2001 Ruling 2001-0073263 - LIMITED PARTNERSHIP-AT RISK

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 Department.

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

Principal Issues:

1. Whether 18.1 will apply to Royalty, Operating Fees and Outsourcing Fees paid by Partnership.

2. Whether 96(2.2)(d) benefit re Call Option.

Position:

1.No
2.Maybe (if exercised)

Reasons:

1. Exception in 18.1(15)(a)(i); reasonable allocations to GP and LPs considering contributions, expertise etc.

2.The mere existence of the (discretionary) call option is not a benefit unless it is exercised, in which case it may be.

XXXXXXXXXX 2001-007326

XXXXXXXXXX, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling

We are writing in response to your letter of XXXXXXXXXX wherein you requested an advance income tax ruling on behalf of the above partnership. We acknowledge your subsequent correspondence and telephone conversations.

To the best of your knowledge, and that of the taxpayers involved, none of the issues contained herein is:

(i) dealt with in an earlier return of the taxpayers or a related person;

(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of one or any of the taxpayers or a related person;

(iii) under objection by one or any of the taxpayers or a related person;

(iv) subject to a ruling previously issued by the Income Tax Rulings Directorate;

(v) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; or

(vi) with respect to the exercise of the Call Option described in paragraphs 32 to 34 below or the payment of the subscription price by instalments, as described in paragraphs 13 and 14 below, dealt with in any documents or any agreements (either verbal or written), other than the documents and agreements that have been submitted to the Income Tax Rulings Directorate in draft form. Further, both you and the taxpayers involved have made enquiries with respect to whether any such additional documents or agreements exist or will exist.

DEFINITIONS

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

(a) "Act" means the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), as amended, and all references to a statute are to the Act, unless otherwise indicated;

(b) "Brand Names" mean "XXXXXXXXXX", brand names of ParentCo;

(c) "Call Option" means the right, but not the obligation, of ParentCo under the Call Option Agreement, as confirmed under the Partnership Agreement, to purchase all, but not less than all, of the issued and outstanding Units held by the Limited Partners;

(d) "CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c.C-44, as amended;

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

(f) "Closing" or "Closings" means the date or dates on which subscriptions for certain Units are accepted;

(g) "Credit Facility Agreement" means the agreement described in paragraph 26 below;

(h) "Current Market Price" means 95% of the weighted average trading price of the Shares on the XXXXXXXXXX over the twenty (20) consecutive trading days ending five (5) trading days before the date fixed for completion under the Call Option;

(i) "Date of the First Issuance" means the date on which the first Units will be issued to the public as described in paragraph 9 below;

(j) "First Call Period" means the period commencing on XXXXXXXXXX and ending on XXXXXXXXXX;

(k) "General Partner" means the general partner of the Partnership, and is presently SubCo, as described in paragraph 4 below;

(l) "Initial Limited Partner" means XXXXXXXXXX. The Initial Limited Partner is the initial limited partner of the Partnership;

(m) "Initial Limited Partnership Agreement" means the agreement referred to in paragraph 5 below;

(n) "License Agreement" means the License Agreement described in paragraph 23 below;

(o) "Limited Partner" or "Limited Partners" means a person or persons, other than the General Partner, who will acquire one or more Units in the Partnership during the XXXXXXXXXX year;

(p) "Limited Partnership Agreement" means the Limited Partnership Agreement described in paragraphs 17 to 19 below. It will replace the Initial Partnership Agreement;

(q) "Operating Agreement" means the Operating Agreement described in paragraph 24 below;

(r) "Operating Fee". means the operating fee payable under the Operating Agreement, as described in paragraph 28 below;

(s) "Outsourcing Agreement" means the Outsourcing Agreement described in paragraph 25 below;

(t) "Outsourcing Fee" means the outsourcing fee payable under the Outsourcing Agreement, as described in paragraph 29 below;

(u) "ParentCo" means XXXXXXXXXX, as described in paragraphs 1 to 3 below;

