2003 Ruling 2002-0178943 - Qualification of XXXXXXXXXX - amendment of terms

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

1. Whether the redemption feature meets the requirements of paragraph 108(2)(a) of the Act?

2. Will there be a disposition of trust property or units of the trust?

3. Is the only undertaking of XXXXXXXXXX investing in property other than real property or acquiring and holding real property that is capital property?

4. Was XXXXXXXXXX established or is maintained primarily for the benefit of non-resident persons?

5. Will XXXXXXXXXX qualify as a unit trust throughout the year?

6. Will XXXXXXXXXX continue to be a registered investment?

7. Will notes issued by XXXXXXXXXX Trust be foreign property?

8. Will GAAR apply?

Position:

1. Yes, as provision worded broadly.

2. No, based on prior Rulings.

3. Yes, it will not carry on any business.

4. No, non-resident ownership is limited.

5. Yes, pursuant to amended s. 108(2)(b).

6. Yes, unless it ceases to be a mutual fund trust.

7. No, since they are debt issued by a resident of Canada.

8. No, issue considered previously by the GAAR Committee.

Reasons:     		See Statement of Principal Issues.

XXXXXXXXXX 2002-017894

XXXXXXXXXX, 2003

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
XXXXXXXXXX ("XXXXXXXXXX") and Affiliates

This is in reply to your letter of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayer with respect to the transactions described herein. To the best of your knowledge and that of XXXXXXXXXX and its Affiliates, none of the issues involved in this ruling request:

1. is in an earlier return of XXXXXXXXXX, its Affiliates, or a related person;

2. is being considered by a Tax Services Office or Taxation Centre in connection with a previously filed tax return of XXXXXXXXXX, its Affiliates, or a related person;

3. is under objection by XXXXXXXXXX, its Affiliates, or a related person;

4. is before the courts; or

5. is the subject of a ruling previously considered by the Income Tax Rulings Directorate.

In this letter, references to the "Act" mean the Income Tax Act, R.S.C. 1985 c.1 (5th Supp.), as amended to the date hereof. Unless otherwise stated, statutory references in this letter are to the Act. Our understanding of the facts, Proposed Transactions and the purpose of the Proposed Transactions is set out below.

Definitions

1. In this letter unless otherwise expressly stated:

(a) "Affiliates" of XXXXXXXXXX means all of the entities listed in Schedule I;

(b) "Amalco" means a newly created corporation to be formed by amalgamating all Opcos, including the Assignee, pursuant to the relevant provisions of the Business Corporations Act (XXXXXXXXXX) and in accordance with the provisions of subsection 87(1);

(c) "Amalgamated GPCo" means a newly created corporation to be formed by amalgamating Amalco and GPCo, pursuant to the relevant provisions of the Business Corporations Act (XXXXXXXXXX) and in accordance with the provisions of subsection 87(1);

(d) "arm's length" has the meaning assigned by subsection 251(1);

(e) "Asset Management and Cost Recovery Agreement" means the agreement pursuant to which XXXXXXXXXX provides asset management services, investor relations services and other financial, investment and administrative services to XXXXXXXXXX in exchange for fees, for the purpose of enhancing the financial performance of the XXXXXXXXXX Properties, repositioning the XXXXXXXXXX Properties where necessary, including planning and implementing necessary capital expenditures, and assisting in locating and acquiring appropriate additional XXXXXXXXXX Properties;

(f) "Assignee" means one or more designated Opcos;

(g) "Board of Trustees" of the Trust means the group of Trustees, which, in accordance with the provisions of the XXXXXXXXXX Declaration of Trust, shall be no fewer than XXXXXXXXXX and not more than XXXXXXXXXX trustees;

(h) "the CCRA" means the Canada Customs and Revenue Agency;

(i) "XXXXXXXXXX Declaration of Trust" means the Declaration of Trust to be made by the XXXXXXXXXX Trustees to hold in trust any and all property of XXXXXXXXXX Trust, and any income and gains therefrom, for the benefit of XXXXXXXXXX Unitholders;

(j) "XXXXXXXXXX Note Indenture" means the trust indenture to be entered into between XXXXXXXXXX Trust and the Note Trustee providing for the issuance of the XXXXXXXXXX Trust Notes;

(k) "XXXXXXXXXX Trust" means XXXXXXXXXX, an unincorporated, limited purpose trust to be established under the laws of the Province of XXXXXXXXXX;

(l) "XXXXXXXXXX Trust Notes" means Series 1 Trust Notes, Series 2 Trust Notes and Series 3 Trust Notes, collectively;

(m) "XXXXXXXXXX Trustees" means XXXXXXXXXX Canadian resident individuals who will act as trustees of the XXXXXXXXXX Trust in accordance with and subject to the provisions of the XXXXXXXXXX Declaration of Trust. It is expected that the initial XXXXXXXXXX Trustees will be XXXXXXXXXX , all of whom are also currently officers of XXXXXXXXXX and XXXXXXXXXX;

(n) "XXXXXXXXXX Unit" means a trust unit of XXXXXXXXXX Trust, each such unit representing an equal undivided beneficial interest therein;

