2006 Ruling 2006-0172931R3 - income trust reorganization

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

Principal Issues: Whether reorganization of an existing MFT structure using 132.2 meets the requirements of the Act and is within policy. Before the proposed transactions, the trust wholly owns various corporations, limited partnerships and XXXXXXXXXX in a complex structure. While the trust limits its undertaking to the investing of its funds in property, the various wholly owned corporations and limited partnerships carry on similar businesses. At the end of the proposed transactions, the trust owns all of its assets indirectly through a limited partnership interest and shares of a corporation that is the general partner of the limited partnership which carries on the businesses formerly operated by various entities within the corporate structure. Does the proposed internal reorganization qualify for a 132.2 exchange? Will GAAR apply?

Position: The proposed transactions are within policy and ruling on the application of 132.2 and section 245 are granted.

Reasons: The proposed transactions do not involve the type of conversion of a taxable Canadian corporation to a mutual fund corporation that has historically caused us concern. The current corporations are 100% within the mutual fund family and thus the conversion/restructuring is within that family.

XXXXXXXXXX 								2006-017293

Attention: XXXXXXXXXX

XXXXXXXXXX, 2006

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX in which you request an advance income tax ruling in respect of the above-noted taxpayer. We also acknowledge your correspondence of XXXXXXXXXX.

To the best of your knowledge and that of your client, none of the issues involved in the ruling request is:

• in an earlier return of your client or a related person,
• being considered by a tax services office or taxation center in connection with a previously filed tax return of your client or a related person,
• under objection by your client or a related person,
• before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired, or
• the subject of a ruling previously considered by the Directorate in respect of your client or a related person.

You provided us with a copy of the XXXXXXXXXX Management Information Circular dated XXXXXXXXXX and the declaration of trust for the XXXXXXXXXX as amended to XXXXXXXXXX and a copy of the proposed amendments to that declaration of trust. This document is based solely on the facts and proposed transactions described below. The documentation submitted with your request does not form part of the facts and proposed transactions and any references thereto are provided solely for the convenience of the reader. All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act"), and the following terms have the meanings specified:

"Amalco" means the corporation to be formed by the amalgamation of Holdco, Holdco II, Holdco III and Opco under the provisions of the XXXXXXXXXX as more fully described in paragraph 20 below;

"Amalco Shares" means the issued and outstanding common shares of Amalco;

"Amalco MFC" means the corporation to be formed by the amalgamation of Newco and Amalco pursuant to an amalgamation agreement under the provisions of the XXXXXXXXXX as more fully described in paragraph 28 below;

"Amalco MFC Class A Share" means a Class A share in the capital of Amalco MFC having the same terms as those of a Class A Newco Share;

"Amalco MFC Class B Share" means a Class B share in the capital of Amalco MFC having the same terms as those of a Class B Newco Share except that the holder of a Amalco MFC Class B Share will be entitled to vote for the appointment of the auditor of Amalco MFC;

"Amalco MFC common share" means a common share in the capital of Amalco MFC having the same terms as those of a common share of Newco;

"Fund" means XXXXXXXXXX;

"Fund Unit" means a unit of the Fund, each such unit representing an equal undivided beneficial interest in the distributions made by the Fund, as well as the net assets of the Fund in the event of termination or winding up of the Fund as described more fully in paragraphs 2 and 3 below;

"Fund Subsidiary Property Gpcos" collectively, means XXXXXXXXXX, each of which is a taxable Canadian corporation and a general partner of one of the Fund Subsidiary Property Partnerships;

"Fund Subsidiary Property Partnerships" means the XXXXXXXXXX limited partnerships collectively, consisting XXXXXXXXXX, which collectively own, directly or indirectly, the land and buildings associated with XXXXXXXXXX;

"Holdco" means XXXXXXXXXX, a taxable Canadian corporation that was incorporated under the XXXXXXXXXX that is a private corporation for purposes of the Act; its business number is XXXXXXXXXX and it has a XXXXXXXXXX year end for purposes of the Act;

"Holdco Loan" means the loan made by the Fund to Holdco under the terms of a loan agreement dated XXXXXXXXXX, having a principal amount and adjusted cost base of $XXXXXXXXXX as of XXXXXXXXXX;

