXXXXXXX .;

(j) "Opco 6" means XXXXXXXXXX .;

(k) "Opco 7" means XXXXXXXXXX .;

(l) "Opco 8" means XXXXXXXXXX ;

(m) "Opco 9" means XXXXXXXXXX ;

(n) "Opco 10" means XXXXXXXXXX (owned XXXXXXXXXX % by Opco 14 and XXXXXXXXXX % by Subco);

(o) "Opco 11" means XXXXXXXXXX ;

(p) "Opco 12" means XXXXXXXXXX .

(q) "Opco 13" means XXXXXXXXXX ;

(r) "Opco 14" means XXXXXXXXXX .;

(s) "Opco Group 1" means XXXXXXXXXX

(t) "Opco Group 1 Parent" means XXXXXXXXXX .;

(u) "Opco Group 1 Parents" means XXXXXXXXXX ;

(v) "Opco Group 2" means XXXXXXXXXX .;

(w) "Opco Group 3" means XXXXXXXXXX ;

(x) "Opco Group 3 Parent" means XXXXXXXXXX .;

(y) "Opco Group 3 Parents" means XXXXXXXXXX ;

(z) "Opco Group 4" means XXXXXXXXXX ;

(aa) "Opco Group 5" means XXXXXXXXXX .;

(bb) "Opco Group 5 Parent 1" means XXXXXXXXXX .;

(cc) "Opco Group 5 Parent 2" means XXXXXXXXXX .;

(dd) "Opco Group 5 Parent 3" means XXXXXXXXXX ;

(ee) "Opco Group 5 Parent 4" means XXXXXXXXXX ;

(ff) "Opco Group 6" means XXXXXXXXXX .;

(gg) "Opco Group 7" means XXXXXXXXXX .;

(hh) "Opco Group 8" means XXXXXXXXXX ;

(ii) "Opco Group 9" means XXXXXXXXXX ;

(jj) "Opco Group 10" means XXXXXXXXXX ;

(kk) "Opco Group 11" means XXXXXXXXXX ;

(ll) "Parent" means XXXXXXXXXX .;

(mm) "Subco" means XXXXXXXXXX .;

(nn) "Subsidiary Corporation 1" means XXXXXXXXXX .;

(oo) "Subsidiary Corporation 2" means XXXXXXXXXX ;

(pp) "Subsidiary Corporation 3" means XXXXXXXXXX .;

(qq) "Subsidiary Corporation 4" means XXXXXXXXXX .;

(rr) "Subsidiary Corporation 5" means XXXXXXXXXX .;

Other Definitions

(ss) "CBCA" means the Canada Business Corporations Act RSC 1985, c. 44, as amended;

(tt) "CCAA" means the Companies' Creditors Arrangement Act RSC 1985, c. 36, as amended;

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

(vv) "Exchange" means the XXXXXXXXXX Stock Exchange;

(ww) "Finco Bonds" means the arm's length borrowings of Finco as more fully described in paragraph 10 below;

(xx) "Foreign Code" means the U.S. Bankruptcy Code - U.S Code, Title 11;

(yy) "Foreign Country" means the United States of America;

(zz) "Foreign Jurisdiction" means the State of XXXXXXXXXX ;

(aaa) "Foreign Legislation" means XXXXXXXXXX ;

(bbb) "Regulations" means the Income Tax Regulations, C.R.C. 1977, c. 945, as amended;

(ccc) "resident in the Foreign Country" means a corporate entity that:

• was formed or created under the laws of the Foreign Country or a state within the Foreign Country;
• has its central management and control in the Foreign Country; and
• is not resident, for Canadian income tax purposes, in any country other than the Foreign Country;

(ddd) "Subco Debt" means Subco's debt owing to Finco as more fully described in paragraph 10 below;

(eee) "arm's length" has the meaning assigned by section 251 of the Act;

(fff) "controlled foreign affiliate" has the meaning assigned by subsection 95(1) of the Act;

(ggg) "cost amount" has the meaning assigned by subsection 248(1) of the Act;

(hhh) "disposition" has the meaning assigned by subsection 248(1) of the Act;

(iii) "excluded property" has the meaning assigned by subsection 95(1) of the Act;

(jjj) "foreign accrual property income" ("FAPI") has the meaning assigned by subsection 95(1) of the Act;

(kkk) "foreign merger" has the meaning assigned by subsection 87(8.1) of the Act;

(lll) "forgiven amount" has the meaning assigned by subsection 80.01(1) of the Act;

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

(nnn) "public corporation" has the meaning assigned by subsection 89(1) of the Act;

(ooo) "related persons" has the meaning assigned by subsection 251(2) of the Act;

(ppp) "subsidiary wholly-owned corporation" has the meaning assigned by subsection 248(1) of the Act;

(qqq) "surplus entitlement percentage" has the meaning assigned by subsection 5905(13) of the Regulations; and

(rrr) "taxable Canadian corporation" has the meaning assigned by subsection 89(1) of the Act.

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

Facts

1. Parent is a corporation that was formed pursuant to the provisions of the CBCA. Parent is a taxable Canadian corporation and a public corporation whose shares trade on the Exchange. XXXXXXXXXX Parent files its tax returns with the XXXXXXXXXX Taxation Centre under Business Account Number XXXXXXXXXX and its tax affairs are administered by the XXXXXXXXXX Tax Services Office.

2. Holdco is a corporation that was formed in the Foreign Jurisdiction and is resident in the Foreign Country. Holdco is a holding company with no significant operations. Holdco files consolidated federal income tax returns in the Foreign Country. Prior to the proposed transactions described below, Holdco is a subsidiary wholly-owned corporation and a controlled foreign affiliate of Parent. As a result of the proposed transactions described in paragraph 18 below, certain shares of Holdco will be acquired by a subsidiary wholly-owned corporation of Parent.

3. Subco is a corporation that was formed in the Foreign Jurisdiction and is resident in the Foreign Country. Subco carries on a XXXXXXXXXX business and acts as a holding company for numerous entities formed in the Foreign Country including subsidiaries that operate XXXXXXXXXX in the Foreign Country. Subco is a subsidiary wholly-owned corporation of Holdco and is a controlled foreign affiliate of Parent. The shares of Subco are capital property to Holdco.

4. Finco is a corporation that was formed in the Foreign Jurisdiction and is resident in the Foreign Country. Finco is a special purpose entity established to act as an issuer of debt. Finco has no operations other than those relating to its financing activities. Finco is a subsidiary wholly-owned corporation of Subco and is a controlled foreign affiliate of Parent.

5. Opco 1 is a corporation formed in the Foreign Country and is resident in the Foreign Country. XXXXXXXXXX Opco 1 is a subsidiary wholly-owned corporation of Subco.

6. Opco 2 is a corporation formed in the Foreign Country and is resident in the Foreign Country. Opco 2 carries on a XXXXXXXXXX business and is a subsidiary wholly-owned corporation of Subco.

7. Opco 3 is a corporation formed in the Foreign Country and is resident in the Foreign Country. Opco 3 carries on XXXXXXXXXX business and is a subsidiary wholly-owned corporation of Subco.