(o) "XXXXXXXXXX Unit Redemption Price" for a XXXXXXXXXX Unit tendered for redemption will be calculated as set out in the documentation provided to the CCRA, summarized generally as follows. The Redemption Price for a Trust Unit tendered for redemption on the same day is multiplied by the number of Trust Units outstanding, and the product is adjusted to remove the value of all assets and liabilities (other than XXXXXXXXXX Units and XXXXXXXXXX Trust Notes) held or owing directly by XXXXXXXXXX. This amount is then reduced by the aggregate amount of XXXXXXXXXX Trust Notes and other indebtedness of XXXXXXXXXX Trust that is outstanding at such time and then divided by the number of XXXXXXXXXX Units outstanding;

(p) "XXXXXXXXXX Unitholder" means a holder of XXXXXXXXXX Units;

(q) XXXXXXXXXX;

(r) XXXXXXXXXX;

(s) XXXXXXXXXX;

(t) XXXXXXXXXX;

(u) "XXXXXXXXXX", or "Trust", means the XXXXXXXXXX, an unincorporated closed-end unit trust that qualifies as a mutual fund trust, established under the laws of the Province of XXXXXXXXXX;

(v) "XXXXXXXXXX Declaration of Trust" means the Amended and Restated Declaration of Trust made in XXXXXXXXXX by the Trustees to hold in trust any and all property of XXXXXXXXXX and income and gains therefrom for the benefit of XXXXXXXXXX Unitholders;

(w) "XXXXXXXXXX Unit" means the interest of a limited partner in the Operating Partnership's capital, designated as a XXXXXXXXXX Unit, and issued as such pursuant to the terms of the Operating Partnership agreement. The XXXXXXXXXX Units are entitled to any distributions of partnership capital in excess of the Priority Return of Capital, and to any distributions and allocations of the limited partners' share of partnership cash flow and income in excess of the Preferred Return;

(x) "XXXXXXXXXX Unit" means the interest of a limited partner in the Operating Partnership's capital, designated as a XXXXXXXXXX Unit, and issued as such pursuant to the terms of the Operating Partnership agreement. XXXXXXXXXX Units are entitled to a Priority Return of Capital and to a Preferred Return, which entitle the XXXXXXXXXX Unit holder to a preferred distribution of partnership cash flow and a preferred allocation of partnership income;

(y) "closed-end unit trust" means a trust that qualifies as a unit trust under paragraph 108(2)(b);

(z) "deferred income plans" means any of RRSPs, RESPs, RRIFs or DPSPs;

(aa) "DPSP" means deferred profit sharing plan as defined in subsection 147(1);

(bb) "Distributable Cash" means the consolidated net income of XXXXXXXXXX determined in accordance with GAAP, excluding gains and losses on the disposition of assets, but including depreciation, amortization and other non-cash items, subject to any other adjustments and reserves as determined by the Trustees in their discretion;

(cc) "Equipment" means any combination of XXXXXXXXXX, machinery and equipment;

(dd) "Equipment Lease" means a lease entered into or to be entered into between XXXXXXXXXX and an Opco with respect to Equipment, providing for the Equipment to be leased to the Opcos for a one (1) year term plus any additional renewal terms of one (1) years each, in exchange for monthly lease payments;

(ee) "Equipment Management and Cost Recovery Agreement" means the agreement pursuant to which XXXXXXXXXX provides XXXXXXXXXX management services and other financial, investment and administrative services to XXXXXXXXXX in exchange for fees;

(ff) "foreign property" has the meaning assigned by subsection 206(1) and Regulation 5000;

(gg) "GAAP" means Generally Accepted Accounting Principles;

(hh) "GPCo" means, collectively, XXXXXXXXXX, a wholly-owned corporate subsidiary of XXXXXXXXXX, and its XXXXXXXXXX wholly-owned subsidiaries, XXXXXXXXXX, each incorporated under the laws of XXXXXXXXXX, and each of which acts as general partner of one of XXXXXXXXXX;

(ii) "GP Unit" means the interest of a general partner in the Operating Partnership's capital, designated as a GP Unit, and issued as such, pursuant to the terms of the Operating Partnership agreement;

(jj) "Holdcos" means wholly-owned subsidiaries of XXXXXXXXXX incorporated under the laws of Canada that act as bare trustees or agents of XXXXXXXXXX in holding legal title to, but not beneficial ownership of, the XXXXXXXXXX Properties pursuant to separate bare trust and agency agreements;

(kk) "XXXXXXXXXX Business" means the XXXXXXXXXX business carried on at the XXXXXXXXXX Properties by an Opco, using all of the resources necessary in the operation of XXXXXXXXXX, including all of the Opco's XXXXXXXXXX;

(ll) "XXXXXXXXXX Management Agreement" means a management agreement, XXXXXXXXXX;

(mm) "XXXXXXXXXX Property" means the real property, buildings, and leasehold interests in the real property acquired or to be acquired by XXXXXXXXXX for the purpose of leasing to an Opco pursuant to a Long-Term Lease, for use XXXXXXXXXX by the Opco;

(nn) "Intercompany Debt" means indebtedness owing by the Affiliates to XXXXXXXXXX represented by one or more promissory notes or bonds and bearing interest at average rates of approximately XXXXXXXXXX% per annum;

(oo) "Investee" means any corporation or debtor;

(pp) "Long-Term Lease" means the real estate lease and fixturing agreements entered into or to be entered into between XXXXXXXXXX and an Opco with respect to each of the XXXXXXXXXX Properties, providing for the XXXXXXXXXX Properties to be leased to the Opcos for an initial term of XXXXXXXXXX, in exchange for monthly and annual rental payments;

(qq) "Monthly Limit" means $XXXXXXXXXX per calendar month less any amounts required to be paid out in cash by XXXXXXXXXX as a result of in specie redemptions of Trust Units tendered to XXXXXXXXXX in that calendar month;

(rr) "mutual fund trust" has the meaning assigned by subsection 132(6);

(ss) "Net Operating Assets" means the Operating Assets of a XXXXXXXXXX Business less outstanding accounts payable and all other indebtedness except Intercompany Debt;

(tt) "Note Trustee" means XXXXXXXXXX or its successors as trustee under the XXXXXXXXXX Note Indenture;

(uu) "Opco" means a wholly-owned corporate subsidiary of XXXXXXXXXX that is a taxable Canadian corporation incorporated under the laws of XXXXXXXXXX;

(vv) "open-end unit trust" means a trust that qualifies as a unit trust under paragraph 108(2)(a);

(ww) "Operating Assets" means all of the working capital, XXXXXXXXXX and any other property owned by an Opco and necessary for the XXXXXXXXXX Business;

(xx) "Operating Facility" means a secured debt facility provided by the XXXXXXXXXX to XXXXXXXXXX consisting of a long term loan and current line of credit, bearing interest at either fixed-rates or variable-rates, or any similar debt facility provided by a similar lender in replacement of the Operating Facility;

(yy) "Operating Partnership" means a limited partnership formed under the laws of XXXXXXXXXX between GPCo and a particular Opco for the purpose of conducting the XXXXXXXXXX Business previously carried on by the Opco. Under the terms of the Operating Partnership agreements, the limited partnership interests will be entitled to XXXXXXXXXX% of all partnership losses, income, and cash flow, and the general partner will be entitled to XXXXXXXXXX% of all partnership losses, income, and cash flow;

(zz) "Permitted Investments" means any combination of property described in subparagraph 108(2)(b)(iii), clauses (A) through (G);

(aaa) "Personnel" means all employees and independent contractors with which an Opco has an independent or collective employment or services contract agreement and who are employed or engaged in the XXXXXXXXXX Business;

(bbb) "Preferred Return" of the holders of XXXXXXXXXX Units means a cumulative annual entitlement to Operating Partnership income and cash flow, calculated by applying the Rate of Preferred Return to the capital accounts of the XXXXXXXXXX Unit holders, being the sum of the amount of original Operating Partnership capital contributed by the XXXXXXXXXX Unit holders less any distributions or returns of partnership capital;

(ccc) "Priority Return of Capital" of the holders of XXXXXXXXXX Units means a priority to the capital distributions from the Operating Partnership equal to the amount of original Operating Partnership capital contributed by the holders of XXXXXXXXXX Units;

(ddd) "proceeds of disposition" has the meaning assigned by section 54;

(eee) "Proposed Transactions" means the transactions outlined in paragraphs 21 to 42;

(fff) "qualified investment" has the meaning assigned by subsection 146(1) in respect of an RRSP, by subsection 146.1(1) in respect of an RESP, by subsection 146.3(1) in respect of an RRIF, or by section 204 in respect of an DPSP, as the case may be;

(ggg) "Rate of Preferred Return" to be applied in computing the Preferred Return of the holders of XXXXXXXXXX Units means a fixed rate of return per annum equal to XXXXXXXXXX% above the prime lending rate, as quoted by the provider of the Operating Facility, in effect at the time XXXXXXXXXX Units are issued, and as may be adjusted from time to time by way of mutual agreement of the general partner and the limited partners of the Operating Partnership;

(hhh) "Redemption Date" is the date on which Trust Units are tendered to XXXXXXXXXX for redemption;

(iii) "Redemption Price" is equal to the lesser of XXXXXXXXXX% of the average closing price of the Units on the principal market on which the Units are quoted for trading during the XXXXXXXXXX-trading day period commencing immediately after the Redemption Date; and XXXXXXXXXX% of the closing market price on the principal market on which the Units are quoted for trading, on the Redemption Date;

(jjj) "registered investment" has the meaning assigned by subsection 204.4(1);

(kkk) "Regulations" means the Income Tax Regulations (Canada);

(lll) "related persons" has the meaning assigned by subsection 251(2);

(mmm) "resident" and "non-resident" of Canada mean resident and non-resident of Canada for purposes of the Act;

(nnn) "Right of Redemption" means the right of redemption of a Unitholder to redeem Trust Units pursuant to, and subject to, the provisions of the amendments to be made to the XXXXXXXXXX Declaration of Trust;

(ooo) "RESP" means registered education savings plan as defined in subsection 146.1(1);

(ppp) "RRIF" means registered retirement income fund as defined in subsection 146.3(1);

(qqq) "RRSP" means registered retirement savings plan as defined in subsection 146(1);