"Holdco II" means XXXXXXXXXX, a taxable Canadian corporation and a private corporation that was incorporated under the XXXXXXXXXX; its business number is XXXXXXXXXX and it has a XXXXXXXXXX year end for purposes of the Act;

"Holdco III" means XXXXXXXXXX, an unlimited liability company incorporated under the XXXXXXXXXX, that is a taxable Canadian corporation and a private corporation for purposes of the Act; its business number is XXXXXXXXXX and it has a XXXXXXXXXX year end for purposes of the Act;

"Holdco IV" means XXXXXXXXXX, a taxable Canadian corporation that is wholly owned by Opco;

"Holdco V" means XXXXXXXXXX, a taxable Canadian corporation that is wholly owned by Opco;

"Holdco VI" means XXXXXXXXXX, a taxable Canadian corporation incorporated under the XXXXXXXXXX;

"Holdings LP" means the XXXXXXXXXX, the activities of which are described more fully in paragraph 10 below;

"Newco" means a newly created corporation to be formed under the XXXXXXXXXX, as more fully described in paragraphs 24-26 below;

"Newco Class A Share" means a class A share in the capital of Newco the terms of which include the following characteristics: non-voting; entitle the holder thereof to receive dividends if, as and when declared by the board of directors of Newco; redeemable at the option of Newco without notice to the holders thereof for the fair market value of any consideration paid on the issuance of the Newco Class A share; redeemable at the option of the holder upon not less than three business days' prior written notice to Newco for the fair market value of any consideration paid on the issuance of the Newco Class A share; and on the liquidation, dissolution or wind-up of Newco, entitle the holder to receive the fair market value of any consideration paid on the issuance of the Newco Class A share plus any declared and unpaid dividends to the date of such dissolution, before any amount is paid, or any assets of Newco are distributed, to the holders of common shares of Newco;

"Newco Class B Share" means a class B share in the capital of Newco the terms of which are same as a Newco Class A Share except that the holder of a Newco Class B Share will be entitled to vote for the appointment of the auditor of Newco and the redemption price for the Newco Class B Share, whether redeemed at the option of Newco or the shareholder or on the liquidation, dissolution or wind-up of Newco, will be the fair market value of any consideration paid on the issuance of the Newco Class B share;

"Opco" means XXXXXXXXXX; Opco is a taxable Canadian corporation and a private corporation for purposes of the Act and its business number is XXXXXXXXXX; it has a XXXXXXXXXX year end for purposes of the Act and is described more fully in paragraph 11 below;

"Opco Subsidiary Gpcos" collectively, means XXXXXXXXXX;

"Opco Subsidiary Partnerships" means the XXXXXXXXXX;

"Operator Gpco" means XXXXXXXXXX, a taxable Canadian corporation which is the general partner of Operator LP and which holds a XXXXXXXXXX% interest in Operator LP and which is more fully described in paragraph 7 below;

"Operator LP" means XXXXXXXXXX and described more fully in paragraph 6 below;

"Stock Exchange" means the XXXXXXXXXX Stock Exchange; and

"Subsidiary Operator Partnerships" means the limited partnerships that are subsidiaries of Operator LP, each of which is a Canadian partnership.

The relevant Taxation Services Office for Holdco, Holdco II, Holdco III and Opco is the XXXXXXXXXX Tax Services Office and the relevant Taxation Centre is the XXXXXXXXXX Taxation Centre. The address of the head office of each of Holdco, Holdco II, Holdco III and Opco is XXXXXXXXXX . The relevant Taxation Services Office for the Fund is the XXXXXXXXXX Tax Services Office and the relevant Taxation Centre is the XXXXXXXXXX. The tax account number for the Fund is XXXXXXXXXX.

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

Facts

1. The Fund is a mutual fund trust as defined in subsection 132(6) that was formed XXXXXXXXXX. The Fund is not a registered investment as defined in section 204.4. The Fund Units XXXXXXXXXX are traded on the Stock Exchange.

2. The head office of the Fund is located at XXXXXXXXXX. It has a XXXXXXXXXX year end for purposes of the Act. Under the terms of the Fund, the Fund may issue an unlimited number of Fund Units. Each Fund Unit is transferable, entitles the holder to one vote on all matters to be voted on at meetings of unitholders and is redeemable on the demand of the holder for a redemption price based on the trading price of Fund Units on the Stock Exchange. The terms of the Fund prohibits non-residents of Canada from collectively owning a majority of the Fund Units.