8. Opco 4, Opco 5, Opco 6, Opco 7, Opco 12, Opco 13, Subsidiary Corporation 3, Subsidiary Corporation 4 and Subsidiary Corporation 5 are corporations formed in the Foreign Country and are each resident in the Foreign Country. Opco 4 is a subsidiary wholly-owned corporation of Opco Group 5 Parent 4. Opco 5 is a subsidiary wholly-owned corporation of Opco 4. Opco 6 is a subsidiary wholly-owned corporation of Subco. Opco 7 is a subsidiary wholly-owned corporation of Opco Group 5 Parent 1. Subsidiary Corporation 3 and Subsidiary Corporation 4 are subsidiary wholly-owned corporations of Opco 13 and Subsidiary Corporation 5 is a subsidiary wholly-owned corporation of Opco 12.

9. All of the remaining Foreign Country Opcos are corporations formed in the Foreign Country and are resident in the Foreign Country. Subco, directly or indirectly, owns all of the equity interests in all of the remaining Foreign Country Opcos. Some of these corporations have elected to be a disregarded entity for purposes of the federal income tax laws of the Foreign Country.

10. In XXXXXXXXXX , Finco borrowed an amount under the terms of the Finco Bonds and on-lent the proceeds to Subco. The current amount of principal outstanding on the Finco Bonds is approximately US $XXXXXXXXXX . The aggregate principal amount of the Subco Debt outstanding to Finco is approximately US $XXXXXXXXXX . The Subco Debt includes the aggregate amount owing to Finco in respect of the Finco Bonds, an amount outstanding in connection with a XXXXXXXXXX issuance of bonds by Finco and other intercompany notes previously issued to Subco by Finco. The rate of interest payable by Subco on the Subco Debt is slightly higher than the rate of interest Finco pays on the Finco Bonds.

11. The securities legislation of the Foreign Country requires the filing of separate audited financial statements for any entity that issues bonds. The use of Finco to issue bonds to third party lenders significantly reduces the administrative burden imposed under this securities legislation. It is relatively easy for Finco to prepare its own separate financial statements since its activities are limited to its financing activities.

12. On XXXXXXXXXX Parent was granted creditor protection under the provisions of the CCAA. Parent also filed a petition for recognition of a foreign proceeding under the Foreign Code. On the same day, Holdco, Subco and Finco and certain of the Foreign Country Opcos were granted creditor protection under the provisions of the Foreign Code.

13. There are in excess of XXXXXXXXXX intercompany debts, denominated in U.S. dollars, outstanding within the group of corporations that includes Holdco, Finco, Subco and the various corporations that comprise the Foreign Country Opcos. Although the balances of these intercompany debts change constantly, it is estimated that there is in excess of U.S. $XXXXXXXXXX of intercompany debt outstanding between all of these corporations.

14. Parent has, and will have at all times during the course of the proposed transactions, a XXXXXXXXXX % surplus entitlement percentage in Holdco, Subco, Finco and each of the Foreign Country Opcos and in each of the successors (by merger) to any of these corporations.

15. To the best of your knowledge and that of Parent, none of the issues involved in this ruling letter:

(i) is in an earlier return of Parent or any related persons of Parent,

(ii) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of Parent or any related persons of Parent,

(iii) is under objection by Parent or any related persons of Parent, or

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

16. Parent and its subsidiaries are currently in the process of negotiating the terms of a worldwide restructuring with their creditors. Emergence from creditor protection is expected to occur in XXXXXXXXXX . It is contemplated that the transactions described below will be implemented prior to, or concurrent with, Parent, Holdco, Subco, Finco and the Foreign Country Opcos (or their successors) referred to in paragraph 12 emerging from creditor protection. The proposed transactions described below are part of a broader corporate reorganization.

Proposed Transactions

17. With the exception of certain inter-company loans outstanding between any of the Foreign Country Opcos, all of the creditors of the Foreign Country Opcos will exchange their outstanding debt claims against each of them, as applicable, for shares of Parent, warrants of Parent, shares of Holdco, new debt or a combination thereof.

18. All of the creditors of Holdco and Subco, including certain related parties that are direct or indirect subsidiaries of Parent, will exchange their outstanding debt claims against each of Holdco and Subco, as applicable, for shares of Parent, warrants of Parent, shares of Holdco, new debt or a combination thereof.

19. The holders of the Finco Bonds will exchange their claims against Finco for shares and warrants of Parent.

20. Various intercompany debts outstanding between the Foreign Country Opcos will be settled, set-off, recapitalized, contributed, distributed or otherwise eliminated as part of the proposed restructuring.

Corporate Reorganization #1

21. Finco will form Newco 1 and Newco 4 in accordance with the Foreign Legislation of the Foreign Jurisdiction. Newco 1 and Newco 4 will each elect to be a disregarded entity for purposes of the federal income tax laws of the Foreign Country.

22. Each corporation in Opco Group 2 is a subsidiary wholly-owned corporation of Subco. The shares of each corporation in Opco Group 2 are capital property to Subco. Each corporation in Opco Group 2 will enter into an agreement of merger with Newco 1. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 1 will be the surviving entity of the merger;
• the sole consideration that Subco will receive upon the surrender of its shares of each corporation in Opco Group 2 will be shares of Finco;
• all rights and property of whatever nature vested in each corporation in Opco Group 2 before its merger into Newco 1 will be vested in Newco 1 immediately after the merger without any further act or deed by Newco 1;
• any intercompany debt that is outstanding between Newco 1 and the corporation being merged into Newco 1 immediately before the merger will be settled on the merger; and
• Newco 1 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 2.

23. Each of the corporations in Opco Group 1 Parents is a subsidiary wholly-owned corporation of Subco. The shares of each corporation in Opco Group 1 Parents are capital property to Subco. Each of the corporations in Opco Group 1 will enter into an agreement of merger with Newco 1. In accordance with the Foreign Legislation, the agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• all of the corporations in Opco Group 1 will merge into Newco 1 simultaneously;
• Newco 1 will be the only surviving entity of the merger;
• the sole consideration that Subco will receive upon the surrender of its shares of each corporation in Opco Group 1 Parents will be shares of Finco;
• Opco Group 1 Parent and each of the Opco Group 1 Parents will surrender the shares of its subsidiary and such shares will be cancelled by the subsidiary;
• all rights and property of whatever nature vested in any of the corporations in Opco Group 1 before their merger into Newco 1 will be vested in Newco 1 immediately after the merger without any further act or deed by Newco 1;
• any intercompany debt that is outstanding between any of the corporations in Opco Group 1 being merged into Newco 1 immediately before the merger will be settled on the merger;
• any intercompany debt that is outstanding between Newco 1 and the corporation being merged into Newco 1 immediately before the merger will be settled on the merger; and
• Newco 1 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 1.

24. Newco 1 will be resident in the Foreign Country immediately before and after the mergers described in paragraphs 22 and 23 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by any of the corporations in Opco Group 1 or Opco Group 2 in respect of any property that becomes property of Newco 1 in the course of the mergers described in paragraphs 22 and 23 above.

25. Each corporation in Opco Group 10 is a subsidiary-wholly owned corporation of Subco. The shares of each corporation in Opco Group 10 are capital property to Subco. Each of the corporation in Opco Group 10 will enter into an agreement of merger with Newco 4. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 4 will be the surviving entity of the merger;
• the sole consideration that Subco will receive upon the surrender of its shares of each corporation in Opco Group 10 will be shares of Finco;
• all rights and property of whatever nature vested in each corporation in Opco Group 10 before its merger into Newco 4 will be vested into Newco 4 immediately after the merger without any further act or deed by Newco 4;
• any intercompany debt that is outstanding between Newco 4 and the corporation being merged into Newco 4 immediately before the merger will be settled on the merger; and
• Newco 4 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 10.

26. Newco 4 will be resident in the Foreign Country immediately before and after the mergers described in paragraph 25 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by any of the corporations in Opco Group 10 in respect of any property that becomes property of Newco 4 in the course of the mergers described in paragraph 25 above. As a result of the mergers described in paragraph 25 above, Newco 4 will have acquired a XXXXXXXXXX % interest in Opco 10.

Corporate Reorganization #2

27. Finco will form Newco 2 in accordance with the Foreign Legislation of the Foreign Jurisdiction. Newco 2 will elect to be a disregarded entity for purposes of the federal income tax laws of the Foreign Country.

28. Opco 1 will enter into an agreement of merger with Newco 2. In accordance with the Foreign Legislation, the agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 2 will be the surviving entity of the merger;
• the sole consideration that Subco will receive upon the surrender of its shares of Opco 1 will be shares of Finco;
• all rights and property of whatever nature vested in Opco 1 before its merger into Newco 2 will be vested in Newco 2 immediately after the merger without any further act or deed by Newco 2; and
• Newco 2 will assume all of the liabilities and other debt obligations of Opco 1.

29. Newco 2 will be resident in the Foreign Country immediately before and after the merger described in paragraph 28 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by Opco 1 in respect of any property that becomes property of Newco 2 in the course of the merger described in paragraph 28 above.

Corporate Reorganization #3

30. In accordance with the Foreign Legislation, Subco will merge into Finco such that Finco (hereafter also referred to as "New Finco") will be the "surviving" corporation of the merger and, as such, will be the same corporation as Finco pursuant to the Foreign Legislation. The agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• the shares of the capital stock of Finco held by Subco will automatically be cancelled;
• the shares of the capital stock of Subco held by Holdco will automatically be converted and changed into shares of the capital stock of New Finco;
• the certificate of incorporation and by-laws of Finco will remain and be the certificate of incorporation and by-laws of New Finco;
• all rights and property of whatever nature vested in each of Subco and Finco before the merger will be vested in New Finco immediately after the merger without any further act or deed by New Finco;
• any intercompany debt that is outstanding between Finco and Subco, notably the Subco Debt, will be settled on the merger; and
• New Finco will assume all of the remaining liabilities and other debt obligations of Subco on its merger into Finco.

31. To secure tax-free treatment of the merger of Subco into Finco in the Foreign Country, Subco must be solvent immediately before the merger. As a result of the transactions described in paragraphs 17, 18, 19 and 20 above, it is expected that the value of the assets of Subco at the time of its merger into Finco will not be less than the amount outstanding under the Subco Debt.

32. Newco 4 will sell its XXXXXXXXXX % interest in Opco 10 to New Finco. New Finco will issue a note payable to Newco 4 as consideration for the interest in Opco 10. Newco 1 will transfer the shares of Subsidiary Corporation 3, Subsidiary Corporation 4 and Subsidiary Corporation 5 to New Finco as a return of capital or as a dividend in kind.

Corporate Reorganization #4

33. As a result of the merger of Subco into Finco and the sale of Opco 14's XXXXXXXXXX % membership interest in Opco 10 to New Finco, Opco 10 and Opco 11 will become subsidiary wholly-owned corporations of New Finco. The membership interests in Opco 10 and Opco 11 will be capital property to New Finco. Opco 10 and Opco 11 will enter into an agreement of merger with Newco 1. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 1 will be the surviving entity of the merger;
• the sole consideration that New Finco will receive upon the surrender of its shares of Opco 10 and Opco 11 will be additional membership interest in Newco 1;
• all rights and property of whatever nature vested in Opco 10 and Opco 11 before their merger into Newco 1 will be vested in Newco 1 immediately after the merger without any further act or deed by Newco 1;
• any intercompany debt that is outstanding between Opco 10 and Newco 1 and Opco 11 and Newco 1 immediately before its merger into Newco 1 will be settled on the merger; and
• Newco 1 will assume all of the remaining liabilities and other debt obligations of Opco 10 and Opco 11.

34. Newco 1 will be resident in the Foreign Country immediately before and after the mergers described in paragraph 33 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by Opco 10 or Opco 11 in respect of any property that becomes property of Newco 1 in the course of the mergers described in paragraph 33 above.

35. As a result of the merger of Subco into Finco, each of the corporations in Opco Group 3 Parents will become a subsidiary wholly-owned corporation of New Finco. The shares or membership interest, as the case may be, of each corporation in Opco Group 3 Parents will be capital property to New Finco. Each of the corporations in Opco Group 3 will enter into an agreement of merger with Opco 2. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Opco 2 will be the surviving entity of the merger;
• the sole consideration that each shareholder of a corporation in Opco Group 3 will receive upon the surrender of their shares, and the sole consideration that each member of a corporation in Opco Group 3 will receive upon the surrender of their membership interest, will be shares of Opco 2;
• any shares of Opco 2 held by the Opco Group 3 Parents and by Opco Group 3 Parent will be cancelled;
• all rights and property of whatever nature vested in each corporation in Opco Group 3 before its merger into Opco 2 will be vested in Opco 2 immediately after the merger without any further act or deed by Opco 2;
• any intercompany debt that is outstanding between Opco 2 and the corporation being merged into Opco 2 immediately before the merger will be settled on the merger; and
• Opco 2 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 3.

36. As a result of the merger of Subco into Finco, each corporation in Opco Group 4 will become a subsidiary wholly-owned corporation of New Finco. The shares or membership interests, as the case may be, of each corporation in Opco Group 4 will be capital property to New Finco. The corporations in Opco Group 4 will enter into an agreement of merger with Opco 2. In accordance with the Foreign Legislation, the agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• all of the corporations in Opco Group 4 will merge into Opco 2 simultaneously;
• Opco 2 will be the only surviving entity of the merger;
• the sole consideration that New Finco will receive upon the surrender of its shares of each of the corporations in Opco Group 4 will be shares of Opco 2;
• all rights and property of whatever nature vested in any of the corporations in Opco Group 4 before their merger into Opco 2 will be vested in Opco 2 immediately after the merger without any further act or deed by Opco 2;
• any intercompany debt that is outstanding between any of the corporations in Opco Group 4 being merged into Opco 2 immediately before the merger will be settled on the merger;
• any intercompany debt that is outstanding between Opco 2 and the corporation being merged into Opco 2 immediately before the merger will be settled on the merger; and
• Opco 2 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 4.

37. The Foreign Country's income tax law provides that no gain or loss will be recognized by any of the corporations in Opco Group 3 or Opco Group 4 in respect of any property that becomes property of Opco 2 in the course of the mergers described in paragraphs 35 and 36 above.

Corporate Reorganization #5

38. Opco 3 will form Newco 3 in accordance with the Foreign Legislation of the Foreign Jurisdiction. Newco 3 will elect to be a disregarded entity for purposes of the federal income tax laws of the Foreign Country.

