1996 Ruling 9638853 - : XXXXXXXXXX DPS

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:

Clarification of our understanding of facts for DPS Ruling.

Position:

Granted

Reasons:

This was always our understanding.

XXXXXXXXXX

Attention: XXXXXXXXXX

Re: Advance Income Tax Ruling #3-960165

XXXXXXXXXX

We are writing in response to your facsimile letter dated XXXXXXXXXX, wherein you requested confirmation of our understanding of the facts and proposed transactions described in advance income tax ruling #960165 (the "Ruling") dated XXXXXXXXXX, 1996, as extended/amended by our letters of XXXXXXXXXX.

Paragraph 28 of the Ruling indicates that $XXXXXXXXXX will be advanced by XXXXXXXXXX, in the aggregate, to XXXXXXXXXX, as the case may be, to allow such corporations to repay and consolidate their portion of the $XXXXXXXXXX emergency advance owing to XXXXXXXXXX and $XXXXXXXXXX in accrued interest and professional fees outstanding (see our XXXXXXXXXX letter) with the balance of the advance (the "Excess" being approximately $XXXXXXXXXX) to be used, to the extent possible, to repay a portion of the $XXXXXXXXXX of "overdue trade payables" owing at the time of closing (as noted in paragraph 8 of the Ruling and as amended by our letters dated XXXXXXXXXX).

You advise that certain repayment arrangements have been reached with some of the overdue trade payable creditors, the result being that where such an arrangement has been reached, such overdue trade payables will not be repaid as described above. You further advise that since XXXXXXXXXX will still have an aggregate balance of overdue trade payables (net of any repayment arrangements) greater than the Excess at the time of closing, you ask for confirmation that the Department does not have any concern as to the ordering of repayment of such overdue trade payables.

We understand that the proposed transactions have now been completed.

As discussed with you on XXXXXXXXXX, the Department does not have any particular concern as to which particular overdue trade payables are repaid by the Excess. However, we would expect that overdue trade payable creditor(s) that have commenced legal action for repayment against XXXXXXXXXX, as the case may be, as described in paragraph 10 of the Ruling, would be repaid from the Excess unless a repayment arrangement has been reached. Accordingly, we confirm that as long as the Excess is used to repay overdue trade payables, as described above, the ordering of such repayment will not, in and of itself, cause us to consider the Ruling invalid.

Yours truly

for Director
Financial Industries Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch