2006 Ruling 2006-0194461R3 - Consolidation of two Phantom Share Plans

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1. Will an amendment to a plan to allow an employee to convert a unit into another unit result in any taxation in and of itself?

2. Will the creation of an exchangeable unit that is obtainable by a participant through the conversion of an existing unit result in taxation?

3. Will the conversion of existing units to the exchangeable units cause the taxation of existing units in and of itself?

4. Will the exchange of the exchangeable units for units of a second plan be a taxable event?

Position: 1.-4 No

Reasons: The employee has a right to receive an amount after the end of a year and the transactions in and of themselves will not result in a change to this right or cause the inclusion of the right in income assuming the exchange ratio is such that the participant has a right to receive the same amount of value immediately after the exchange. The right may become taxable if at any time the plans do not comply with regulation 6801(d).

XXXXXXXXXX 							2006-019446

XXXXXXXXXX , 2006

Dear XXXXXXXXXX :

Re: Advance Income Tax Ruling
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

This is in reply to your letters of XXXXXXXXXX, in respect of your request for an advance income tax ruling on behalf of the above-noted corporations. We also acknowledge the information provided during our telephone conversations and electronic correspondence.

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

Definitions and Abbreviations

1. In this letter, the following terms have the meanings specified:

(a) "Act" means: the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof;

(b) "Agreement" means: the proposed XXXXXXXXXX to be entered into by Holdco and Opco, a draft copy of which was provided with your request;

(c) "Corporate Group" means: the Parent, Holdco, Opco, Subco and their affiliates;

(d) "CRA" means: the Canada Revenue Agency;

(e) "Effective Date" means: the day that is after the date of this Ruling and before XXXXXXXXXX, on which the proposed transactions are initiated;

(f) "Exchange" means: the XXXXXXXXXX Stock Exchange;

(g) "Holdco" means: XXXXXXXXXX.

Holdco has the Business Number: XXXXXXXXXX and files its income tax returns through the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Taxation Centre;

(h) "Opco" means: XXXXXXXXXX.

Opco has the Business Number: XXXXXXXXXX and files its income tax returns through the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Taxation Centre;

(i) "Parent" means: XXXXXXXXXX;

(j) "Ruling" means: this advance income tax ruling;

(k) "Subco" means: XXXXXXXXXX.

Subco has the Business Number: XXXXXXXXXX and files its income tax returns through the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Taxation Centre;

2. In this letter, the following terms have the meanings specified in respect to the Holdco Plan:

(a) "Holdco Committee" means: the human resources committee of Holdco;

(b) "Holdco Plan" means: the XXXXXXXXXX. Deferred Share Unit Plan as adopted by Holdco on XXXXXXXXXX , a copy of which was provided with your request;

(c) "Holdco Plan Market Price" means: the price of a common share of the Parent determined as:

the weighted average closing prices of a regular lot of shares at the Exchange for the 5 trading days immediately preceding a given date or, if trading on the share stops or is suspended, for the 5 trading days immediately preceding such stop or suspension. In the absence of a closing price of a regular lot of shares on any given date of said period of 5 days, the average of the bid and ask prices of the shares on such day at the Exchange shall be utilized instead and in place of such closing price. In any case, if the price includes a fraction of a cent, such fraction shall only be used to calculate the price if it is equal to or higher than one half, in which case the price shall be increased to the next highest cent. If the shares were not traded on an organized market at a given date, their price shall be established on such given date by the Holdco Committee, which can retain for such purpose an independent expert;

(d) "Holdco Share Unit" means: a deferred share unit of Holdco issued by Holdco under the terms of the Holdco Plan;

(e) "Letter of Grant" means: the letter provided to Members of the Holdco Plan that sets out the terms of the grant of Holdco Share Units and the vesting of the Holdco Share Units;

(f) "Member" means: a member of the Holdco Plan who is an employee of a member of the Corporate Group and is an officer, professional or XXXXXXXXXX of a member of the Corporate Group;