39. Opco 4 is a subsidiary wholly-owned corporation of Opco Group 5 Parent 4. The shares of Opco 4 are capital property to Opco Group 5 Parent 4. Opco 5 is a subsidiary wholly-owned corporation of Opco 4. Opco 4 and Opco 5 will enter into an agreement of merger with Newco 3. In accordance with the Foreign Legislation, the agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Opco 4 and Opco 5 will merge into Newco 3 simultaneously;
• Newco 3 will be the only surviving entity of the merger;
• the sole consideration that Opco Group 5 Parent 4 will receive upon the surrender of its shares of Opco 4 will be shares of Opco 3;
• Opco 4 will surrender its shares of Opco 5 and they will be cancelled;
• any intercompany debt that is outstanding between Opco 4 and Opco 5 immediately before their merger into Newco 3 will be settled upon the merger;
• all rights and property of whatever nature vested in Opco 4 and Opco 5 before their merger into Newco 3 will be vested in Newco 3 immediately after the merger without any further act or deed by Newco 3; and
• Newco 3 will assume all of the remaining liabilities and other debt obligations of Opco 4 and Opco 5.

40. Newco 3 will be resident in the Foreign Country immediately before and after the merger described in paragraph 39 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by Opco 4 or Opco 5 in respect of any property that becomes property of Newco 3 in the course of the merger described in paragraph 39 above.

Corporate Reorganization #6

41. Opco 7 is a subsidiary-wholly owned corporation of Opco Group 5 Parent 1. The shares of Opco 7 are capital property to Opco Group 5 Parent 1. Opco 7 will enter into an agreement of merger with Newco 3. In accordance with the Foreign Legislation, the agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 3 will be the surviving entity of the merger;
• the sole consideration that Opco Group 5 Parent 1 will receive upon the surrender of its shares of Opco 7 will be shares of Opco 3;
• all rights and property of whatever nature vested in Opco 7 before its merger into Newco 3 will be vested into Newco 3 immediately after the merger without any further act or deed by Newco 3;
• any intercompany debt that is outstanding between Opco 7 and Newco 3 immediately before the merger will be settled on the merger; and
• Newco 3 will assume all of the remaining liabilities and other debt obligations of Opco 7.

42. Newco 3 will be resident in the Foreign Country immediately before and after the merger described in paragraph 41 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by Opco 7 in respect of any property that becomes property of Newco 3 in the course of the merger described in paragraph 41 above.

43. As a result of the merger of Subco into Finco, Opco Group 5 Parent 3 and Opco Group 5 Parent 4 will become subsidiary wholly-owned corporations of New Finco. The shares of Opco Group 5 Parent 3 and Opco Group 5 Parent 4 will be capital property to New Finco. Each of the corporations in Opco Group 5 will enter into an agreement of merger with Opco 3. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Opco 3 will be the surviving entity of the merger;
• the sole consideration that New Finco will receive upon the surrender of its shares of Opco Group 5 Parent 3 and Opco Group 5 Parent 4 will be shares of Opco 3;
• the sole consideration that Opco Group 5 Parent 1, Opco Group 5 Parent 3 and Opco Group 5 Parent 4 will receive upon the surrender of the shares of its subsidiary will be shares of Opco 3;
• the sole consideration that Opco Group 5 Parent 2 and Opco Group 5 Parent 3 will receive upon the surrender of the shares of Opco Group 5 Parent 1 will be shares of Opco 3;
• the shares of Opco 3 held by Opco Group 5 Parent 1, Opco Group 5 Parent 2, Opco Group 5 Parent 3 and Opco Group 5 Parent 4 will be cancelled;
• all rights and property of whatever nature vested in Opco Group 5 Parent 1, Opco Group 5 Parent 2, Opco Group 5 Parent 3 and Opco Group 5 Parent 4 before its merger into Opco 3 will be vested in Opco 3 immediately after the merger without any further act or deed by Opco 3;
• any intercompany debt that is outstanding between Opco 3 and the corporation being merged into Opco 3 immediately before the merger will be settled on the merger; and
• Opco 3 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 5.

44. The Foreign Country's income tax law provides that no gain or loss will be recognized by any of the corporations in Opco Group 5 in respect of any property that becomes property of Opco 3 in the course of the mergers described in paragraph 43 above.

Corporate Reorganization #7

45. As a result of the merger of the corporations in Opco Group 4 into Opco 2, Subsidiary Corporation 1 will become a subsidiary wholly-owned corporation of Opco 2. Subsidiary Corporation 1 will enter into an agreement of merger with Opco 2. In accordance with the Foreign Legislation, the agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Opco 2 will be the surviving entity of the merger;
• Opco 2 will surrender all of its shares of Subsidiary Corporation 1 and such shares will be cancelled by Subsidiary Corporation 1;
• all rights and property of whatever nature vested in Subsidiary Corporation 1 before its merger into Opco 2 will be vested in Opco 2 immediately after the merger without any further act or deed by Opco 2;
• any intercompany debt that is outstanding between Opco 2 and Subsidiary Corporation 1 immediately before the merger will be settled on the merger; and
• Opco 2 will assume all of the remaining liabilities and other debt obligations of Subsidiary Corporation 1.

46. The Foreign Country's income tax law provides that any gain arising, or any loss incurred, upon the disposition of Subsidiary Corporation 1's property to Opco 2 in the course of the merger described in paragraph 45 above will be recognized in the Foreign Country.

47. Subsidiary Corporation 2 was a subsidiary wholly-owned corporation of Opco Group 1 Parent before the merger of Opco Group 1 Parent into Newco 1. Subsidiary Corporation 2 will enter into an agreement of merger with Newco 1. In accordance with the Foreign Legislation, the agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 1 will be the surviving entity of the merger;
• Newco 1 will surrender its membership interest in Subsidiary Corporation 2 and such membership interest will be cancelled by Subsidiary Corporation 2;
• all rights and property of whatever nature vested in Subsidiary Corporation 2 before its merger into Newco 1 will be vested in Newco 1 immediately after the merger without any further act or deed by Newco 1;
• any intercompany debt outstanding between Newco 1 and Subsidiary Corporation 2 immediately before the merger will be settled on the merger; and
• Newco 1 will assume all of the remaining liabilities and other debt obligations of Subsidiary Corporation 2.

48. Newco 1 will be resident in the Foreign Country immediately before and after the merger described in paragraph 47 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by Subsidiary Corporation 2 in respect of any property that becomes property of Newco 1 in the course of the merger described in paragraph 47 above.

49. As a result of the merger of Subco into Finco, each corporation in Opco Group 6 will become a subsidiary wholly-owned corporation of New Finco. The shares of each corporation in Opco Group 6 will be capital property to New Finco. Each corporation in Opco Group 6 will enter into an agreement of merger with New Finco. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• New Finco will be the surviving entity of the merger;
• New Finco will surrender all of its shares of each corporation in Opco Group 6 and such shares will be cancelled by the corporation;
• all rights and property of whatever nature vested in each corporation in Opco Group 6 before its merger into New Finco will be vested in New Finco immediately after the merger without any further act or deed by New Finco;
• any intercompany debt that is outstanding between New Finco and the corporation being merged into New Finco immediately before the merger will be settled on the merger; and
• New Finco will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 6.

50. The Foreign Country's income tax law provides that any gain arising, or any loss incurred, by a corporation in Opco Group 6 upon the disposition of its property to New Finco in the course of the mergers described in paragraph 49 above will be recognized in the Foreign Country.