3. XXXXXXXXXX.

4. XXXXXXXXXX the trustees of the Fund are individuals resident in Canada. The terms of the Fund require a majority decision of the trustees for all decisions concerning the property of the Fund. Under the terms of the Fund's declaration of trust, holders of Fund Units are entitled to vote with respect to the election or removal of trustees of the Fund.

Fund Ownership Structure

5. The Fund's assets consist principally of:

XXXXXXXXXX.

6. Under the limited partnership agreement of Operator LP, the authorized capital of Operator LP consists of XXXXXXXXXX.

7. The general partner of Operator LP is Operator Gpco. No trustee of the Fund is a director or officer of Operator Gpco, or of any corporation that is a general partner of a Subsidiary Operator Partnership. The board of directors of Operator Gpco, and of each corporation that is a general partner of a Subsidiary Operator Partnership, has the powers and authority to manage the business and affairs of Operator Gpco, or such subsidiary general partner corporation, and Operator Gpco, or such subsidiary general partner corporation, administers, manages, controls and operates the business of Operator LP, or such Subsidiary Operator Partnership as the case may be. The trustees of the Fund do not, and will not, have or limit such powers and authority of the directors or officers of Operator Gpco or of any subsidiary general partner corporation of a Subsidiary Operator Partnership.

8. The authorized capital of Holdco consists of an unlimited number of common shares. The Fund holds XXXXXXXXXX all of the issued and outstanding Holdco common shares, with an aggregate adjusted cost base and paid-up capital of $XXXXXXXXXX. The fair market value of the Holdco common shares is at least equal to this amount. Holdco is indebted to the Fund for the amount of the Holdco Loan.

9. The authorized capital of Holdco II consists of an unlimited number of common shares. Holdco holds XXXXXXXXXX all of the issued and outstanding Holdco II common shares having an adjusted cost base and paid-up capital of $XXXXXXXXXX. Holdco II is indebted to Holdco in the principal amount of $XXXXXXXXXX.

10. The authorized capital of Holdco III consists of an unlimited number of common shares. The Holdings LP holds all of the issued and outstanding common shares of Holdco III having an adjusted cost base and paid-up capital of $XXXXXXXXXX. Holdco III is indebted to Holdings LP in the principal amount of $XXXXXXXXXX In addition, Holdings LP carries on the business of XXXXXXXXXX The two partners that form Holdings LP are Holdco, the sole limited partner of Holdings LP, XXXXXXXXXX, and Holdco II, the sole general partner of Holdings LP, XXXXXXXXXX.

11. The authorized capital of Opco consists of an unlimited number of common shares. Holdco III holds XXXXXXXXXX common shares of Opco and Holdco II holds XXXXXXXXXX common shares of Opco. Opco is indebted to Holdco III and Holdco II XXXXXXXXXX The assets of Opco consist principally of:

XXXXXXXXXX.

12. Holdco V holds XXXXXXXXXX.

Recent Transactions

13. XXXXXXXXXX.

Proposed Transactions

14. Prior to the implementation of the proposed transactions described below, the approval of the holders of the Fund Units will be sought by way of special resolution. In connection therewith and in accordance with applicable securities legislation, the Fund will mail to its unitholders a management information circular describing the proposed transactions in respect of which approval is being sought. The Fund will file the management information circular with the securities regulators in each of the provinces in Canada as required under the applicable securities legislation. The special resolution also will seek the unitholders' approval for the amendments to the terms of the Fund as described in paragraph 34 below.

15. Holdco will transfer all its limited partnership interest in Holdings LP to Holdco II in consideration for common shares of Holdco II having a fair market value equal to that of the transferred limited partnership interest, and will cease to be a partner of Holdings LP. Holdco and Holdco II will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to such transfer so that no gain or loss will be realized by Holdco on the transfer.

16. Upon the completion of the transfer referred to in paragraph 15 above, Holdings LP will have only one partner and, as a result, Holdings LP will dissolve by operation of law such that all the assets and liabilities of Holdings LP will become assets and liabilities of Holdco II. Following such dissolution, Holdco II will continue to carry on the business of Holdings LP and will continue to use, in the course of the business, the property received on the dissolution.

17. XXXXXXXXXX.

18. Holdco III and Opco will XXXXXXXXXX so that, XXXXXXXXXX, Holdco III and Opco will each be a corporation governed by the XXXXXXXXXX. The XXXXXXXXXX will not effect any change to the authorized and issued share capital of either corporation.

19. Each of Holdco and Holdco II will XXXXXXXXXX so that, XXXXXXXXXX, each corporation will be a corporation governed by the XXXXXXXXXX. Such XXXXXXXXXX will not effect any change to their respective authorized and issued share capital.

20. Holdco, Holdco II, Holdco III and Opco (referred to collectively in this paragraph as the "predecessor corporations") will amalgamate pursuant to an amalgamation agreement to form Amalco in such a manner that:

• all the property (except any amounts receivable from any predecessor corporation or shares in the capital stock of any predecessor corporation) of the predecessor corporations held immediately before the amalgamation will become the property of Amalco by virtue of the amalgamation;
• all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Amalco; and
• all of the Holdco II common shares held by Holdco, all of the Holdco III common shares held by Holdco II and all of the Opco common shares held by Holdco II and Holdco III immediately prior to the amalgamation will be cancelled as a result of the amalgamation.

21. Pursuant to the terms of the amalgamation agreement, the authorized capital of Amalco will consist of an unlimited number of common shares and the Fund will receive XXXXXXXXXX Amalco Shares, representing all of the issued and outstanding common shares of Amalco in exchange for its common shares of Holdco on the amalgamation.

22. Amalco will transfer all of the properties described in paragraph 11(a) above XXXXXXXXXX to Operator LP in exchange for the assumption by Operator LP of any existing liabilities relating to any of the properties described in paragraph 11(a) above XXXXXXXXXX and the Class B units of Operator LP having a fair market value equal to the fair market value of such assets less the amount of the assumed liabilities, if any.

23. Operator Gpco, the Fund, Amalco and each other partner of Operator LP will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have the provisions of subsection 97(2) apply to the transfer of assets to Operator LP by Amalco in such a manner that no gain or loss will be realized by Amalco on such transfer. Following the completion of the transfers described in this paragraph, Amalco's assets will consist solely of limited partnership units of Operator LP, limited partnership interests in the Opco Subsidiary Partnerships, the shares of the Opco Subsidiary Gpcos, XXXXXXXXXX, the shares of Holdco IV and the shares of nominee corporations XXXXXXXXXX.

24. The Fund will incorporate Newco and will acquire one common share of Newco on incorporation for a nominal amount. The only undertaking of Newco will be the investing of its funds in property, including the Amalco shares and the Holdco Loan which are to be acquired in the manner described in paragraph 27 below. The authorized capital of Newco will consist of an unlimited number of common shares, Newco Class A shares and Newco Class B shares. Each common share of Newco will:

• entitle the holder thereof to one vote on all matters to be voted on at all meetings of shareholders;
• entitle the holder thereof to receive dividends if, as and when declared by the board of directors of Newco;
• be redeemable, at the option of the holder or Newco for a redemption price of $XXXXXXXXXX per share; and
• on the liquidation, dissolution or winding up of Newco, entitle the holder to share rateably in any remaining assets of Newco.

25. In accordance with the management information circular, the Fund will subscribe for a number of Newco Class A Shares equal to the number of Fund Units then outstanding for a subscription price per Newco Class A Share of $XXXXXXXXXX. The Fund will then distribute the Newco Class A Shares acquired to holders of Fund Units as a return of capital. Each holder of Fund Units will receive a number of Newco Class A Shares equal to the number of Fund Units owned by such holder immediately before the distribution of the Newco Class A Shares.

26. The distribution of the Newco Class A Shares to the unitholders of the Fund, as well as the distribution of the Fund Units distributed in paragraph 30 below, in accordance with the management information circular will be exempt from the registration and prospectus requirements of applicable Canadian securities legislation. The number of Fund Units owned by each holder will not be reduced as a result of this distribution. The Newco Class A Shares will be listed on the Stock Exchange immediately following the distribution of such shares to the holders of Fund Units. Accordingly, following the distribution of the Newco Class A Shares, and prior to the amalgamation described in paragraph 28 below, Newco will be a public corporation pursuant to paragraph (a) of the definition of that term in subsection 89(1).