(v) "Partnership" means the limited partnership known as "XXXXXXXXXX" and governed by the Limited Partnership Agreement;

(w) "Properties" means the XXXXXXXXXX designed, developed, and built by ParentCo under the Brand Names;

(x) "Royalty" means the royalty payable under the terms of the License Agreement, as described in paragraphs 23 and 27 below;

(y) "Second Call Period" means the period commencing on XXXXXXXXXX and ending on XXXXXXXXXX;

(z) "SubCo" means XXXXXXXXXX, as described in paragraph 4 below;

(aa) "Subscription Agreement" means each subscription agreement pursuant to which a person will acquire Units of the Partnership;

(bb) "Subsidiary Wholly-Owned Corporation" has the meaning in subsection 248(1) of the Act;

(cc) "Tax Shelter" has the meaning assigned by subsection 237.1(1) of the Act;

(dd) "Tax Shelter Investment" has the meaning assigned by subsection 143.2(1) of the Act;

(ee) "Unit" or "Units" means an interest of a Limited Partner in the Partnership, as provided in the Limited Partnership Agreement.

FACTS

1. ParentCo is a taxable Canadian corporation incorporated under the CBCA.

2. ParentCo's shares are listed on the XXXXXXXXXX (the "Shares").

3. ParentCo carries on a business consisting of, inter alia, designing, developing, building and operating XXXXXXXXXX under the trademark and Brand Names.

4. SubCo, a corporation incorporated under the laws of Canada on XXXXXXXXXX, is the general partner of the Partnership. SubCo conducts its business from its head office located at XXXXXXXXXX SubCo manages the business and affairs of the Partnership, and is solely responsible for the daily operating activities of the Partnership. SubCo is a taxable Canadian corporation and is a subsidiary wholly-owned corporation of ParentCo.

5. The Partnership was formed on XXXXXXXXXX as a limited partnership pursuant to the laws of XXXXXXXXXX. An Initial Limited Partnership Agreement was entered into on XXXXXXXXXX by and between SubCo and the Initial Limited Partner.

6. The Partnership has been formed to carry on a business consisting in the commercial exploitation of Properties in XXXXXXXXXX.

7. The Partnership conducts its business from the office of SubCo. The fiscal year end of the Partnership is XXXXXXXXXX of each year.

PROPOSED TRANSACTIONS

8. The Limited Partnership Agreement will be amended and replace the Initial Limited Partnership Agreement.

9. There will be a confidential offering memorandum (the "Offering Memorandum") provided to prospective Limited Partners of the Partnership and pursuant to which these Limited Partners will enter into Subscription Agreements with the Partnership and thereby agree to acquire Units of the Partnership in XXXXXXXXXX.

The offering of Units by the Partnership will consist of XXXXXXXXXX Units to be issued on or about XXXXXXXXXX (the date of issue of Units being referred to as the "Date of the Public Issue"), at a subscription price of $XXXXXXXXXX per unit.

10. The Offering Memorandum will contain the following:

"THE RULING OBTAINED FROM THE CANADA CUSTOMS AND REVENUE AGENCY CONTAINS CAVEATS. THE RULING MAY BE VIEWED ON REQUEST, SUBJECT To the Signing of a Confidentiality Agreement."

11. The Units will be offered pursuant to certain exemptions from the prospectus and registration requirements of the securities legislation in each province of Canada. The Partnership will only accept subscriptions from subscribers who are eligible to rely on these exemptions.

12. The offering will be made to investors by a duly licensed securities brokerage firm or firms (the "Brokers"), and such Broker will be entitled to receive a commission (the "Brokerage Fee") in the amount of XXXXXXXXXX% of the proceeds from the sales of the Units. The Brokerage Fee will be solely in respect of the services rendered by the Broker in selling the Units.

13. The full subscription price for Units will be payable on the Date of the Public Issue. However, Limited Partners may choose to pay the subscription price for their Units on a partially deferred basis in three equal instalments as follows:

(a) 1/3 on the date of issuance of the Unit (the date of the closing);

(b) 1/3 on XXXXXXXXXX; and

(c) 1/3 on XXXXXXXXXX.