51. As a result of the merger of Subco into Finco, Opco 8 and Opco 9 will become subsidiary wholly-owned corporations of New Finco. The shares of Opco 8 and the membership interest in Opco 9 will be capital property to New Finco. Opco 8 and Opco 9 will enter into an agreement of merger with New Finco. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• New Finco will be the surviving entity of the merger;
• New Finco will surrender all of its shares of Opco 8 and such shares will be cancelled by Opco 8 and New Finco will surrender all of its membership interest in Opco 9 and such membership interest will be cancelled by Opco 9;
• all rights and property of whatever nature vested in Opco 8 or Opco 9 before its merger into New Finco will be vested in New Finco immediately after the merger without any further act or deed by New Finco;
• any intercompany debt that is outstanding between Opco 8 and New Finco and Opco 9 and New Finco immediately before its merger into New Finco will be settled on the merger; and
• New Finco will assume all of the remaining liabilities and other debt obligations of Opco 8 and Opco 9.

52. The Foreign Country's income tax law provides that no gain or loss will be recognized by Opco 8 or Opco 9 in respect of any property that becomes property of New Finco in the course of the mergers described in paragraph 51 above.

53. As a result of the merger of Subco into Finco, each corporation in Opco Group 7 will become a subsidiary wholly-owned corporation of New Finco. The shares of each corporation in Opco Group 7 will be capital property to New Finco. Each corporation in Opco Group 7 will enter into an agreement of merger with Newco 4.

In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 4 will be the surviving entity of the merger;
• the sole consideration that New Finco will receive upon the surrender of its shares of each corporation in Opco Group 7 will be additional membership interest in Newco 4;
• all rights and property of whatever nature vested in each corporation in Opco Group 7 before its merger into Newco 4 will be vested in Newco 4 immediately after the merger without any further act or deed by Newco 4;
• any intercompany debt that is outstanding between Newco 4 and the corporation being merged into Newco 4 immediately before the merger will be settled on the merger; and
• Newco 4 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 7.

54. Newco 4 will be resident in the Foreign Country immediately before and after the mergers described in paragraph 53 above. The Foreign Country's income tax law provides that no gain or loss will be recognized by any of the corporations in Opco Group 7 in respect of any property that becomes property of Newco 4 in the course of the mergers described in paragraph 53 above.

55. Each corporation in Opco Group 8 is a subsidiary wholly-owned corporation of Opco 6. Each corporation in Opco Group 8 will enter into an agreement of merger with Opco 6. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Opco 6 will be the surviving entity of the merger;
• Opco 6 will surrender all of its shares of the corporation and such shares will be cancelled;
• all rights and property of whatever nature vested in each corporation in Opco Group 8 before its merger into Opco 6 will be vested in Opco 6 immediately after the merger without any further act or deed by Opco 6;
• any intercompany debt that is outstanding between Opco 6 and the corporation being merged into Opco 6 immediately before the merger will be settled on the merger; and
• Opco 6 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 8.

56. The Foreign Country's income tax law provides that no gain or loss will be recognized by any of the corporations in Opco Group 8 in respect of any property that becomes property of Opco 6 in the course of the mergers described in paragraph 55 above.

57. Each corporation in Opco Group 9 is a subsidiary wholly-owned corporation of Opco 6. Each corporation in Opco Group 9 will enter into an agreement of merger with Opco 6. In accordance with the Foreign Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Opco 6 will be the surviving entity of the merger;
• Opco 6 will surrender all of its shares of the corporation and such shares will be cancelled by the corporation;
• all rights and property of whatever nature vested in each corporation in Opco Group 9 before its merger into Opco 6 will be vested in Opco 6 immediately after the merger without any further act or deed by Opco 6;
• any intercompany debt that is outstanding between Opco 6 and the corporation being merged into Opco 6 immediately before the merger will be settled on the merger; and
• Opco 6 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 9.

58. The Foreign Country's income tax law provides that any gain arising, or any loss incurred, by a corporation in Opco Group 9 upon the disposition of its property to Opco 6 in the course of the mergers described in paragraph 57 above will be recognized in the Foreign Country.

59. As a result of the merger of Subco into Finco, each corporation in Opco Group 11 will become a subsidiary wholly-owned corporation of New Finco. The shares or membership interest, as the case may be, of each corporation in Opco Group 11 will be capital property to New Finco. Each corporation in Opco Group 11 will enter into an agreement of merger with Newco 4. In accordance with the Foreign

60. Legislation, each agreement of merger will provide, inter alia, that, upon the effective time of the merger:

• Newco 4 will be the surviving entity of the merger;
• the sole consideration that New Finco will receive upon the surrender of its shares of each corporation in Opco Group 11, and the sole consideration that each member of a corporation in Opco Group 11 will receive upon the surrender of their membership interest, will be additional membership interests in Newco 4;
• all rights and property of whatever nature vested in each corporation in Opco Group 11 before its merger into Newco 4 will be vested in Newco 4 immediately after the merger without any further act or deed by Newco 4;
• any intercompany debt that is outstanding between Newco 4 and the corporation being merged into Newco 4 immediately before the merger will be settled on the merger; and
• Newco 4 will assume all of the remaining liabilities and other debt obligations of each corporation in Opco Group 11.

60. Newco 4 will be resident in the Foreign Country immediately before and after the mergers described in paragraph 59 above. The Foreign Country's income tax law provides that any gain arising, or any loss incurred, by a corporation in Opco Group 11 upon the disposition of its property to Newco 4 in the course of the mergers described in paragraph 59 above will be recognized in the Foreign Country.

Purposes of the Proposed Transactions

61. The proposed transactions are part of a broader corporate reorganization which is intended to achieve two primary purposes: (i) the re-capitalization of external and internal debt, including the settlement of external and internal debts at a discount, and (ii) simplification and rationalization of the existing corporate structure. The reduction in the number of legal entities operating in the Foreign Country will assist Parent in accomplishing the following objectives:

• the number of state property tax filings; and
• Reduce state income tax liabilities through a reduction in losses created in certain legal entities that cannot be offset against profits earned by other legal entities within the existing corporate group.

Rulings

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

A. The simultaneous merger of the corporations in Opco Group 1 into Newco 1, as described in paragraph 23 above, the simultaneous merger of the corporations in Opco Group 4 into Opco 2, as described in paragraph 36 above, and the simultaneous merger of Opco 4 and Opco 5 into Newco 3, as described in paragraph 39 above, will each qualify as a foreign merger.

B. Subsection 80.01(3) of the Act will apply on the merger of the corporations in Opco Group 1 into Newco 1, on the merger of the corporations in Opco Group 4 into Opco 2 and on the merger of Opco 4 and Opco 5 into Newco 3 such that any intercompany debts referred to in paragraphs 23, 36 and 39 above will be deemed to have been settled immediately before the time that is immediately before each merger by a payment made by the debtor, and received by the creditor, of an amount equal to the amount that would have been the creditor's cost amount of the intercompany debt at that time, if the cost amount were computed in accordance with paragraphs 80.01(3)(a) and (b) of the Act.

C. The merger of Opco 1 into Newco 2, as described in paragraph 28 above, and the merger of Subco into Finco, as described in paragraph 30 above, will each qualify as a foreign merger.

D. Subsection 80.01(3) of the Act will apply on the merger of Subco into Finco such that the Subco Debt will be deemed to have been settled immediately before the time that is immediately before the merger by a payment made by Subco, and received by Finco, of an amount equal to the amount that would have been Finco's cost amount of the Subco Debt at that time, if the cost amount were computed in accordance with paragraphs 80.01(3)(a) and (b) of the Act.

E. The merger of each corporation in Opco Group 2 into Newco 1, as described in paragraph 22 above, the merger of each corporation in Opco Group 10 into Newco 4, as described in paragraph 25 above, the merger of each corporation in Opco Group 3 into Opco 2, as described in paragraph 35 above, and the merger of each corporation in Opco Group 5 into Opco 3, as described in paragraph 43 above, will each qualify as a foreign merger.

F. Subsection 80.01(3) of the Act will apply to each merger of a corporation in Opco Group 2 into Newco 1, to each merger of a corporation in Opco Group 10 into

Newco 4, to each merger of a corporation in Opco Group 3 into Opco 2 and to each merger of a corporation in Opco Group 5 into Opco 3 such that any intercompany debts referred to in paragraphs 22, 25, 35 and 43 above will be deemed to have been settled immediately before the time that is immediately before each merger by a payment made by the debtor, and received by the creditor, of an amount equal to the amount that would have been the creditor's cost amount of the intercompany debt at that time, if the cost amount were computed in accordance with paragraphs 80.01(3)(a) and (b) of the Act.

G. The merger of Opco 7 into Newco 3, as described in paragraph 41 above, the merger of Subsidiary Corporation 1 into Opco 2, as described in paragraph 45 above, and the merger of Subsidiary Corporation 2 into Newco 1, as described in paragraph 47 above, will each qualify as a foreign merger.

H. Subsection 80.01(3) of the Act will apply on the merger of Opco 7 into Newco 3, on the merger of Subsidiary Corporation 1 into Opco 2 and on the merger of Subsidiary Corporation 2 into Newco 1 such that any intercompany debt referred to in paragraphs 41, 45 and 47 above will be deemed to have been settled immediately before the time that is immediately before each merger by a payment made by the debtor, and received by the creditor, of an amount equal to the amount that would have been the creditor's cost amount of the intercompany debt at that time, if the cost amount were computed in accordance with paragraphs 80.01(3)(a) and (b) of the Act.

I. The merger of Opco 10 and Opco 11 into Newco 1, as described in paragraph 33 above, the merger of each corporation in Opco Group 6 into New Finco, as described in paragraph 49 above, the merger of Opco 8 and Opco 9 into New Finco, as described in paragraph 51 above, the merger of each corporation in Opco Group 7 into Newco 4, as described in paragraph 53 above, the merger of each corporation in Opco Group 8 into Opco 6, as described in paragraph 55 above, the merger of each corporation in Opco Group 9 into Opco 6, as described in paragraph 57 above, and the merger of each corporation in Opco Group 11 into Newco 4, as described in paragraph 59 above, will each qualify as a foreign merger.

J. Subsection 80.01(3) of the Act will apply to the merger of Opco 10 and Opco 11 into Newco 1, to each merger of a corporation in Opco Group 6 into New Finco, to the merger of Opco 8 and Opco 9 into New Finco, to each merger of a corporation in Opco Group 7 into Newco 4, to each merger of a corporation in Opco Group 8 and Opco Group 9 into Opco 6, and to each merger of a corporation in Opco Group 11 into Newco 4 such that any intercompany debts referred to in paragraphs 33, 49, 51, 53, 55, 57 and 59 above will be deemed to have been settled immediately before the time that is immediately before each merger by a payment made by the debtor, and received by the creditor, of an amount equal to the amount that would have been the creditor's cost amount of the intercompany debt at that time, if the cost amount were computed in accordance with paragraphs 80.01(3)(a) and (b) of the Act.

K. For the purposes of subdivision i of Division B of Part I of the Act, subsection 87(4) will apply, in the manner set out in paragraph 95(2)(d), to:

(i) Subco, as the result of the merger of Opco 1 into Newco 2, the merger of each of the Opco Group 1 Parents into Newco 1, the merger of the corporations in Opco Group 2 into Newco 1 and the merger of each of the corporations in Opco Group 10 into Newco 4;

(ii) Holdco, as the result of the merger of Subco into Finco;

(iii) Opco Group 3 Parent, as the result of the merger of its wholly-owned subsidiary into Opco 2;

(iv) each of the Opco Group 3 Parents, as the result of the merger of its wholly-owned subsidiary into Opco 2;

(v) New Finco, as the result of the merger of each of the Opco Group 3 Parents into Opco 2, the merger of Opco Group 5 Parent 3 and Opco Group 5 Parent 4 into Opco 3, the merger of each of the corporations in Opco Group 4 into Opco 2, the merger of each of the corporations in Opco Group 7 into Newco 4, the merger of Opco 10 and Opco 11 into Newco 1 and the merger of each of the corporations in Opco Group 11 into Newco 4;

(vi) Opco Group 5 Parent 1, as the result of the merger of Opco 7 into Newco 3; and

(vii) Opco Group 5 Parent 4, as the result of the merger of Opco 4 into Newco 3.

L. For the purposes of subdivision i of Division B of Part I of the Act:

(i) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 1 that becomes capital property of Newco 1 such that each corporation in Opco Group 1 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 1 for proceeds of disposition equal to the cost amount of such property at that time;

(ii) subparagraph 95(2)(d.1)(ii) will apply to Newco 1 such that it will, with respect to any subsequent disposition of a capital property referred to in
paragraph (i), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 1;

(iii) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 2 that becomes capital property of Newco 1 such that each corporation in Opco Group 2 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 1 for proceeds of disposition equal to the cost amount of such property at that time;

(iv) subparagraph 95(2)(d.1)(ii) will apply to Newco 1 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (iii), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 2;

(v) subparagraph 95(2)(d.1)(i) will apply to each capital property of Opco 1 that becomes capital property of Newco 2 such that Opco 1 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 2 for proceeds of disposition equal to the cost amount of such property at that time;

(vi) subparagraph 95(2)(d.1)(ii) will apply to Newco 2 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (v), be deemed to be the same corporation as, and a continuation of, Opco 1;

(vii) provided that no gain or loss is recognized in the Foreign Country in respect of any capital property of Subco or Finco that becomes capital property of New Finco in the course of the merger described in paragraph 30, subparagraph 95(2)(d.1)(i) will apply to each capital property of Subco that becomes capital property of New Finco such that Subco will be deemed to have disposed of each capital property held by it immediately before its merger into Finco for proceeds of disposition equal to the cost amount of such property at that time;

(viii) subparagraph 95(2)(d.1)(ii) will apply to New Finco such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (vii), be deemed to be the same corporation as, and a continuation of, Subco;

(ix) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 3 that becomes capital property of Opco 2 such that each corporation in Opco Group 3 will be deemed to have disposed of
each capital property held by it immediately before its merger into Opco 2 for proceeds of disposition equal to the cost amount of such property at that time;

(x) subparagraph 95(2)(d.1)(ii) will apply to Opco 2 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (ix), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 3;

(xi) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 4 that becomes capital property of Opco 2 such that each corporation in Opco Group 4 will be deemed to have disposed of each capital property held by it immediately before its merger into Opco 2 for proceeds of disposition equal to the cost amount of such property at that time;

(xii) subparagraph 95(2)(d.1)(ii) will apply to Opco 2 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xi), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 4;

(xiii) subparagraph 95(2)(d.1)(i) will apply to each capital property of Opco 4 and/or Opco 5 that becomes capital property of Newco 3 such that Opco 4 and Opco 5 will each be deemed to have disposed of each capital property held by it immediately before its merger into Newco 3 for proceeds of disposition equal to the cost amount of such property at that time;

(xiv) subparagraph 95(2)(d.1)(ii) will apply to Newco 3 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xiii), be deemed to be the same corporation as, and a continuation of, Opco 4 and Opco 5;