27. The Fund and Newco will enter into an agreement of purchase and sale under which the Fund will transfer to Newco both the Amalco Shares and the amount receivable under the Holdco Loan in consideration for the issue by Newco to the Fund of Newco Class B Shares with an aggregate fair market value equal to the fair market value of the Amalco Shares and the amount receivable under the Holdco Loan. The Fund will jointly elect with Newco, in prescribed form and within the time referred to in subsection 85(6) to have the provisions of subsection 85(1) apply to the transfer of the Amalco Shares and the loan receivable so that no gain or loss will be realized by the Fund on the transfer.

28. Newco and Amalco (referred to collectively in this paragraph as the "predecessor corporations") will amalgamate to form Amalco MFC in such a manner that:

• all of the property (except any amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations held immediately before the amalgamation will become property of Amalco MFC by virtue of the amalgamation;
• all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Amalco MFC; and
• all of the Amalco Shares and the Holdco Loan receivable held by Newco immediately prior to the amalgamation will be cancelled by virtue of the amalgamation.

Pursuant to the amalgamation agreement, the articles of amalgamation of Amalco MFC will be the same as the articles of Newco, and Amalco MFC will not issue any securities in connection with the amalgamation. Each shareholder of Newco will receive shares of Amalco MFC that are identical to the shares of Newco held by such shareholder immediately prior to the amalgamation. The amalgamation agreement will specify that the amalgamation is effective at a time after the distribution of the Newco Class A Shares described at paragraph 26 above has been completed and the Newco Class A Shares are listed on the Stock Exchange.

29. Amalco MFC and the Fund intend to enter into an agreement of purchase and sale under which Amalco MFC will transfer all of its assets to the Fund in consideration for the Fund assuming its indebtedness, if any, and in consideration for the Fund issuing to Amalco MFC a number of Fund Units with an aggregate fair market value equal to the fair market value of the assets so transferred less the amount of assumed liabilities, if any. XXXXXXXXXX.

30. On the same day as, but following, the transfer described in paragraph 29 above, Amalco MFC will redeem all of the issued and outstanding Amalco MFC Class A Shares as well as all of the Amalco MFC Class B Shares owned by the Fund. In exchange for such redemptions, Amalco MFC will distribute the Fund Units that it acquires from the Fund, as described in paragraph 29 above, to the holders of Amalco MFC Class A Shares and the Fund in proportion to the respective values of their shareholdings in Amalco MFC. This will be the only consideration received on the redemption of the Amalco Class A and Amalco Class B shares. As the Fund cannot at law hold an interest in itself, the Fund Units distributed to it by Amalco MFC on the redemption of the Amalco MFC Class B Shares will be cancelled upon receipt.

31. Following the transactions described in paragraphs 29 and 30 above Amalco MFC will jointly elect with the Fund, in prescribed form and within the time referred to in paragraph (c) of the definition of qualifying exchange in subsection 132.2(2), to have the provisions of section 132.2 apply to the transfer by Amalco MFC of its assets to the Fund.

32. Following the exchange described in paragraph 30 above, Amalco MFC will have no assets XXXXXXXXXX Amalco MFC may also hold certain contracts as nominee on behalf of the Fund or its subsidiaries pending the receipt of third party consents to assignment.

33. The outstanding Fund Units, including the Fund Units distributed to the holders of Amalco MFC Class A Shares in paragraph 30 above, will automatically be consolidated such that the total number of Fund Units outstanding upon completion of the proposed transactions will be equal to the total number of Fund Units outstanding immediately prior to the commencement of such transactions. Neither the proposed transactions described above nor the consolidation of Fund Units will have an impact on the outstanding convertible unsecured subordinated debentures issued by the Fund.

34. The terms of the Fund's declaration of trust will be amended to provide that, if a unitholder of the Fund is not entitled to receive cash upon a redemption of Units as a result of the limitations set out in the terms of the Fund, then the Units tendered for redemption will, subject to any applicable regulatory approvals, be redeemed in part by cash and in part by way of a distribution in specie of notes or other securities of Operator LP or another subsidiary of the Fund having an aggregate fair market value equal to the redemption price of the Fund Units so tendered for redemption, and not Holdco Notes as currently contemplated in the terms of the Fund.