(rrr) "Series 1 Notes" means the interest bearing unsecured subordinated demand notes, series 1, of XXXXXXXXXX Trust to be issued to the Trust pursuant to the XXXXXXXXXX Note Indenture;

(sss) "Series 2 Notes" means the interest bearing unsecured subordinated notes, series 2, of XXXXXXXXXX Trust to be issuable pursuant to the XXXXXXXXXX Note Indenture;

(ttt) "Series 3 Notes" means the interest bearing unsecured subordinated notes, series 3, of XXXXXXXXXX Trust to be issuable pursuant to the XXXXXXXXXX Note Indenture;

(uuu) "Tax Deferral Election" means a protective election under subsections 85(1) or 97(2), as the case may be, to be filed in the manner and within the time provided in the Act that, in accordance with those subsections, the transferee's proceeds of disposition of the transferred property and the transferor's cost of the acquisition of the transferred property will be deemed to equal such elected amount as the transferor may specify;

(vvv) "taxation year" has the meaning assigned by subsection 249(1);

(www) "Temporary Services Agreement" means an agreement entered into between each Operating Partnership and each Opco under which the Operating Partnership will agree to provide the services of its Personnel to the Opcos at cost plus a reasonable mark-up. The term of the Temporary Services Agreement will expire at the earlier of (a) the Operating Partnership acquiring the XXXXXXXXXX Business of the Opco or successor company; and (b) notice being given by the Opco;

(xxx) "Trust" or "XXXXXXXXXX " means XXXXXXXXXX, an unincorporated closed-end unit trust that qualifies as a mutual fund trust, established under the laws of the Province of XXXXXXXXXX;

(yyy) "Trust Unit" means a trust unit of XXXXXXXXXX, each such unit representing an equal undivided beneficial interest therein;

(zzz) "Trustees" means the individuals that act as trustees of XXXXXXXXXX in accordance with and subject to the provisions of the XXXXXXXXXX Declaration of Trust, and which as of the date hereof consist of XXXXXXXXXX Canadian resident individuals, namely XXXXXXXXXX;

(aaaa) XXXXXXXXXX;

(bbbb) "unit trust" means a trust that qualifies as a unit trust under subsection 108(2); and

(cccc) "Unitholder" means a holder of one or more Trust Units.

Facts

2. The principal office, tax account number, and Tax Services Office for XXXXXXXXXX and each Affiliate are set out in Schedule II. XXXXXXXXXX and all of its Affiliates have a XXXXXXXXXX year-end.

3. XXXXXXXXXX is as a closed-end unit trust that qualifies as a mutual fund trust. Trust Units are listed for trading on the XXXXXXXXXX, are eligible investments for deferred income plans, and are not foreign property.

4. Trust Units are widely held by the public, and to the knowledge of the Trustees there is no direct or indirect beneficial owner of, nor any person who exercises control or direction over, Trust Units carrying more than 10% of the votes and value of all outstanding Trust Units, XXXXXXXXXX.

5. XXXXXXXXXX is governed by a Board of Trustees consisting of XXXXXXXXXX individuals who are residents of Canada, which hold the Trust's property and conduct and manage the affairs of the Trust in accordance with and subject to the terms of the XXXXXXXXXX Declaration of Trust.

6. In accordance with paragraph 108(2)(b), paragraph 132(6)(b), subsection 132(7) and the relevant terms of the XXXXXXXXXX Declaration of Trust, the Trust qualifies as a mutual fund trust and, specifically, the Trust: (1) limits its undertaking to the investing of its funds in property, and to acquiring, holding, maintaining, improving, leasing and managing real property and interests in real property that is capital property; (2) invests more than XXXXXXXXXX% of its property in Permitted Investments; (3) earns more than XXXXXXXXXX % of its income - computed without regard to subsection 104(6) - from Permitted Investments; (4) does not invest any more than 10% of its property in any combination of bonds, securities or shares of any one Investee; and (5) is not maintained primarily for the benefit of non-resident persons, and non-residents of Canada are collectively beneficial owners of less than XXXXXXXXXX% of the Trust Units.

7. For purposes of subsection 206(2) and in accordance with the relevant provisions of the XXXXXXXXXX Declaration of Trust, XXXXXXXXXX invests no more than XXXXXXXXXX% of its property in foreign property.

8. XXXXXXXXXX qualifies and is registered as a "registered investment" for deferred income plans pursuant to section 204.4.

9. Pursuant to the terms of the XXXXXXXXXX Declaration of Trust, the Trust is required to distribute to Unitholders monthly a cash distribution from the Trust in an amount determined by the Trustees that is at least equal, in any one fiscal year of the Trust, to the greater of (i) the taxable income of the Trust, for purposes of the Act, for such fiscal year; and (ii) XXXXXXXXXX % of the Distributable Cash of the Trust for such fiscal year.

10. XXXXXXXXXX.

11. XXXXXXXXXX.

12. XXXXXXXXXX leases each XXXXXXXXXX Property to a separate Opco pursuant to a Long-Term Lease, in exchange for rent.

13. XXXXXXXXXX , directly and indirectly through XXXXXXXXXX, owns all of the outstanding limited partner interest in, and Intercompany Debt of, XXXXXXXXXX. GPCo is the general partner of XXXXXXXXXX.

14. XXXXXXXXXX owns XXXXXXXXXX Equipment across Canada, and leases such Equipment to the Opcos under separate Equipment Leases, in exchange for lease charges.

15. XXXXXXXXXX.

16. XXXXXXXXXX, directly or indirectly, owns all of the limited partner interest in, and Intercompany Debt of, XXXXXXXXXX. XXXXXXXXXX's indirect interest as limited partner is held through XXXXXXXXXX. GPCo is the general partner of XXXXXXXXXX

17. XXXXXXXXXX.

18. XXXXXXXXXX employs staff at its head office in XXXXXXXXXX. In addition to the services rendered to the Opcos, XXXXXXXXXX provides management services to XXXXXXXXXX pursuant to an Asset Management and Cost Recovery Agreement, and to XXXXXXXXXX pursuant to an Equipment Management and Cost Recovery Agreement.

19. On XXXXXXXXXX, GPCo and the Opcos formed XXXXXXXXXX new Operating Partnerships, one for each XXXXXXXXXX Business. Each Opco subscribed for one GP Unit in one Operating Partnership for a nominal amount, and GPCo subscribed for one XXXXXXXXXX Unit in each Operating Partnership for a nominal amount.

20. On XXXXXXXXXX, each Opco transferred all its Personnel, and assigned all of the employment or services contracts governing the Personnel, to its respective Operating Partnership in order to facilitate the labour transition in connection with the impending transfer of the XXXXXXXXXX Business as contemplated in the Proposed Transactions. All employees previously employed by the Opcos are now employed by the Operating Partnerships. The Opcos and the Operating Partnerships have entered into Temporary Services Agreements, under which the Operating Partnerships will provide the services of its Personnel to the Opcos at cost plus a reasonable mark-up, until such time as each Operating Partnership acquires a XXXXXXXXXX Business as contemplated by the Proposed Transactions.

Proposed Transactions

21. XXXXXXXXXX will seek approval for certain of the Proposed Transactions, where required by the XXXXXXXXXX Declaration of Trust, at its annual general meeting of Unitholders, which is expected to be held on XXXXXXXXXX. All of the Proposed Transactions that will follow are set out in order below and will occur sometime shortly after obtaining Unitholder approval, subject to having obtained a satisfactory Advance Income Tax Ruling from the CCRA. Accordingly, the Proposed Transactions are expected to close on or about XXXXXXXXXX, and in any event no later than XXXXXXXXXX.

22. An inter vivos open-end unit trust, XXXXXXXXXX Trust, will be created under the laws of XXXXXXXXXX pursuant to the XXXXXXXXXX Declaration of Trust. To create XXXXXXXXXX Trust, XXXXXXXXXX will initially settle $XXXXXXXXXX cash on the XXXXXXXXXX Trustees in exchange for one XXXXXXXXXX Unit. The XXXXXXXXXX Trust will be a commercial trust established for the purpose of investing as a limited partner in the Operating Partnerships.

23. Under XXXXXXXXXX trust law, the assets of XXXXXXXXXX Trust will be transferred to the XXXXXXXXXX Trustees in trust and will constitute trust property, autonomous and distinct from that of the XXXXXXXXXX Trust settlor, the XXXXXXXXXX Trustees or any XXXXXXXXXX Unitholder. Pursuant to the XXXXXXXXXX Declaration of Trust, the XXXXXXXXXX Units will represent undivided beneficial interests of the holders thereof in the XXXXXXXXXX Trust. Each XXXXXXXXXX Unit will carry one vote at meetings of the XXXXXXXXXX Unitholders and each XXXXXXXXXX Unitholder will have equal privileges and will be entitled to participate equally in distributions by the XXXXXXXXXX Trust, and, in the event of any required distribution of all of the property of the XXXXXXXXXX Trust, in the net assets of the XXXXXXXXXX Trust after satisfaction of all liabilities of the XXXXXXXXXX Trust. The XXXXXXXXXX Trust will not be a mutual fund trust or a personal trust.

24. Pursuant to the XXXXXXXXXX Declaration of Trust, the control and administration of the XXXXXXXXXX Trust's property and the right to conduct and manage the affairs and business of the XXXXXXXXXX Trust will be vested exclusively in the XXXXXXXXXX Trustees. The XXXXXXXXXX Trustees will consist of XXXXXXXXXX individuals to be appointed by majority voting by XXXXXXXXXX Unitholders. The President and member of the Board of Trustees of XXXXXXXXXX must be one of the XXXXXXXXXX Trustees; however, the remaining XXXXXXXXXX Trustees must not be Trustees of XXXXXXXXXX. The term of the appointment of XXXXXXXXXX Trustees will be one year, but may be renewed by a vote of the XXXXXXXXXX Unitholders each year.

25. Pursuant to the XXXXXXXXXX Declaration of Trust, XXXXXXXXXX Units will be redeemable at any time on demand of the XXXXXXXXXX Unitholders upon delivery of written notice to XXXXXXXXXX Trust to redeem XXXXXXXXXX Units. Upon tender of XXXXXXXXXX Units for redemption, the holder of XXXXXXXXXX Units tendered for redemption will no longer have any rights with respect to such XXXXXXXXXX Units other than the right to receive the XXXXXXXXXX Unit Redemption Price for such XXXXXXXXXX Units. The XXXXXXXXXX Unit Redemption Price for XXXXXXXXXX Units tendered for redemption will be calculated as set out in the documentation you have provided to the CCRA and is summarized in paragraph 1.

26. The XXXXXXXXXX Unit Redemption Price payable by XXXXXXXXXX Trust in respect of XXXXXXXXXX Units tendered for redemption will be satisfied, at the option of the XXXXXXXXXX Trustees: (i) by cheque; (ii) by the issuance of Series 2 Trust Notes, or (iii) by any combination of cash and Series 2 Trust Notes. Payment of the XXXXXXXXXX Unit Redemption Price will be made on XXXXXXXXXX. The principal amount of any Series 2 Trust Notes payable will be rounded down to the nearest $XXXXXXXXXX (or such other lower amount as the Trustees may establish from time to time), with the remaining balance payable in cash.

27. The XXXXXXXXXX Declaration of Trust will be amended to include the Right of Redemption for the Trust Units set out in the documentation you have provided to the CCRA. The voting rights, distribution rights, and all other rights attached to the Trust Units will not change. A Unitholder will be granted the right to require the Trust to redeem his or her Trust Units at any time on demand, as provided for in the terms of the XXXXXXXXXX Declaration of Trust, in exchange for cash or in-kind consideration, as set out in the Right of Redemption.

28. Under the Right of Redemption, Trust Units will be redeemable at any time at the demand of Unitholders for cash equal to the Redemption Price at the time of the exercise of the redemption up to a maximum of the Monthly Limit, although the Trustees may waive this limitation in respect of any month. Payment of the Redemption Price will be made at the end of the calendar month following the month in which the Trust Units are tendered for redemption.

29. For Trust Unit redemptions in excess of the Monthly Limit, and in certain other defined circumstances, the Unitholder is entitled to the fair market value thereof as determined by the Trustees and, subject to any applicable regulatory approvals, shall be satisfied by way of a distribution in specie. In these circumstances, the Trust will exercise its right to require XXXXXXXXXX Trust to redeem any combination of Series 1 Trust Notes and XXXXXXXXXX Units in consideration for the issuance to the Trust of Series 3 Trust Notes and Series 2 Trust Notes having an aggregate principal amount equal to the amount of the in specie redemption. The Series 2 Trust Notes and Series 3 Trust Notes will then be distributed in satisfaction of the in specie redemption. Series 2 Trust Notes and Series 3 Trust Notes will not, at the discretion of the Trustees, be distributed in multiples of less than $XXXXXXXXXX, or such other lower amount as the Trustees may establish from time to time.

30. If the fair market value of Trust Units subject to an in specie redemption exceeds the aggregate principal amount of Series 2 Trust Notes and Series 3 Trust Notes distributed in respect that redemption by more than $XXXXXXXXXX, the excess will be satisfied by way of cash payment. If a single unit is redeemed, a cash payment equal to its fair market value will be made, rounded down to the nearest dollar.

31. The XXXXXXXXXX Trustees will issue the XXXXXXXXXX Trust Notes pursuant to the XXXXXXXXXX Note Indenture. Pursuant to the terms of the XXXXXXXXXX Trust Notes and the XXXXXXXXXX Note Indenture, the XXXXXXXXXX Trust Notes will be have the following terms and conditions:

a) Series 1 Trust Notes to be issued to XXXXXXXXXX will be payable on demand, will mature on the XXXXXXXXXX anniversary of the date of issuance and will bear interest at the same average rate of interest as existing Intercompany Debt, payable on the XXXXXXXXXX. The rate of interest may be adjusted from year to year by mutual agreement of the Trustees and the XXXXXXXXXX Trustees, to reflect changes in market rates of interest;

b) Series 2 Trust Notes will be reserved by XXXXXXXXXX Trust to be issued exclusively to holders of XXXXXXXXXX Units as full or partial payment of the XXXXXXXXXX Unit Redemption Price for XXXXXXXXXX Units, as the XXXXXXXXXX Trustees may decide or, in certain circumstances, be obliged to issue. Each Series 2 Trust Note will mature on a date which is no later than the XXXXXXXXXX anniversary of the date of issuance thereof and will bear interest at the then current prime lending rate, as quoted by the provider of the Operating Facility at the time of issuance of a Series 2 Trust Note, plus XXXXXXXXXX%, payable monthly in arrears on the XXXXXXXXXX day of each calendar month that such Series 2 Trust Note is outstanding;

c) Series 3 Trust Notes will be reserved by XXXXXXXXXX Trust to be issued exclusively as full or partial payment of the redemption price for Series 1 Trust Notes or as consideration for an interest in XXXXXXXXXX Properties or other property acquired from XXXXXXXXXX in the event of an in specie payment of the Redemption Price for Trust Units redeemed by a Unitholder. Each Series 3 Trust Note will mature on the XXXXXXXXXX anniversary of the date of issuance and bear interest at the then current prime lending rate, as quoted by the provider of the Operating Facility at the time of issuance a Series 3 Trust Note, plus XXXXXXXXXX%, payable monthly in arrears on the XXXXXXXXXX day of each calendar month that such Series 3 Trust Note is outstanding;

d) The XXXXXXXXXX Trust Notes will be redeemable at any time at the option of XXXXXXXXXX Trust prior to maturity;

e) Under the terms of the XXXXXXXXXX Note Indenture, principal and interest on the XXXXXXXXXX Trust Notes will be subordinated to the prior payment in full of the principal and accrued interest on, and all other amounts owing in respect of, all senior indebtedness, which will include all indebtedness, liabilities and obligations of XXXXXXXXXX Trust which, by the terms of the instrument creating or evidencing the same, expressly rank in priority to the indebtedness evidenced by the XXXXXXXXXX Note Indenture; and

f) The XXXXXXXXXX Trust Notes will not be convertible into or exchangeable for, or provide a holder with, any right to acquire property that is foreign property.