(xv) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 5 that becomes capital property of Opco 3 such that each corporation in Opco Group 5 will be deemed to have disposed of each capital property held by it immediately before its merger into Opco 3 for proceeds of disposition equal to the cost amount of such property at that time;

(xvi) subparagraph 95(2)(d.1)(ii) will apply to Opco 3 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xv), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 5;

(xvii) subparagraph 95(2)(d.1)(i) will apply to each capital property of Subsidiary Corporation 2 that becomes capital property of Newco 1 such that Subsidiary Corporation 2 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 1 for proceeds of disposition equal to the cost amount of such property at that time;

(xviii) subparagraph 95(2)(d.1)(ii) will apply to Newco 1 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xvii), be deemed to be the same corporation as, and a continuation of, Subsidiary Corporation 2;

(xix) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 7 that becomes capital property of Newco 4 such that each corporation in Opco Group 7 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 4 for proceeds of disposition equal to the cost amount of such property at that time;

(xx) subparagraph 95(2)(d.1)(ii) will apply to Newco 4 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xix), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 7;

(xxi) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 8 that becomes capital property of Opco 6 such that each corporation in Opco Group 8 will be deemed to have disposed of each capital property held by it immediately before its merger into Opco 6 for proceeds of disposition equal to the cost amount of such property at that time;

(xxii) subparagraph 95(2)(d.1)(ii) will apply to Opco 6 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xxi), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 8;

(xxiii) subparagraph 95(2)(d.1)(i) will apply to each capital property of a corporation in Opco Group 10 that becomes capital property of Newco 4 such that each corporation in Opco Group 10 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 4 for proceeds of disposition equal to the cost amount of such property at that time;

(xxiv) subparagraph 95(2)(d.1)(ii) will apply to Newco 4 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xxiii), be deemed to be the same corporation as, and a continuation of, the disposing corporation in Opco Group 10;

(xxv) subparagraph 95(2)(d.1)(i) will apply to each capital property of Opco 7 that becomes capital property of Newco 3 such that Opco 7 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 3 for proceeds of disposition equal to the cost amount of such property at that time;

(xxvi) subparagraph 95(2)(d.1)(ii) will apply to Newco 3 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xxv), be deemed to be the same corporation as, and a continuation of, Opco 7;

(xxvii) subparagraph 95(2)(d.1)(i) will apply to each capital property of Opco 8 and Opco 9 that becomes capital property of New Finco such that Opco 8 and Opco 9 will be deemed to have disposed of each capital property held by it immediately before its merger into New Finco for proceeds of disposition equal to the cost amount of such property at that time;

(xxviii) subparagraph 95(2)(d.1)(ii) will apply to New Finco such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xxvii), be deemed to be the same corporation as, and a continuation of, Opco 8 and Opco 9;

(xxix) subparagraph 95(2)(d.1)(i) will apply to each capital property of Opco 10 and Opco 11 that becomes capital property of Newco 1 such that Opco 10 and Opco 11 will be deemed to have disposed of each capital property held by it immediately before its merger into Newco 1 for proceeds of disposition equal to the cost amount of such property at that time; and

(xxx) subparagraph 95(2)(d.1)(ii) will apply to Newco 1 such that it will, with respect to any subsequent disposition of a capital property referred to in paragraph (xxix), be deemed to be the same corporation as, and a continuation of, Opco 10 and Opco 11.

M. Pursuant to paragraph (b) of the definition "disposition" and subsection 84(9) of the Act:

(i) Opco Group 1 Parent and each of the corporations in Opco Group 1 Parents will be considered to have disposed of the shares of its subsidiary to such subsidiary;

(ii) Subco will be considered to have disposed of its shares of Finco to Finco;

(iii) Opco Group 3 Parent and each of the corporations in Opco Group 3 Parents will be considered to have disposed of the shares of its subsidiary to such subsidiary;

(iv) Opco 4 will be considered to have disposed of its shares of Opco 5 to Opco 5;

(v) Opco Group 5 Parent 1, Opco Group 5 Parent 2, Opco Group 5 Parent 3 and Opco Group 5 Parent 4 will be considered to have disposed of their shares of Opco 3 to Opco 3;

(vi) Opco 2 will be considered to have disposed of its shares of Subsidiary Corporation 1 to Subsidiary Corporation 1;

(vii) Newco 1 will be considered to have disposed of its shares of Subsidiary Corporation 2 to Subsidiary Corporation 2;

(viii) New Finco will be considered to have disposed of its shares of each of the corporations in Opco Group 6 to such corporation;

(ix) New Finco will be considered to have disposed of its shares of each of Opco 8 to Opco 8 and its shares of Opco 9 to Opco 9; and

(x) Opco 6 will be considered to have disposed of its shares of each of the corporations in Opco Group 8 and each of the corporations in Opco Group 9 to such corporation.

N. Paragraph 69(1)(b) of the Act will apply to any of the share dispositions referred to in Ruling M above if Opco Group 1 Parent, each of the corporations in Opco Group 1 Parents, Subco, Opco Group 3 Parent, each of the corporations in Opco Group 3 Parents, Opco 4, Opco Group 5 Parent 1, Opco Group 5 Parent 2, Opco Group 5 Parent 3, Opco Group 5 Parent 4, Opco 2, Newco 1, New Finco or Opco 6, as the case may be, receives no consideration for such shares or receives consideration that is less than the fair market value of such shares at the time of the disposition.

O. No amount will be included in computing the FAPI of Parent as a result of the settlement of any of the intercompany debts referred to in paragraphs 22, 23, 25, 30, 33, 35, 36, 39, 41, 43, 45, 47, 49, 51, 53, 55, 57 and 59 above.

P. No amount will be included in computing the FAPI of Parent in respect of the disposition:

(i) by Opco Group 1 Parent and by each of the corporations in Opco Group 1 Parents of the shares of their subsidiary, as described in paragraph (i) of Ruling M, provided that the shares of its subsidiary are excluded property of Opco Group 1 Parent and each of the corporations in Opco Group 1 Parents at the time of the disposition;

(ii) by Subco of the shares of Finco, as described in paragraph (ii) of Ruling M, provided that the shares of Finco are excluded property of Subco at the time of the disposition;

(iii) by Opco Group 3 Parent and by each of the corporations in Opco Group 3 Parents of the shares of their subsidiary, as described in paragraph (iii) of Ruling M, provided that the shares of its subsidiary are excluded property of Opco Group 3 Parent and each of the corporations in Opco Group 3 Parents at the time of the disposition;

(iv) by Opco 4 of the shares of Opco 5, as described in paragraph (iv) of Ruling M, provided that the shares of Opco 5 are excluded property of Opco 4 at the time of the disposition;

(v) by Opco Group 5 Parent 1, by Opco Group 5 Parent 2, by Opco Group 5 Parent 3 and by Opco Group 5 Parent 4 of the shares of Opco 3, as described in paragraph (v) of Ruling M, provided that the shares of Opco 3 are excluded property of Opco Group 5 Parent 1, Opco Group 5 Parent 2, Opco Group 5 Parent 3 and Opco Group 5 Parent 4 at the time of the disposition;

(vi) by Opco 2 of the shares of Subsidiary Corporation 1, as described in paragraph (vi) of Ruling M, provided that the shares of Subsidiary Corporation 1 are excluded property of Opco 2 at the time of the disposition;

(vii) by Newco 1 of the shares of Subsidiary Corporation 2, as described in paragraph (vii) of Ruling M, provided that the shares of Subsidiary Corporation 2 are excluded property of Newco 1 at the time of the disposition;

(viii) by New Finco of the shares of each of the corporations in Opco Group 6, as described in paragraph (viii) of Ruling M, provided that the shares of each of the corporations in Opco Group 6 are excluded property of New Finco at the time of the disposition;

(ix) by New Finco of the shares of each of Opco 8 and Opco 9, as described in paragraph (ix) of Ruling M, provided that the shares of Opco 8 and Opco 9 are excluded property of New Finco at the time of the disposition; and

(x) by Opco 6 of the shares of each of the corporations in Opco Group 8 and each of the corporations in Opco Group 9, as described in paragraph (x) of Ruling M, provided that the shares of each of the corporations in Opco Group 8 and each of the corporations in Opco Group 9 are excluded property of Opco 6 at the time of the disposition.