35. Following the completion of the proposed transactions described above and provided that necessary lender, franchisor and other relevant consents are obtained as anticipated, the Fund intends to transfer XXXXXXXXXX , to Operator LP in consideration for

• the assumption by Operator LP of such portion of the liabilities of the Fund as is agreed between the Fund and Operator LP, and
• Class A Units of Operator LP having a fair market value equal to the difference between the fair market value of the assets so transferred by the Fund and the amount of liabilities so assumed by Operator LP.

36. The Fund and each partner of Operator LP will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have the provisions of subsection 97(2) apply to the transfer of assets to Operator LP by the Fund so that no gain or loss will be realized by the Fund on such transfer of assets.

37. XXXXXXXXXX.

Purpose of the Proposed Transactions

38. The purpose of the proposed transactions is to reorganize the Fund and its subsidiaries in order to achieve a more efficient and integrated operational structure that will position the Fund to pursue additional XXXXXXXXXX acquisitions in accordance with its long-term business plan. The existing ownership structure of the Fund is complex with a significant number of subsidiaries. It is anticipated that the Fund will achieve significant operating and other cost reductions by virtue of the proposed transactions described above. The proposed transactions also will result in a more tax-efficient structure whereby XXXXXXXXXX operating income is taxed at the unitholder level, which should improve the Fund's ability to access the capital markets to raise cash to fund future acquisitions. In addition, simplifying the Fund's ownership structure and consolidating the ownership and operation of the XXXXXXXXXX under Operator LP, will improve the Fund's ability to XXXXXXXXXX.

Rulings Given

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

A. Provided that

(a) Amalco MFC is a mutual fund corporation within the meaning assigned by subsection 131(8) and the Fund is a mutual fund trust within the meaning assigned by subsection 132(6) at the time of the transfer of property described in paragraph 29;

(b) the property transferred from Amalco MFC to Fund as described in paragraph 29 has a fair market value of at least 90% of the fair market value of all property owned by Amalco MFC at the time of the transfer; and

(c) Amalco MFC and the Fund jointly elect under paragraph (c) of the definition of "qualifying exchange" in subsection 132.2(2) by filing the prescribed form within the time set forth in that subsection;

the transfer of assets from Amalco MFC to Fund as described in paragraphs 29 to 31 will constitute a "qualifying exchange" within the meaning of subsection 132.2(2) such that provisions of subsection 132.2(1) will apply to:

(d) the transfer of the property described in paragraph 29 from Amalco MFC to the Fund;

(e) the purchase for cancellation by Amalco MFC of the Amalco MFC Class A shares and Amalco MFC Class B shares described in
paragraph 30 above; and

(f) the transfer of the Fund Units from Amalco MFC to holders of the Amalco MFC Class A Shares and the Amalco MFC Class B Shares described in paragraph 30 above.

B. Subsection 245(2) will not apply to re-determine the tax consequences described above, solely as a result of the proposed transactions described herein.

The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act.

Nothing in this advance income tax ruling should be construed as implying that we are ruling on, or have considered, or discussed with you any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the Rulings given above. More particularly, you did not request, nor have we considered or given any ruling with respect to the recent transactions, any other aspect of the reorganization or any other aspect of the taxation of the Fund.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the CRA provided that proposed transactions are completed within 6 months of the date of this letter. As indicated in Information Circular 70-6R5, we do not rule on matters involving the determination of the fair market value of property and nothing in this ruling should be construed as implying that CRA has agreed to or reviewed the determination of the fair market value, the adjusted cost base, or fair market value of any particular asset or the paid-up capital of any shares referred to herein.

Opinion

On July 18, 2005, the Department of Finance released legislative proposals concerning section 132.2. In addition, we understand that the Department of Finance issued a letter dated February 14, 2006 (the "Comfort Letter"), indicating that it was prepared to recommend further amendments to the Minister of Finance in respect of section 132.2 to clarify that the time period in which the proceeds of disposition of units of the transferee or shares of the transferor would be determined under proposed subsection 132.2(3)(f) or (g) includes the time that is immediately after the "transfer time" as that term is defined in the proposed amendments to subsection 132.2(1). Provided that subsection 132.2(3)(f) and (g) are amended in the manner suggested in the Comfort Letter and the conditions set out in ruling A are met in respect of the proposed transactions, it is our view that the proposed transactions described in paragraphs 29 to 31 above would qualify as a qualifying exchange within the meaning of proposed subsection 132.2(1).

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