32. Series 2 Trust Notes and Series 3 Trust Notes, which would be distributed in certain circumstances to Unitholders as an in specie redemption of Trust Units, will not be listed on any stock exchange and no market is expected to develop in such securities, and they may be subject to resale restrictions under applicable securities laws. Series 2 Trust Notes and Series 3 Trust Notes would generally not be qualified investments for deferred income plans.

33. XXXXXXXXXX will transfer all of the interest as limited partner that it directly holds in XXXXXXXXXX to GPCo at its estimated fair market value in exchange for shares of GPCo, and may file a Tax Deferral Election in respect of the transfer. XXXXXXXXXX will continue to hold its interest as limited partner in XXXXXXXXXX .

34. GPCo will transfer all of the interests as limited partner that it directly holds in XXXXXXXXXX to an Assignee, at their estimated fair market value in exchange for shares of the Assignee, and may file a Tax Deferral Election in respect of the transfer. XXXXXXXXXX will continue to hold its interests as limited partner in XXXXXXXXXX.

35. XXXXXXXXXX will transfer all of the interest as limited partner that it directly holds in XXXXXXXXXX to the Assignee at its estimated fair market value in exchange for shares of the Assignee, and may file a Tax Deferral Election in respect of the transfer. XXXXXXXXXX will continue to hold its interest as limited partner in XXXXXXXXXX.

36. Amalco will be created by amalgamating all of the Opcos, including the Assignee, in an amalgamation governed by subsection 87(1).

37. XXXXXXXXXX will subscribe for a combination of XXXXXXXXXX Units and Series 1 Trust Notes with the funds necessary for XXXXXXXXXX Trust to acquire, at fair market value, interests as limited partner in and all the Intercompany Debt of XXXXXXXXXX and all of the Net Operating Assets of each XXXXXXXXXX Business, as detailed below. Tax Deferral Elections may be filed in respect of these transactions.

38. XXXXXXXXXX Trust will use a portion of the subscription proceeds from the XXXXXXXXXX Units and Series 1 Trust Notes to subscribe for XXXXXXXXXX Units in each Operating Partnership in proportion to the estimated fair market value of the Net Operating Assets of each XXXXXXXXXX Business.

39. XXXXXXXXXX Trust will use the balance of the subscription proceeds to acquire, at their estimated fair market value, all of the interests as limited partner in XXXXXXXXXX held by Amalco. No Tax Deferral Elections will be available in respect of this transaction.

40. Amalco will transfer all the Net Operating Assets of one XXXXXXXXXX Business to each Operating Partnership, and all of the rights and obligations under each Equipment Lease, Long-Term Lease and XXXXXXXXXX Management Agreement in respect of that XXXXXXXXXX Business, in exchange for estimated fair market value consideration.

The consideration payable by each Operating Partnership will consist of a combination of cash, debt assumption and XXXXXXXXXX Units in the Operating Partnership. Amalco may file Tax Deferral Elections in respect of the sale of Net Operating Assets to certain Operating Partnerships.

41. Amalco will retain the cash proceeds of sale of the Net Operating Assets and of the interests as limited partner in XXXXXXXXXX, or will distribute all or a portion of such proceeds as a combination of: repayment of Intercompany Debt; reduction and return of paid-up capital; distribution of capital dividends to the extent of Amalco's capital dividend account, pursuant to subsection 83(2); and taxable dividends.

42. Amalco and GPCo will be amalgamated under the relevant provisions of the Business Corporations Act (XXXXXXXXXX) to form Amalgamated GPCo in an amalgamation governed by subsection 87(1).

Purpose of the Proposed Transactions

43. The purpose of the Proposed Transactions is to maximize Unitholder value and to increase the value of the XXXXXXXXXX Businesses by providing a more flexible legal and operating structure. An open-end unit trust is preferable to a closed-end unit trust as a vehicle for indirectly investing in operating businesses since an open-end unit trust is not subject to many of the same investment restrictions and limitations imposed on closed-end unit trusts.

44. The change from closed-end to open-end status would allow XXXXXXXXXX to expand its current investment strategies by allowing it to invest more than 10% of its property in any one Investee. In addition, XXXXXXXXXX would no longer be required to restrict its investments to the Permitted Investments. These changes would allow XXXXXXXXXX to consolidate its holdings in subsidiary operating entities, and also to consider strategic investments in larger XXXXXXXXXX operating companies that may exceed XXXXXXXXXX's current investment guidelines.