Q. For the purposes of Part LIX of the Regulations, Newco 1, Newco 2, Newco 3, Newco 4, New Finco, Opco 2, Opco 3 and Opco 6 will, in respect of the foreign mergers described herein, each compute their opening exempt surplus, opening exempt deficit, opening taxable surplus, opening taxable deficit and opening underlying foreign tax in accordance with the rules in paragraph 5905(3)(a) of the Regulations.

R. For the purposes of subsection 87(8.1) and Subdivision i of Division B of Part I of the Act, each membership interest in Newco 1, Newco 2, Newco 3 and Newco 4 will be considered to be a "share" of the capital stock of Newco 1, Newco 2, Newco 3 and Newco 4, respectively, as that term is defined in subsection 248(1) of the Act.

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

Except as expressly stated, this advance income tax ruling does not imply acceptance, approval or confirmation of any other income tax implications of the facts or proposed transactions described herein. For greater certainty, the CRA has not reviewed any of the proposed transactions referred to in paragraphs 17, 18, 19 or 20 above or any of the agreements referred to in paragraphs 22, 23, 25, 28, 30, 33, 35, 36, 39, 41, 43, 45, 47, 49, 51, 53, 55, 57 and 59 above.

The above-noted rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act which, if enacted, could affect the rulings provided herein.

Opinions

1. Provided that the proposed amendments to the Act, to add paragraph (n) to the definition of "disposition" in subsection 248(1) of the Act, as contained in former Bill C-10 (39th Parliament - second session), and to amend paragraph 95(2)(d.1) of the Act, as contained in subsection 133(11) of the draft legislation released by the Department of Finance on February 27, 2004, are enacted in substantially the same form as proposed, our opinions are as follows:

No disposition will occur when:

(i) the shares of the subsidiary of Opco Group 1 Parent and the shares of each of the subsidiaries of the corporations in Opco Group 1 Parents are cancelled on their merger into Newco 1;

(ii) the shares of Finco are cancelled on the merger of Subco into Finco;

(iii) the shares of Opco 2 are cancelled on the merger of Opco Group 3 Parent and each corporation in Opco Group 3 Parents into Opco 2;

(iv) the shares of Opco 5 are cancelled on the merger of Opco 5 into Newco 3;

(v) the shares of Opco 3 are cancelled on the merger of Opco Group 5 Parent 1, Opco Group 5 Parent 2, Opco Group 5 Parent 3 and Opco Group 5 Parent 4 into Opco 3;

(vi) the shares of Subsidiary Corporation 1 are cancelled on its merger into Opco 2;

(vii) the shares of Subsidiary Corporation 2 are cancelled on its merger into Newco 1;

(viii) the shares of each of the corporations in Opco Group 6 are cancelled on its merger into New Finco; and

(ix) the shares of Opco 8 and Opco 9 are cancelled on their merger into New Finco;

(x) the shares of each of the corporations in Opco Group 8 are cancelled on its merger into Opco 6;

(xi) the shares of each of the corporations in Opco Group 9 are cancelled on its merger into Opco 6; and

provided that either:

(A) the disposing corporation receives no consideration for the shares,

or

(B) the disposing corporation receives no consideration for the shares other than property that was, immediately before the merger, owned by the issuing corporation and that, on the merger, becomes property of the new corporation.

2. For the purposes of proposed paragraph 95(2)(d.1):

(i) for the foreign mergers described in paragraphs 22, 23, 33 and 47 above, Newco 1 will be the "new foreign corporation" and each of the corporations being merged into Newco 1 will be a "predecessor foreign corporation";

(ii) for the foreign merger described in paragraph 28 above, Newco 2 will be the "new foreign corporation" and Opco 1 will be the "predecessor foreign corporation";

(iii) for the foreign mergers described in paragraphs 39 and 41 above, Newco 3 will be the "new foreign corporation" and Opco 4, Opco 5 and Opco 7 will each be a "predecessor foreign corporation";

(iv) for the foreign mergers described in paragraphs 25, 53 and 59 above, Newco 4 will be the "new foreign corporation" and each of the corporations being merged into Newco 4 will be a "predecessor foreign corporation";

(v) for the foreign mergers described in paragraphs 30, 49 and 51 above, New Finco will be the "new foreign corporation" and each of the corporations being merged into New Finco will be a "predecessor foreign corporation";

(vi) for the foreign mergers described in paragraphs 35, 36 and 45 above, Opco 2 will be the "new foreign corporation" and each of the corporations being merged into Opco 2 will be a "predecessor foreign corporation";

(vii) for the foreign mergers described in paragraph 43 above, Opco 3 will be the "new foreign corporation" and each of the corporations being merged into Opco 3 will be a "predecessor foreign corporation";

(viii) for the foreign mergers described in paragraphs 55 and 57 above, Opco 6 will be the "new foreign corporation" and each of the corporations being merged into Opco 6 will be a "predecessor foreign corporation";

such that:

(ix) each property of a new foreign corporation, that was a property of that new foreign corporation immediately before the merger, will be deemed to have been disposed of by that new foreign corporation at the time that is immediately before the merger for proceeds of disposition equal to the cost amount of the property to the new foreign corporation at that time;

(x) each property of a new foreign corporation after the merger that was a property of a predecessor foreign corporation immediately before the merger will be deemed to have been disposed of by the predecessor foreign corporation at the time that is immediately before the merger for proceeds of disposition equal to the cost amount of the property to the predecessor foreign corporation at that time;

(xi) each new foreign corporation will be deemed to be the same corporation as, and a continuation of, its predecessor foreign corporation(s) for the purposes of

(A) subsection 95(2) and the definition of FAPI with respect to any disposition by a new foreign corporation of property owned by the new foreign corporation or a predecessor foreign corporation immediately before the merger of that predecessor foreign corporation into its new foreign corporation, and

(B) paragraphs 95(2)(c.1) to (c.6), (f.1) to (f.93) and (h) to (h.5); and

(xii) subsection 87(4) will apply to Holdco, Finco, Subco and each of the Foreign Country Opcos that, immediately before a foreign merger, owned shares of the capital stock of a predecessor foreign corporation as if the reference in that subsection to

(A) the word "amalgamation" were a reference to the expression "foreign merger" and with any other modifications that the circumstances require,

(B) the expression "predecessor corporation" were a reference to the expression "predecessor foreign corporation" and with any other modifications that the circumstances require,

(C) the expression "new corporation" were a reference to the expression "new foreign corporation" and with any other modifications that the circumstances require, and

(D) the expression "adjusted cost base" were a reference to the expression "relevant cost base" and with any other modifications that the circumstances require.

Yours truly,

for Director
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch