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 Amalco, Amalco II and Amalco III are entitled to the "bump" under paragraph 88(1)(c)?
2. XXXXXXXXXX
3. XXXXXXXXXX
4. XXXXXXXXXX
Position:
1. Yes
2. Yes
3. No
4. Yes
Reasons:
1. Meets the requirements of the law.
2. XXXXXXXXXX
3. XXXXXXXXXX
4. XXXXXXXXXX
XXXXXXXXXX
2002-018086
XXXXXXXXXX, 2003
Dear XXXXXXXXXX:
Re: XXXXXXXXXX ("Aco"), XXXXXXXXXX ("TargetCo"), XXXXXXXXXX ("CanSub 1"), XXXXXXXXXX ("CanSub 2"), XXXXXXXXXX ("CanSub 3"), XXXXXXXXXX ("CanSub 4"), XXXXXXXXXX ("Purchaser1"), XXXXXXXXXX ("Purchaser2"), XXXXXXXXXX ("Purchaser3") and XXXXXXXXXX ("AcquisitionCo").
This is in reply to your letters of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers.
To the best of your knowledge and that of ACo, CanSub 1, CanSub 2, CanSub 3, CanSub 4, TargetCo, Purchaser1, Purchaser2 and Purchaser3 (the "Parties"), none of the issues raised in the Ruling:
1. was identified in an earlier tax return of the Parties or any related persons;
2. is being considered by a tax services office or taxation centre in connection with a previously filed tax return of the Parties or any related person;
3. is under objection by any of the Parties or by any related person;
4. is before the courts; or
5. is the subject of a Ruling previously issued by the Income Tax Rulings Directorate of the CCRA issued to any of the Parties or any related person.
The above-noted corporations file their income tax returns at the following Tax Centres and are served by the following Tax Services Offices, and their account numbers are as follows:
ACo
Non-resident of Canada, No Business Number
XXXXXXXXXX
TargetCo
BN# XXXXXXXXXX
XXXXXXXXXX Tax Centre, XXXXXXXXXX Tax Services Office
CanSub 1
BN#XXXXXXXXXX
XXXXXXXXXX Tax Centre,
XXXXXXXXXX Tax Services Office
CanSub 2
BN#XXXXXXXXXX
XXXXXXXXXX Tax Centre,
XXXXXXXXXX Tax Services Office
CanSub 3
BN#XXXXXXXXXX
XXXXXXXXXX Tax Centre,
XXXXXXXXXX Tax Services
CanSub 4
BN#XXXXXXXXXX
XXXXXXXXXX Tax Centre,
XXXXXXXXXX Tax Services Office
Purchaser1
BN#XXXXXXXXXX
XXXXXXXXXX Tax Centre,
XXXXXXXXXX Tax Services Office
Purchaser2
BN#XXXXXXXXXX
XXXXXXXXXX Tax Centre,
XXXXXXXXXX Tax Services Office
Purchaser3
BN#XXXXXXXXXX
XXXXXXXXXX Tax Centre
XXXXXXXXXX Tax Services Office
DEFINITIONS
Unless otherwise noted, all statutory references herein are to the Income Tax Act, R.S.C. 1985, c. 1 (5th Sup.), as amended (hereinafter referred to as the "Act"), or to the Income Tax Regulations to the Act (referred to as the "Regulations"). Unless otherwise noted, any reference to dollar amounts herein are to Canadian dollars.
Unless otherwise stated, the terms and expressions used herein are defined as follows:
XXXXXXXXXX;
"ACo" means the corporation described in paragraph 2 below;
"AcquisitionCo" means XXXXXXXXXX, a taxable Canadian corporation and a subsidiary of Purchaser1;
XXXXXXXXXX;
"adjusted cost base" has the meaning assigned by section 54;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"Amalco" means the corporation formed on the First Amalgamation;
"Amalco II" means the corporation formed on the Second Amalgamation;
"Amalco III" means the corporation formed on the Third Amalgamation;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"BCo" means XXXXXXXXXX, the corporation described in paragraph 1 below;
XXXXXXXXXX;
XXXXXXXXXX;
"Canadian partnership" has the meaning assigned to the expression by subsection 102(1);
"Canadian-controlled private corporation" has the meaning assigned to the expression by subsection 125(7);
"CanSub 1" means the corporation described in paragraph 5 below;
XXXXXXXXXX;
"CanSub 2" means the corporation described in paragraph 6 below,
"CanSub 3" means XXXXXXXXXX;
"CanSub 4" means XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"CanSub 5" means XXXXXXXXXX;
XXXXXXXXXX;
"CanSub 6" means XXXXXXXXXX, a taxable Canadian corporation and a subsidiary of TargetCo;
"CanSub 7" means XXXXXXXXXX;
XXXXXXXXXX;
"capital property" has the meaning assigned by section 54;
XXXXXXXXXX;
"CCo" has the meaning assigned in paragraph 41 below;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"DCo" has the meaning assigned in paragraph 41 below;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"depreciable property" has the meaning assigned by subsection 13(21);
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"ECo" means XXXXXXXXXX, which is a direct wholly-owned subsidiary of ACo XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"FCo" means XXXXXXXXXX;
"First Amalgamation" means the amalgamation between TargetCo and AcquisitionCo, as described in paragraph 84 below;
"fiscal period" has the meaning assigned to the expression by subsection 249.1(1);
XXXXXXXXXX;
XXXXXXXXXX;
"GCo" means XXXXXXXXXX;
XXXXXXXXXX;
"HCo" means XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"ICo" means XXXXXXXXXX;
XXXXXXXXXX;
"ineligible property" has the meaning assigned by paragraph 88(1)(c);
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"LCo" means XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"LP1" means XXXXXXXXXX;
"LP2" means XXXXXXXXXX;
"LP3" means XXXXXXXXXX, a limited partnership formed under laws of XXXXXXXXXX, in which XXXXXXXXXX is the sole limited partner and XXXXXXXXXX is a general partner;
XXXXXXXXXX;
"Managementco" has the meaning assigned in paragraph 41 below;
XXXXXXXXXX;
XXXXXXXXXX;
"MCo" means XXXXXXXXXX;
XXXXXXXXXX;
"NCo" has the meaning assigned in paragraph 42 below;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"paid-up capital" has the meaning assigned by subsection 89(1);
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"private corporation" has the meaning assigned to the expression by subsection 89(1);
"Proposed Amalgamations" means the First Amalgamation, the Second Amalgamation and the Third Amalgamation and "Proposed Amalgamation" means any one of them;
"public corporation" has the meaning assigned to the expression by subsection 89(1);
"Purchase Price" means the purchase price payable by AcquisitionCo for the shares of TargetCo, as described in greater detail in paragraph 48 below;
XXXXXXXXXX;
"Purchaser1" means XXXXXXXXXX;
"Purchaser1 Note" has the meaning assigned in paragraph 79 below;
"Purchaser2" means XXXXXXXXXX;
"Purchaser2 Note" has the meaning assigned in paragraph 80 below;
"Purchaser3" means XXXXXXXXXX;
"Purchaser3 Note" has the meaning assigned in paragraph 80 below;
"Purchasers" means collectively Purchaser1, Purchaser2 and Purchaser3 and "Purchaser" means any one of them;
XXXXXXXXXX;
"SCo" means XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"Second Amalgamation" means the amalgamation between CanSub 1 and Amalco, as described in paragraph 86 below;
"series of transactions or events" includes the related transactions or events described in subsection 248(10);
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"Subsidiaries" means, collectively, LCo, MCo, and ICo and "Subsidiary" means any one of them;
"specified person" has the meaning assigned by paragraph 88(1)(c.2);
"subsidiary wholly-owned corporation" has the meaning assigned by subsection 248(1);
"substituted property" includes the meanings assigned by subsection 248(5) and paragraph 88(1)(c.3);
"TargetCo" means the corporation described in paragraph 3 below;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"taxable Canadian corporation" has the meaning assigned to the expression by subsection 89(1);
"taxation year" has the meaning assigned to the expression by subsection 249(1);
XXXXXXXXXX;
"Third Amalgamation" means the amalgamation between CanSub 3 and Amalco II, as described in paragraph 87 below;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
XXXXXXXXXX;
"W" means XXXXXXXXXX;
"X" means XXXXXXXXXX;
"Y" has the meaning assigned in paragraph 42 below; and
"Z" means XXXXXXXXXX.
Our understanding of the facts, purposes of the proposed transactions and proposed transactions is as follows:
FACTS
Bco
1. BCo is XXXXXXXXXX.
2. ACo is indirectly wholly owned by BCo. XXXXXXXXXX .
3. TargetCo is a corporation incorporated under the XXXXXXXXXX and is a taxable Canadian corporation. TargetCo is wholly owned by ACo and XXXXXXXXXX .
LP1 and its Partners
4. LP1 is a limited partnership XXXXXXXXXX.
XXXXXXXXXX.
5. CanSub 1 is a corporation incorporated under the XXXXXXXXXX and is a taxable Canadian corporation. CanSub 1 is wholly owned by TargetCo. XXXXXXXXXX.
6. CanSub 2 is a corporation incorporated under the XXXXXXXXXX and is a taxable Canadian corporation. XXXXXXXXXX.
7. XXXXXXXXXX.
8. FCo is a corporation incorporated under the XXXXXXXXXX and is a taxable Canadian corporation. It is a wholly owned subsidiary of Purchaser1.
9. XXXXXXXXXX.
10. XXXXXXXXXX.
XXXXXXXXXX.
11. XXXXXXXXXX.
12. XXXXXXXXXX.
13. XXXXXXXXXX.
14. XXXXXXXXXX.
15. XXXXXXXXXX.
XXXXXXXXXX.
16. XXXXXXXXXX.
17. XXXXXXXXXX.
18. XXXXXXXXXX.
19. XXXXXXXXXX.
20. TargetCo owns 100% of the shares of CanSub 5. XXXXXXXXXX.
21. TargetCo owns 100% of the shares of CanSub 6 and CanSub 7XXXXXXXXXX.
Gco
22. GCo is a corporation incorporated under the XXXXXXXXXX.
23. XXXXXXXXXX. The Subsidiaries are wholly-owned by GCo. XXXXXXXXXX.
24. XXXXXXXXXX.
XXXXXXXXXX.
25. XXXXXXXXXX.
26. XXXXXXXXXX.
27. XXXXXXXXXX.
28. XXXXXXXXXX.
29. XXXXXXXXXX.
30. XXXXXXXXXX.
31. XXXXXXXXXX.
32. XXXXXXXXXX.
33. XXXXXXXXXX.
34. XXXXXXXXXX.
35. XXXXXXXXXX.
36. XXXXXXXXXX.
37. XXXXXXXXXX.
38. XXXXXXXXXX.
Purchasers
39. Purchaser1 is a corporation incorporated under the XXXXXXXXXX and is a taxable Canadian corporation XXXXXXXXXX.
40. Purchaser2 is a corporation incorporated under XXXXXXXXXX. Purchaser2 is a taxable Canadian corporation for purposes of the Act.
41. Purchaser3 is XXXXXXXXXX.
42. CCo is a corporation governed by the XXXXXXXXXX and is a direct wholly-owned subsidiary of DCo. DCo is a corporation governed by XXXXXXXXXX.
Managementco is a corporation governed by XXXXXXXXXX, a taxable Canadian corporation and an indirect wholly-owned subsidiary of XXXXXXXXXX ("NCo"). NCo is a corporation governed by XXXXXXXXXX and a taxable Canadian corporation. XXXXXXXXXX of the shares of NCo are owned by Y XXXXXXXXXX.
43. CCo also owns XXXXXXXXXX% of the shares of XXXXXXXXXX ("JCo"), a corporation governed by XXXXXXXXXX that owns all of the shares of XXXXXXXXXX ("Kco").
43.1 XXXXXXXXXX.
XXXXXXXXXX.
44. XXXXXXXXXX.
45. XXXXXXXXXX.
XXXXXXXXXX.
XXXXXXXXXX.
46. XXXXXXXXXX.
47. XXXXXXXXXX.
48. XXXXXXXXXX.
49. XXXXXXXXXX.
50. XXXXXXXXXX.
51. XXXXXXXXXX.
52. XXXXXXXXXX.
53. XXXXXXXXXX.
54. XXXXXXXXXX.
XXXXXXXXXX.
55. XXXXXXXXXX.
56. XXXXXXXXXX.
57. XXXXXXXXXX.
58. XXXXXXXXXX.
59. XXXXXXXXXX.
60. XXXXXXXXXX.
61. XXXXXXXXXX.
62. XXXXXXXXXX.
63. XXXXXXXXXX.
64. XXXXXXXXXX.
XXXXXXXXXX.
65. XXXXXXXXXX.
66. XXXXXXXXXX.
XXXXXXXXXX.
67. XXXXXXXXXX.
68. XXXXXXXXXX.
Other Agreements.
69. XXXXXXXXXX.
70. XXXXXXXXXX.
XXXXXXXXXX.
71. XXXXXXXXXX.
Preliminary Steps
As preliminary steps to the proposed transactions outlined below, the following transactions will be undertaken.
Loan Restructurings and Documentation
72. XXXXXXXXXX.
73. XXXXXXXXXX.
74. XXXXXXXXXX.
XXXXXXXXXX.
75. XXXXXXXXXX.
76. XXXXXXXXXX.
XXXXXXXXXX.
77. XXXXXXXXXX.
78. AcquisitionCo was incorporated on XXXXXXXXXX Purchaser1 acquired one common share of AcquisitionCo for a nominal amount.
79. Purchaser1 will subscribe for common shares of AcquisitionCo, XXXXXXXXXX. Purchaser1 will then make a loan to AcquisitionCo XXXXXXXXXX . Such loan will be evidenced by a promissory note (the "Purchaser1 Note").
80. Purchaser2 XXXXXXXXXX and Purchaser3 will each make a XXXXXXXXXX loan to AcquisitionCo XXXXXXXXXX. Each such loan will be evidenced by a promissory note (the "Purchaser2 Note" and the "Purchaser3 Note", respectively).
81. XXXXXXXXXX.
PROPOSED TRANSACTIONS
82. AcquisitionCo will purchase all of the shares of TargetCo from ACo for the purchase price described in paragraph 48 above XXXXXXXXXX.
83. XXXXXXXXXX.
84. AcquisitionCo and its subsidiary wholly-owned corporation, TargetCo (hereinafter referred to as "predecessor corporations") will undertake an amalgamation (the "First Amalgamation") under the provisions of XXXXXXXXXX to form Amalco in such a manner that:
(a) 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 by virtue of the amalgamation;
(b) 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 by virtue of the amalgamation; and
(c) all of the shares of TargetCo held by AcquisitionCo immediately prior to the amalgamation will be cancelled by virtue of the amalgamation.
A designation will be made, in Amalco's return of income under Part I of the Act for its first taxation year, under the provisions of subsection 87(11) and paragraph 88(1)(d) to increase the adjusted cost base of certain capital property (other than ineligible property as defined in paragraph 88(1)(c)) owned by TargetCo immediately before the amalgamation. XXXXXXXXXX.
85. XXXXXXXXXX.
86. Amalco and its subsidiary wholly-owned corporation CanSub 1 (hereinafter referred to as "predecessor corporations") will undertake an amalgamation (the "Second Amalgamation") under the provisions of XXXXXXXXXX to form Amalco II in such a manner that:
(a) 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 II by virtue of the amalgamation;
(b) 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 II by virtue of the amalgamation; and
(c) all of the shares of CanSub 1 held by Amalco immediately prior to the amalgamation will be cancelled by virtue of the amalgamation.
A designation will be made, in Amalco II's return of income under Part I of the Act for its first taxation year, under the provisions of subsection 87(11) and paragraph 88(1)(d) to increase the adjusted cost base of certain capital property (other than ineligible property as defined in paragraph 88(1)(c)) owned by CanSub 1 immediately before the amalgamation. XXXXXXXXXX.
87. Amalco II and its subsidiary wholly-owned corporation, CanSub 3 (hereinafter referred to as "predecessor corporations") will undertake an amalgamation (the "Third Amalgamation") under the provisions of XXXXXXXXXX to form Amalco III in such a manner that:
(a) all of the property (except any amounts receivable from any predecessor corporation or share of the capital stock of any predecessor corporation) of the predecessor corporations held immediately before the amalgamation will become property of Amalco III by virtue of the amalgamation;
(b) 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 III by virtue of the amalgamation; and
(c) all of the shares of CanSub 3 held by Amalco II immediately prior to the amalgamation will be cancelled by virtue of the amalgamation.
A designation will be made, in Amalco III's return of income under Part I of the Act for its first taxation year, under the provisions of subsection 87(11) and paragraph 88(1)(d) to increase the adjusted cost base of certain capital property (other than ineligible property as defined in paragraph 88(1)(c)) owned by CanSub 3 immediately before the amalgamation. XXXXXXXXXX.
88. XXXXXXXXXX.
89. XXXXXXXXXX.
90. Amalco III will transfer the following to Purchaser2 XXXXXXXXXX in repayment and satisfaction of the principal amount of the Purchaser2 Note XXXXXXXXXX.
91. Amalco III will transfer the following to Purchaser3 in repayment and satisfaction of the principal amount of the Purchaser3 Note XXXXXXXXXX.
92. Amalco III will distribute the following to Purchaser1 by way of a repayment of a portion of the Purchaser1 Note:
XXXXXXXXXX.
SUBSEQUENT TRANSACTIONS
93. XXXXXXXXXX.
94. XXXXXXXXXX.
PURPOSES OF THE PROPOSED TRANSACTIONS
95. XXXXXXXXXX.
96. XXXXXXXXXX.
97. XXXXXXXXXX.
98. Paragraph 82 of the Ruling Request describes the actual purchase of the TargetCo shares by AcquisitionCo. XXXXXXXXXX.
99. XXXXXXXXXX.
100. XXXXXXXXXX.
101. The purpose of the Amalgamations described in paragraphs 84, 86 and 87 is to distribute the underlying CanSub 2 shares and LP1 limited partnership interest, as well as the underlying CanSub 4 shares and LP2 interest, to AcquisitionCo (or its successor by amalgamation) and to have the cost to AcquisitionCo of acquiring the TargetCo shares recognized in the cost of such distributed properties.
102. XXXXXXXXXX.
103. XXXXXXXXXX.
104. The purpose of the distributions described in paragraphs 90 and 91 is to provide Purchaser3 and Purchaser2 XXXXXXXXXX with a direct interest in the shares of CanSub 2 and CanSub 4 and the limited partnership interests in LP1 and LP2, as well as in any other property of Amalco III.
105. The purpose of the distribution described in paragraph 92 is to provide Purchaser1 with a direct interest in shares of CanSub 2 and CanSub 4. XXXXXXXXXX.
106. XXXXXXXXXX.
107. XXXXXXXXXX.
RULINGS
Provided that the above statements constitute a complete and accurate disclosure of all the relevant facts, purposes of the proposed transactions and proposed transactions, we rule as follows:
A) XXXXXXXXXX
B) The provisions of subsections 87(11) and 88(1) will apply to the First Amalgamation such that, for purposes of the Act:
(a) the shares of TargetCo owned by AcquisitionCo immediately before the amalgamation will be deemed to have been disposed of by AcquisitionCo on the amalgamation for proceeds of disposition equal to the greater of the amounts determined under subparagraphs 88(1)(b)(i) and (ii); and
(b) the cost to Amalco of each property of TargetCo that becomes property of Amalco on the amalgamation will be deemed to be the amount deemed by paragraph 88(1)(a) to be the proceeds of disposition of the property to TargetCo, plus, subject to the provisions of subparagraphs 88(1)(d)(ii) and (iii), and provided that no such property acquired by Amalco on the First Amalgamation, or "any property acquired by any person in substitution therefor" (within the meaning of the phrase for the purposes of clause 88(1)(c)(vi)(B)) ("TargetCo Distributed or Substituted Property") is acquired by any person described in any of subclauses 88(1)(c)(vi)(B)(I), (II) or (III) (on the assumption that the "subsidiary" referred to in those subclauses is TargetCo and the "parent" is AcquisitionCo) (a "TargetCo Person") as part of the series of the transactions or events that includes the proposed transactions described herein, and, on the assumption that such property is capital property, but not depreciable property, such portion of the amount, if any, by which:
(i) the aggregate of the adjusted cost base to AcquisitionCo of its shares of TargetCo immediately before the amalgamation
exceeds
(ii) the aggregate of the amounts determined under subparagraphs 88(1)(d)(i) and (i.1),
as is designated by Amalco under paragraph 88(1)(d) in respect of the property in its return of income under Part I of the Act for the taxation year in which the amalgamation occurred.
For greater certainty:
(a) XXXXXXXXXX
(b) none of the transactions described in any paragraph preceding paragraph 93 will result in TargetCo Distributed or Substituted Property being acquired by a TargetCo Person.
C) The provisions of subsections 87(11) and 88(1) will apply to the Second Amalgamation such that, for purposes of the Act:
(c) the shares of CanSub 1 owned by Amalco immediately before the amalgamation will be deemed to have been disposed of by Amalco on the amalgamation for proceeds of disposition equal to the greater of the amounts determined under subparagraphs 88(1)(b)(i) and (ii); and
(b) the cost to Amalco II of each property of CanSub 1 that becomes property of Amalco II on the amalgamation will be deemed to be:
(i) in the case of property that is an interest in a partnership, the amount that, but for paragraph 88(1)(c), would be the cost to Amalco II of the property; and
(ii) in any other case, the amount deemed by paragraph 88(1)(a) to be the proceeds of disposition of the property to CanSub1
plus, subject to the provisions of subparagraphs 88(1)(d)(ii) and (iii), and provided that no property acquired by Amalco II on the Second Amalgamation, or "any other property acquired by any person in substitution therefor" (within the meaning of the phrase for the purposes of clause 88(1)(c)(vi)(B)) ("CanSub 1 Distributed or Substituted Property") is acquired by any person described in any of subclauses 88(1)(c)(vi)(B)(I), (II) or (III) (on the assumption that the "subsidiary" referred to in those subclauses is CanSub1 and the "parent' is Amalco) (a "CanSub 1 Person") as part of the series of transactions or events that includes the proposed transactions, and, on the assumption that such property is capital property, but not depreciable property, such portion of the amount, if any, by which:
(iii) the aggregate of the adjusted cost base to Amalco of its shares of CanSub1 immediately before the amalgamation
exceeds
(iv) the aggregate of the amounts determined under subparagraphs 88(1)(d)(i) and (i.1),
as is designated by Amalco II under paragraph 88(1)(d) in respect of the property in its return of income under Part I of the Act for the taxation year in which the amalgamation occurred.
For greater certainty:
(a) XXXXXXXXXX
(b) by virtue of the application of paragraphs 87(2)(e.1), 88(1)(a.2) and 88(1)(e.2), any adjustments to the adjusted cost base to CanSub 1 of its limited partnership interest in LP1 will be reflected in the adjusted cost base of that limited partnership interest to Amalco II; and
(c) none of the transactions described in any paragraph preceding paragraph 93 will result in CanSub 1 Distributed or Substituted Property being acquired by a CanSub 1 Person.
D) The provisions of subsections 87(11) and 88(1) will apply to the Third Amalgamation such that, for purposes of the Act:
(a) the shares of CanSub 3 owned by Amalco II immediately before the amalgamation will be deemed to have been disposed of by Amalco II on the amalgamation for proceeds of disposition equal to the greater of the amounts determined under subparagraphs 88(1)(b)(i) and (ii); and
(b) the cost to Amalco III of each property of CanSub 3 that becomes property of Amalco III on the amalgamation will be deemed to be:
(ii) in the case of property that is an interest in a partnership, the amount that, but for paragraph 88(1)(c), would be the cost to Amalco III of the property, and
(iii) in any other case, the amount deemed by paragraph 88(1)(a) to be the proceeds of disposition of the property to CanSub 3
plus, subject to the provisions of subparagraphs 88(1)(d)(ii) and (iii), and provided that no property acquired by Amalco III on the Third Amalgamation above, or "any other property acquired by any person in substitution therefor" (within the meaning of the phrase for the purposes of clause 88(1)(c)(vi)(B)) ("CanSub 3 Distributed or Substituted Property") is acquired by any person described in any of subclauses 88(1)(c)(vi)(B)(I), (II) or (III)) (on the assumption that the "subsidiary" referred to in those subclauses is CanSub3 and the "parent" is Amalco II) ( a "CanSub3 Person") as part of the series of transactions or events that includes the proposed transactions described herein, and, on the assumption that such property is capital property, but not depreciable property, such portion of the amount, if any, by which:
(iv) the aggregate of the adjusted cost base to Amalco II of its shares of CanSub 3 immediately before the amalgamation
exceeds
(v) the aggregate of the amounts determined under subparagraphs 88(1)(d)(i) and (i.1),
as is designated by Amalco III under paragraph 88(1)(d) in respect of the property in its return of income under Part I of the Act for the taxation year in which the amalgamation occurred.
For greater certainty:
(a) XXXXXXXXXX
(b) by virtue of the application of paragraphs 87(2)(e.1), 88(1)(a.2) and 88(1)(e.2), any adjustments to the adjusted cost base to CanSub 3 of its limited partnership interest in LP2 will be reflected in the adjusted cost base of that limited partnership interest to Amalco III; and
(c) none of the transactions described in any paragraph preceding paragraph 93 above will result in CanSub 3 Distributed or Substituted Property being acquired by a CanSub 3 Person.
E) XXXXXXXXXX.
F) XXXXXXXXXX.
G) XXXXXXXXXX.
H) XXXXXXXXXX.
I) Section 245 will not be applied as a result of the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given above.
These rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R5 issued on May 17, 2002, and are binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed before XXXXXXXXXX.
The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act, which if enacted, could have an effect on the rulings provided herein.
Nothing in this ruling should be construed as implying that the Canada Customs and Revenue Agency has agreed to or reviewed:
(a) the determination of the adjusted cost base, paid-up capital or fair market value of any shares referred to herein; or
(b) any tax consequences relating to the facts and proposed transactions described herein other than those described in the rulings given above.
Yours truly,
XXXXXXXXXX
Section Manager
for Division Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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