45. Although XXXXXXXXXX limits its undertaking to investing funds directly in XXXXXXXXXX, it holds indirect investments in XXXXXXXXXX operating businesses. XXXXXXXXXX many of the businesses that have come to market in recent times as income funds and business trusts, XXXXXXXXXX have adopted an open-end unit trust structure similar to that of the Proposed Transactions.

46. The addition of a redemption right will also provide Unitholders with an additional means of realizing on their investment in XXXXXXXXXX. Although it is expected that investors' primary source of liquidity for Trust Units will continue to be through their sale on the XXXXXXXXXX, under certain circumstances redemption may be a preferred alternative to public trading.

47. XXXXXXXXXX Trust will be formed as a commercial unit trust established for the purpose of investing indirectly, or as limited partner, in XXXXXXXXXX businesses and related operations for the benefit of XXXXXXXXXX and its Unitholders. Whereas XXXXXXXXXX will continue to concentrate its investment objectives on XXXXXXXXXX real estate properties and related investments, XXXXXXXXXX Trust will be established for the purpose of undertaking investments in various types of XXXXXXXXXX businesses. XXXXXXXXXX Trust will also serve as a vehicle to provide Unitholders with additional liquidity and diversification through the Right of Redemption, pursuant to which Unitholders may be able under certain circumstances to exchange some or all of their Trust Units for an in specie distribution of securities in XXXXXXXXXX Trust.

48. The Operating Partnerships were established for the purpose of carrying on the XXXXXXXXXX business operations at the XXXXXXXXXX properties owned by XXXXXXXXXX. As partnership vehicles, the Operating Partnerships allow for a more efficient consolidation of operating results in the hands of the limited partner, XXXXXXXXXX Trust, by allowing for the pooling of income and losses and a flow-through of operating cash flow. At the same time, the limited partnership status will provide for needed liability and operating protection XXXXXXXXXX.

Rulings Given

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, Proposed Transactions, and the purposes of the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, and subject to the comments set out below, our ruling is as follows:

A. Existing Unitholders will not be considered to have disposed of their units by virtue of the addition of the Right of Redemption to the Trust Units, and the related changes to the XXXXXXXXXX Declaration of Trust.

B. XXXXXXXXXX will not be considered to have disposed of its property and resettled a new trust by virtue of the addition of the Right of Redemption to the Trust Units, and the related changes to the XXXXXXXXXX Declaration of Trust.

C. XXXXXXXXXX will be considered to be an open-end unit trust pursuant to paragraph 108(2)(a) immediately after the addition of the Right of Redemption.

D. XXXXXXXXXX will be considered to be a mutual fund trust within the meaning of subsection 132(6) throughout the year that includes the Proposed Transactions, provided that it complies with the conditions specified in paragraph 132(6)(c).

E. The redemption feature to be included in the XXXXXXXXXX Declaration of Trust will satisfy the requirements of subparagraph 108(2)(a)(i) for purposes of determining whether XXXXXXXXXX Trust qualifies as a unit trust.

F. XXXXXXXXXX Trust Notes will not be considered foreign property for purposes of Part XI provided that XXXXXXXXXX Trust remains resident in Canada.

G. The registration of XXXXXXXXXX as a "registered investment" under section 204.4 will not be revoked pursuant to subsection 204.4(3) as result of the Proposed Transactions.

H. Provided that XXXXXXXXXX continues to qualify as a registered investment, Trust Units will not be foreign property within the meaning of subsection 206(1).

I. Provided that XXXXXXXXXX remains a mutual fund trust and is the sole holder of XXXXXXXXXX Units, XXXXXXXXXX Trust will not be liable for tax under Part XII.2.

J. Subsection 245(2) will not be applied to the Proposed Transactions, in and of themselves, to re-determine the tax consequences confirmed in this letter.

This ruling is governed by the general limitations and qualifications set out in Information Circular 70-6R5. It is binding on the CCRA in respect of the Proposed Transactions as long as they are completed by XXXXXXXXXX. This ruling is based on the Act in its present form and does not take into account any proposed amendments to the Act that if enacted could affect the ruling.

Comments

Nothing in this letter should be construed as implying that the CCRA has considered, examined, or agreed to or ruled on:

a) The fair market value of any of the tangible or intangible property or interests transferred as part of, or as contemplated by, the Proposed Transactions;

b) Any aspect of the Tax Deferral Elections with respect to any of the Proposed Transactions;

c) Any gains or losses for XXXXXXXXXX that might arise upon the redemption of Series 1 Trust Notes as a result of changes in their fair market value;

d) The use of Holdcos as bare trustees or agents of XXXXXXXXXX in holding legal title to, but not beneficial ownership of, the XXXXXXXXXX Properties;

e) Any aspect of the amalgamations pursuant to subsection 87(1); or

f) As a question of fact whether GPCo operates as principal, as opposed to agent on behalf of XXXXXXXXXX, with respect to GPCo's business activities.

Additionally, nothing in this letter should be construed as implying that the CCRA has agreed to or reviewed any tax consequences relating to the facts and Proposed Transactions other than those specifically set out in Rulings Given.

Yours truly,

XXXXXXXXXX
Section Manager
For Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch

Attachments

XXXXXXXXXX
- 2-