3. In this letter, the following terms have the meanings specified in respect to the Opco Plan:

(a) "Eligible Compensation" means: an Opco Employee's Compensation as reported in box 14 of the Opco Employee's T-4 statement for a given calendar year plus the Opco Employee's deferred compensation as described in 8(d) through 8(f) below to the extent it is apportioned to that calendar year;

(b) "Notional Account" means: the notional account established under the Opco Plan for each Participant to record the Participant's interest under the Opco Plan, where "Notional Account-A" is used to record the Participant's unconditional interest under the Opco Plan and "Notional Acount-B" is used to record the Participant's conditional interest under the Opco Plan;

(c) "Opco Committee" means: the committee established by the board of Opco to administer the New Plan;

(d) "Opco Employee" means: a full time employee of the XXXXXXXXXX of a member of the Corporate Group or any other full time employee of a member corporation of the Corporate Group that the Opco Committee so designates;

(e) "Opco Plan" means: the XXXXXXXXXX. Deferred Compensation Plan for Key Employees, a draft copy of which was provided with your request;

(f) "Opco Share Unit" means: a deferred share unit of Opco issued by Opco under the terms of the Opco Plan that has a nominal value equal to the value of a Preferred Share of a corresponding series of Preferred Shares. There is as many series of Opco Share Units as there are series of Preferred Shares and each series of Opco Share Units corresponds to a series of Preferred Shares;

(g) "Participant" means: an employee of Opco or one of its affiliates, who is a participant in the Opco Plan;

(h) "Preferred Share" means: a non-cumulative, redeemable preferred share of a particular series of preferred shares issued by Subco in one or more series where each such series corresponds to a specific mutual fund or other investment as selected by the Opco Committee to serve as the basis upon which the Redemption Price of the corresponding Opco share Units is calculated;

(i) "Redemption Price" means: with respect to any particular series of Opco Share Units, the price as at a given date, at which a Preferred Share of the corresponding series of Preferred Shares may be redeemed at the option of Subco.

In addition, in this letter, the terms "taxable Canadian corporation" and "public corporation" have the meanings assigned by subsection 89(1) of the Act; "employee", "employment" and "salary deferral arrangement" have the meanings assigned by subsection 248(1) of the Act, and the term "related person" has the meaning assigned by subsection 251(2) of the Act.

Facts

4. Holdco is a taxable Canadian corporation and a public corporation that, as its sole activity, holds interests in its subsidiaries and other investments. Parent indirectly controls Holdco.

5. Opco is a subsidiary of Holdco and a taxable Canadian corporation. Parent indirectly controls Opco.

6. Subco is a subsidiary of Holdco and a taxable Canadian corporation. Parent indirectly controls Subco. Subco was created on the implementation of the Opco Plan to hold investments in connection with the Opco Plan.

Holdco Plan

7. Holdco established the Holdco Plan in XXXXXXXXXX, as a deferred share unit plan under which the Letters of Grant (which are agreements that are intended to comply with the provisions of paragraph 6801(d) of the Regulations) were entered into with Members.

For the purposes of this Ruling, the salient terms of the Holdco Plan and its administration are as follow:

(a) The Holdco Committee designates officers, professionals and XXXXXXXXXX who are employees of a member of the Corporate Group, as Members of the Holdco Plan;

(b) In the Letter of Grant a Member is advised of the Member's entitlement to receive certain incentive compensation in a year;

(c) Members that are XXXXXXXXXX (approximately XXXXXXXXXX Members) are required to receive their incentive compensation (bonuses) in the form of Holdco Share Units to be granted under the terms of the Holdco Plan.

(d) Prior to becoming entitled to receive certain incentive compensation in a year certain designated Members that are officers or professionals (approximately XXXXXXXXXX Members) may elect:

i. receive Holdco Share Units granted under the terms of the Holdco Plan, or

ii. receive the incentive compensation under the terms of Holdco's short term bonus program;

Once made, this election is irrevocable with respect to that particular entitlement;

(e) The number of Holdco Share Units granted to a member under the Holdco Plan is determined by dividing the incentive compensation a Member would otherwise receive (as described in (c) or (d) above), by the Holdco Plan Market Price of a common share of the Parent on the date of the grant.

(f) When dividends are paid on the common shares of the Parent, additional Holdco Share Units will be granted to a Member where the number of Holdco Share Units granted is equal to the amount of the dividend per share multiplied by the number of Holdco Share Units held by the Member divided by the Holdco Plan Market Price of a common share of the Parent on the date the dividend is paid.

(g) Holdco Share Units vest as specified in a member's Letter of Grant and generally vest over a XXXXXXXXXX -year period provided the member is employed by a member of the Corporate Group on such vesting dates. The Holdco Committee may accelerate vesting. As of XXXXXXXXXX , the outstanding Holdco Share Units were as follows:

	Vested Units			 XXXXXXXXXX
	Vesting on XXXXXXXXXX 		 XXXXXXXXXX
	Vesting on XXXXXXXXXX 		 XXXXXXXXXX
	Vesting on XXXXXXXXXX 		 XXXXXXXXXX
	Vesting on XXXXXXXXXX 		 XXXXXXXXXX 

(h) Upon the termination of employment or the death of a Member, a Member, the Member's designated beneficiary or the Member's estate, as the case may be, is paid an amount (net of any applicable withholding taxes) on a date that is not later than the end of the first calendar year following the date of the member's termination or death, as the case may be, where the amount of the payment is equal to the Holdco Market Price of a common share of the Parent multiplied by the number of vested Holdco Share Units held in the Members Account; and

(i) The Board of directors of Holdco may amend or terminate the Holdco Plan subject to any approvals that may be required from regulatory authorities and the shareholders of Holdco. However, unless the Members agree in writing prior to an amendment or termination, the amendment or termination may not affect the rights of the Members to become vested with, or to exercise the rights under, the Holdco Share Units that were granted prior to the amendment or termination, provided that the conditions and terms of the Holdco Plan and the Letter of Grant prior to the amendment or termination are fulfilled.

Opco Plan

8. Opco established the Opco Plan effective XXXXXXXXXX, as a deferred share unit plan under which agreements that are intended to comply with the provisions of paragraph 6801(d) of the Regulations are entered into with Participants. An advance income tax ruling was issued on XXXXXXXXXX , 2003, under our file number 2003-003372 and a supplemental ruling was issued on XXXXXXXXXX, 2003 under our file number 2003-005003 in respect of the Opco Plan. For the purposes of this Ruling, the salient terms of the Opco Plan and its administration are as follow:

(a) Participation in the Plan is available to Opco Employees. For greater certainty Participants may include employees of any member of the Corporate Group including Holdco;

(b) An Opco Employee is eligible to participate in the Opco Plan in respect to a fiscal year of Opco, if the Opco Employee is a resident of Canada and has Eligible Compensation for the immediately preceding calendar year that is greater than $XXXXXXXXXX. An employee must re-qualify each year to participate in the Plan in respect of the following year;

(c) The Opco Committee may also allow an Opco Employee to participate in the Opco Plan during a fiscal year where the Opco Employee does not satisfy the conditions set out in (b) above. In this event, the Opco Committee will establish an amount that will be deemed to be the Opco Employee's Eligible Compensation for the immediately preceding year.

(d) A Participant may elect to defer the receipt of a portion of the Participant's compensation to be earned in a fiscal period. Subject to (f) below, the amount that may be deferred cannot exceed XXXXXXXXXX% of the Participant's Eligible Compensation for the immediately preceding calendar year.

(e) A Participant may only elect to defer compensation to be earned in the fiscal period that follows the fiscal period during which the election is made (the "Deferred Compensation"). A Participant's election must be filed annually and no later than XXXXXXXXXX business days prior to the end of that period. No election to defer compensation may be made in respect of compensation earned prior to the date on which the election is submitted to the Opco Committee. An election, once made, may not be revoked for the year to which it relates.

(f) The Opco Committee may in its sole discretion, revise the formula used in (d) above or set aside the formula and set a specific deferral amount.

(g) A Participant's Employer that is a member of the Corporate Group may, in its sole discretion, elect to provide an additional notional amount (the "Additional Amount") to a Participant in respect of a fiscal period and must notify the Opco Committee of the Additional Amount within XXXXXXXXXX days of the period. The award of the Additional Amount is irrevocable.

(h) Additional Amounts will not be made to compensate a Participant for any decrease in the value of a Participant's interest in the Plan and the Corporate Group will never grant any amount or benefit for the purpose of reducing the impact, in whole or in part, of any reduction in the fair market value of the Preferred Shares.

(i) The shareholders of Subco are members of the Corporate Group. The articles of incorporation of Subco authorize the issuance of the Preferred Shares. Subco has and will continue to issue series of the Preferred Shares to its shareholders. Each series of the Preferred Shares track the value of different portfolio investments held by Subco and which members of the Corporate Group currently offer directly to its customers or employees, such as mutual funds that are created, managed and distributed by the Corporate Group. It is expected that as each series of Preferred Shares tracks the value of specified investments held by Subco, then the fair market value of each series of Preferred Shares held by the shareholders should also track the fair market value of the specified investments held by Subco.

(j) Series "A" of the Preferred Shares track the value of the common share of the Parent.

(k) A different series of Opco Share Units have and may be established where each series of Opco Share Units corresponds to a series of Preferred Shares. Series A Opco Share Units track the Series "A" Preferred Shares.

(l) Participants must specify in the election to defer compensation for a period, the Deferred Compensation and the percentage of that amount (in multiples of XXXXXXXXXX%) to be allocated to each available series of Opco Share Units. Where necessary, fractional DSUs will be issued.

(m) A Participant's employer must notify the Opco Committee of the manner in which any Additional Amounts are to be allocated to the available series of Opco Share Units.

(n) Each Participant is allocated Opco Share Units of a series equal to the portion of the Participant's Deferred Compensation allocated to that series divided by the Redemption Price of the Opco Share Unit of that series at that time. Fractional Opco Share Units will be allocated as necessary.

(o) Each Participant is allocated Opco Share Units of a series equal to the portion of the Participant's Additional Amount that is allocated to that series divided by the Redemption Price of the Opco Share Unit of that series at that time. Fractional Opco Share Units will be allocated as necessary.

(p) The Opco Share Units allocated under (n) above are recorded in the Participant's Notional Account-A. The Opco Share Units in a Participant's Notional Account-A vest immediately upon allocation. However, the Participant does not have any right to receive any benefits under the Plan until the Participant retires or terminates employment (including death) with any member of the Corporate Group.

(q) The Opco Share Units allocated under (o) above are recorded in the Participant's Notional Account-B. The Opco Share Units in a Participant's Notional Account-B do not vest immediately. Rather, they vest over a period of XXXXXXXXXX fiscal years (XXXXXXXXXX% per year) after being credited to the Participant's Notional Account-B. Accelerated vesting may occur under special circumstances such as death or retirement. However, should a Participant's retirement or termination of employment from the Corporate Group occur after the vesting of the Opco Share Units, their continued vesting and thus the Participant's entitlement thereto is subject to the Participant not accepting employment with a competitor of the Corporate Group after the Participant's retirement or termination of employment. In any event, a Participant does not have any right to receive any benefits under the Plan until the Participant retires or terminates employment (including death) with any member of the Corporate Group.

(r) The amounts credited to a Participant's Notional Accounts are recorded as an accrued liability of the Group Member with whom the Participant is employed.

(s) Additional Opco Share Units of a series (or fractions thereof) are credited to a Participant's Notional Accounts when dividends are paid on the corresponding series of Preferred Shares. The number of additional Opco Share Units allocated to a Notional Account is determined by multiplying the amount of the dividend by the number of the Opco Share Units of the relevant series held in that Notional account and dividing the result by the Redemption Price of the particular Opco Share Unit on the date the dividend is paid.

(t) Once a year, a Participant can elect to exchange previous allocations of Opco Share Units in the Participant's Notional Account-A for Opco Share Units of another series. The number of Opco Share Units that can be acquired through an exchange is equal to the number of Opco Share Units to be exchanged multiplied by their Redemption Price on the date of the exchange divided by the Redemption Price on the date of the exchange of the Opco Share Units being acquired.

(u) A Participant has no legal ownership of or beneficial interest in the series of Preferred Shares or the underlying portfolio investments of Subco or the Corporate Group by virtue of the allocation of Opco Share Units. For greater certainty, an Opco Share Unit will not entitle a Participant to any shareholder rights vis à vis Subco or the Corporate Group, including without limitation, voting rights, dividend entitlements or rights on liquidation.

(v) In the event of the declaration of any stock dividend, of a subdivision, consolidation, reclassification, exchange, or other change with respect to the Preferred Shares of a given series, or of a merger, consolidation, spin-off, or other distribution (other than ordinary course cash dividends) of Subco's assets to its shareholders, the Notional Accounts of each Participant and the Opco Share Units outstanding under the Plan corresponding to such Preferred Shares shall be automatically adjusted in such manner as the Committee may, in its sole and absolute discretion, deem appropriate to reflect such event, provided, however that no amount shall be paid to or in respect of, a Participant under the plan or pursuant to any other arrangement, and no Opco Share Units of a given series shall be granted to such Participant, to compensate for a downward fluctuation in the fair market value of the Preferred Shares of such series or in the value of the mutual fund units or other securities to which they relate, nor will any other form of benefit be conferred at any time upon, or in respect of, a Participant for such purpose.

(w) At any time prior to the end of business on the day a Participant retires or suffers a loss of office or employment, a Participant, may file a distribution election form with the Opco Committee with respect to the timing of the payment of the benefits derived from the vested Opco Share Units held in the Participant's Notional Account-A. Where the Participant has died, the legal representative of the Participant may file the distribution election in a manner specified by the Opco Committee. In the distribution election form, the Participant may elect to receive the Participant's vested benefits in no more than two instalments payable no earlier than the last business day of the month during which the retirement death or loss of office or employment occurred and no later than the end of the first fiscal period that ends after the calendar year in which the Participant retires, is terminated or dies.

(x) If a distribution election is filed as provided under (w) above, the benefits to be paid out of the Participant's Notional Account-A will be paid in accordance with the distribution election. If no distribution election is filed as provided under (w) above, the vested benefits will be paid out of the Participant's Notional Account-A in one lump sum on the last business day of the second month immediately following the day the Participant retires, is terminated or dies.

(y) Notwithstanding (x) above, all vested benefits will be distributed to a Participant (or to the Participant's legal representative in the event of the Participant's death) no later than the end of the fiscal period immediately following the year in which the Participant retires, is terminated or dies and, in any event, no later than the end of the first calendar year commencing after the Participant retires or is terminated (including death) from employment with the Corporate Group.

(z) The amount payable to a Participant will be equal to the sum of the amounts obtained by multiplying the number of Opco Share Units of each series held in the Participant's Notional Account-A on the payment date by the Redemption Price of the particular Opco Share Units and the number of vested Opco Share Units of each series held in the Participant's notional Account-B on the payment date by the Redemption Price of the particular Opco Share Units where the Redemption Price is the Redemption Price determined for the last business day of the month that immediately precedes the payment date.

(aa) The Participant's employer will pay all benefits in cash. In no event shall assets be distributed to a Participant that consists of treasury shares of any member of the Corporate Group.

(bb) The members of the Corporate Group will pay all costs and expenses associated with administering the Plan.

(cc) The Plan may be amended or terminated by Opco through its board of directors or through the Opco Committee at any time. However, no such amendment or termination will adversely affect the rights of the Participants as they exist as of the date of such an amendment or termination and furthermore will not accelerate payment of any benefits to the Participants.

Other Facts

9. All current Members of the Holdco Plan and all current Participants of the Opco Plan are residents of Canada and the corporate Group does not contemplate allowing any non-residents to participate in either plan in the near future.

10. XXXXXXXXXX.

Proposed Transactions

11. The Holdco Committee will approve amendments to the Holdco Plan that are to be effective as of the Effective Date. The salient amendments to the Holdco Plan are as follows:

(a) The term "Holdco Share Unit" will be renamed "Holdco Class A Share Unit";

(b) The term "Holdco Class B Share Unit" will be added and will mean a deferred share unit of Holdco issued by Holdco under the terms of the amended Holdco Plan. The Holdco Class B Share Units will vest upon issuance;

(c) The term "Opco Plan" will be added and means the Opco Plan as described in 8 above;

(d) New provision will be added to the Holdco Plan to provide that:

(i) All Holdco Class A Share Units held by a Member (either vested or not) will be convertible, after the Effective Date and before XXXXXXXXXX , but in no event after the termination of the employment of the Member, in whole only, at the sole option of the Member, into Holdco Class B Share Units, on the basis of one Holdco Class B Share Unit for one Holdco Class A Share Unit held by the Member, provided the Holdco Class A Share Units are equal in fair market value to the Holdco Class B Share Units. Subject to the preceding sentence, the conversion shall be deemed completed with respect to all Holdco Class A Share Units held by a Member on the date on which a written conversion request signed by the Member is received by Holdco or on the date, if any, specified in the request.

(ii) Holdco Class B Share Units will only be issued to a Member upon the conversion of the Member's Holdco Class A Share Units as provided in (i) above.

(iii) All Holdco Class B Share Units will be convertible, at any time after the Effective Date and before XXXXXXXXXX, in whole only and at the sole option of Opco, into Series A Opco Share Units to be held in the Opco Notional Account-A of the Opco Plan for the Member/Participant.

(iv) Prior to a conversion of the Holdco Class B Share Units into Series A Opco Share Units, Opco will notify a Member of the conversion date. A Conversion will be deemed to be completed on the date specified in the notice.

(v) Upon conversion of all Holdco Class B Share Units issued to a Member into Series A Opco Share Units, the Holdco Class B Share Units of the Member will be cancelled and Series A Opco Share Units will be credited to the Member/Participant that have, in total, a fair market value equal to the converted Holdco Class B Share Units.

(vi) Immediately after conversion of the Holdco Class B Share Units into Series A Opco Share Units, the Holdco Plan will no longer be valid with respect to the Member for whom the Holdco Class B Share Units have been converted and these Members will not have any right or recourse of any nature whatsoever under the Holdco Plan as if no Holdco Share Units had ever been granted to the Member. The Opco Share Units shall be governed exclusively by the terms of the Opco Plan.

12. Holdco and Opco will enter into an agreement relating to the implementation of the proposed transactions.

13. In accordance with 8(c) above, the Opco Committee will allow all current Members of the Holdco Plan to become eligible to participate in the Opco Plan.

14. On the Effective Date and pursuant to 11(d)(iii) above, Opco will elect to convert all Holdco Class B Share Units into Series "A" Opco Share Units and credit these to the Member/Participant's Notional Account-A. For greater certainty, the number of Opco Share Units issued on the conversion will be equal to:

the number of Holdco Class B Share Units multiplied by the Holdco Plan Market Price of the Holdco Class B Share Units on the date of the conversion divided by the Redemption Price of the Series A Opco Share Units on the date of the conversion.

The Opco Share Units so credited to the Participant's Account "A" shall thereafter be governed solely by the terms of the Opco Plan.

15. Subject to all Holdco Plan Members electing to convert as described in 10(d) above, the Holdco Plan will be terminated. Should this not occur, the Holdco Plan will remain in existence for those Members who have chosen not to convert.

16. In the event that the Parent declares dividends on its common shares before the Effective Date that are paid after the Effective Date, the Committee will insure that Opco Share Units are credited to Participants' Notional Account-A in accordance with 8(s) above in respect of the dividends when the dividends are paid and that no Holdco Share Units are credited under 7(f) above.

17. Distributions will not be made to a Member or Participant as a result of the Proposed Transactions in and of themselves.

18. No Participants' rights under the Opco Plan will be altered as a result of the Proposed Transactions.

19. For greater certainty, contributions shall not be credited to any Participant's Notional Account-"B" either immediately before, during the course of, or as a consequence of the Proposed Transactions.

Purpose of the Proposed Transactions

20. The Holdco Plan is being amended to permit Holdco Share Units previously issued under the Plan to be converted into Series "A" Opco Share Units of the Opco Plan in order to:

(i) streamline the management and administration of the two plans,

(ii) offer the same benefits as currently provided under the Opco Plan to all current Members and Participants under either the Holdco Plan or the Opco Plan, and

(iii) motivate and encourage the retention of officers, professionals and XXXXXXXXXX of Holdco and its affiliates who are key to the long-term success of the Corporate Group.

Additional Information

21. To the best of your knowledge, and that of the Corporate Group, any Member or any Participant, none of the issues involved in this Ruling are:

(i) in an earlier tax return of any member of the Corporate Group, a Member or a Participant or any person related to a member of the Corporate Group, a Member or a Participant other than with respect to the operation of the deferred compensation plans as they presently exist;

(ii) being or have been considered by a tax services office or tax centre in connection with a previously filed tax return of a member of the Corporate Group, a Member, a Participant or any person related to a member of the Corporate Group, a Member or a Participant;

(iii) under objection by a member of the Corporate Group, a Member, a Participant or any person related to a member of the Corporate Group a member or a Participant;

(iv) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired; nor

(v) the subject of a ruling previously issued by the Directorate to a member of the Corporate Group, a Member, a Participant or any person related to a member of the Corporate Group, a Member or a Participant other than as described in 8 of the above facts.

Rulings

Provided that:

(i) the preceding statements constitute a complete and accurate disclosure of all of the relevant definitions, the relevant facts, including the terms of the existing Opco and Holdco Plans, the proposed amendments to the Holdco Plan, the proposed transactions and the purpose of the proposed transactions, and

(ii) the wording of the provisions of the Opco and Holdco Plans after the proposed transactions are undertaken are, and continue to be, substantially as described above, we rule as follows:

A. No amount will be included in the income of any Member or Participant pursuant to section 3, subsection 5(1), paragraph 6(1)(a), paragraph 6(1)(c), or subsection 6(3) of the Act as a result of the Proposed Transactions, in and by themselves.

B. Subject to paragraph 18(1)(a) and section 67 of the Act, all costs paid for by Holdco or Opco to amend the Holdco Plan, convert Holdco Share Units into Series "A" Opco Share Units or terminate the Holdco Plan, if applicable, will be deductible in accordance with section 9 of the Act in the year in which the costs are incurred, in computing the income of the members of the Corporate Group to the extent such costs are reasonable apportioned to such members of the Corporate Group.

The above rulings, which are based on the Act in its present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the CRA provided that the proposed Plan is implemented by XXXXXXXXXX.

Comments

Nothing in this letter should be construed as implying that the CRA has:

(a) confirmed, reviewed or has made any determination in respect of any other tax consequences relating to the facts, proposed Plan or any transaction or event taking place either prior to the implementation of the proposed transactions or subsequent to the implementation of the proposed transactions, whether described in this letter or not, other than those specifically described in the rulings given above; or

(b) confirmed, reviewed or has made any determination that the Holdco Market Price represent the fair market value of a common share of the Parent or that the Redemption Price represents the fair market value of a Preferred Share of Subco.

Yours truly,

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