14. The Units subscribed for by Limited Partners who elect to pay the subscription price on a partially deferred basis will be pledged with the Partnership as security for the subsequent payments. If a Limited Partner does not make the subsequent payments on the dates set forth in paragraph 13 above, then the Units of such Limited Partner will be deemed to have been surrendered, without consideration therefor, to the Partnership. Such Units may be cancelled or sold by the Partnership and the said Limited Partner shall remain liable for any deficiency if the proceeds of any sale are insufficient to cover the amount of the subsequent payments and the cost of sale.

15. Limited Partners may choose to finance all or a portion of their investment in Units and must arrange for the financing of the subscription price for their Units and must represent and warrant in the Subscription Agreement that all financing arranged for the subscription of Units (the "Loan") will not constitute a "limited recourse amount" for purposes of the Act.

Neither ParentCo, nor Partnership, nor any person who does not deal at arm's length with ParentCo or Partnership will make a loan to any Limited Partner or prospective Limited Partner.

16. Following the acquisition of Units by Limited Partners, the Unit of the Partnership owned by the Initial Limited Partner will be redeemed.

17. Under the Limited Partnership Agreement, the General Partner will be solely responsible for carrying on the business of the Partnership and managing the business and affairs of the Partnership, and its daily operating activities. Subject to restrictions in the Limited Partnership Agreement, the General Partner has the full power and authority for and on behalf of and in the name of the Partnership to, inter alia, manage the assets of the Partnership, enter into contracts, retain professionals and do all acts required for the business of the Partnership.

18. The Limited Partnership Agreement will provide that all allocations of income and losses and all distributions of cash from the Partnership will be XXXXXXXXXX% to the Limited Partners and XXXXXXXXXX% to the General Partner.

Total losses equal to no more than XXXXXXXXXX on a cumulative basis from the time of the subscription of Units by a Limited Partner to the disposition by that Limited Partner of that Unit will be allocated to each Limited Partner at the end of each fiscal year of the Partnership. Losses, if any, in excess of the XXXXXXXXXX% will be allocated to the General Partner. It is represented that there will be no benefits whatsoever described in subparagraph (b)(ii) of the definition of "tax shelter" in subsection 237.1(1) of the Act.

19. The General Partner's entitlement to a share of the income or loss of the Partnership and to monthly management fees as described in paragraph 20 below arises from its contribution and provision to the Partnership of specialized management and administrative services in respect of the Partnership's business.

Fees to General Partner

20. Pursuant to the Limited Partnership Agreement, the General Partner will be entitled to receive monthly management fees of $XXXXXXXXXX.

21. In addition to the management fees mentioned at paragraph 20 above, the General Partner will be entitled to be reimbursed for all disbursements and operating expenses incurred for and on behalf of the Partnership.

Agreements between Partnership and ParentCo

22. On or about the date of the closing:

(a) the Partnership and ParentCo will enter into the following agreements:

• the License Agreement;
• the Operating Agreement;
• the Outsourcing Agreement;
• the Credit Facility Agreement; and

(b) ParentCo and the Limited Partners will enter into the Call Option Agreement.

23. Under the terms of the License Agreement, ParentCo will grant the Partnership the exclusive right to commercially exploit, for a period of XXXXXXXXXX years, all the Properties established by ParentCo in XXXXXXXXXX before XXXXXXXXXX, and including the existing Attraction known as "XXXXXXXXXX" in XXXXXXXXX. It is anticipated that at least XXXXXXXXXX Properties will be established and will be in operation before XXXXXXXXXX. The License Agreement will authorize the Partnership to grant sub-licenses before XXXXXXXXXX. The License Agreement will grant all other ancillary rights necessary for the Partnership to carry on its business, such as the use of trademarks, software, etc. ParentCo will retain the ownership of all such property including the Properties.

24. Under the terms of the Operating Agreement, ParentCo will agree to provide the Partnership with such goods and services as the Partnership may require to carry on its business, for an initial term of XXXXXXXXXX years. The Operating Agreement may be renewed for additional periods of XXXXXXXXXX years, at the option of the Partnership up to XXXXXXXXXX. The decision to renew the Operating Agreement shall be subject to the approval and consent of Limited Partners representing XXXXXXXXXX of the issued and outstanding Units. The services supplied by ParentCo will include administrative, accounting, tax, cash management, in-house legal, financial and other similar services as the Partnership may require.

25. Under the terms of the Outsourcing Agreement, ParentCo has agreed to provide the Partnership with such strategic, planning, management, consulting and other similar services as the Partnership may require for the development, expansion, establishment and financing of its business, and including:

XXXXXXXXXX.

26. Under the Credit Facility Agreement, ParentCo will be obligated to provide funds to the Partnership on an ongoing basis, as needed by the Partnership, to finance the operations of the Partnership's business. At the option of ParentCo, ParentCo will provide such funds by:

(i) causing the General Partner to make a cash contribution to the capital of the Partnership for the amount of funding requested by the Partnership, and for purposes thereof, ParentCo will provide the General Partner with the necessary funds; or

(ii) by way of a loan from ParentCo to the Partnership.

Payments by Partnership to ParentCo

27. Pursuant to the License Agreement, the Partnership will be required to pay an annual royalty (the "Royalty") to ParentCo equal to the greater of the following two (2) amounts:

(i) $XXXXXXXXXX per Attraction in operation, and

(ii) XXXXXXXXXX% of the gross revenue from the Properties.

28. Pursuant to the Operating Agreement, the Partnership will pay ParentCo's cost of providing these goods and services plus XXXXXXXXXX% (the "Operating Fee"). For this purpose, ParentCo's cost will consist of all salaries benefits and payroll deductions paid or incurred by ParentCo in respect of its employees who provide such services (pro-rated in accordance with the amount of time spent), any out-of-pocket costs incurred by ParentCo, and a percentage of ParentCo's general overhead at its head office.

29. The Partnership will pay a fixed Outsourcing Fee of XXXXXXXXXX. The Outsourcing Agreement will have an initial term ending on XXXXXXXXXX, and may be renewed for additional XXXXXXXXXX year terms, under the same conditions, at the option of the Partnership until XXXXXXXXXX. The decision to renew the Outsourcing Agreement shall be subject to the approval and consent of Limited Partners representing XXXXXXXXXX of the issued and outstanding Units.

30. It is represented that

(i) the expenditures in paragraphs 27, 28 and 29 will be made by the Partnership solely for the purpose of carrying on the business of the Partnership; and

(ii) none of the main purposes for making the expenditures in paragraphs 27, 28 and 29 above is that the Partnership, ParentCo, or a person with whom Partnership does not deal at arm's length, obtain a tax benefit within the meaning assigned by subsection 18.1(1) of the Act.

31. Interest on a loan described in paragraph 26(ii) above will be paid by the Partnership at a rate of interest no less favourable to the Partnership than that made available to ParentCo from its primary institutional lender plus XXXXXXXXXX%, which is due on demand within XXXXXXXXXX days of notice thereof, and secured by a general security over the assets of the Partnership.

Call Option

32. ParentCo will, under the terms of the Call Option, have the right, but not the obligation, to purchase all, but not less than all, of the issued and outstanding Units held by the Limited Partners.

33. ParentCo may exercise the Call Option during the First Call Period or the Second Call Period.

34. The purchase price per Unit during the First Call Period will be $XXXXXXXXXX, which will be satisfied by the delivery of that number of freely tradable shares in ParentCo determined by dividing $XXXXXXXXXX by XXXXXXXXXX% of the Current Market Price of these shares.

The purchase price per Unit during the Second Call Period will be the same as the purchase price payable during the First Call Period together with a cash payment per Unit equal to the greater of:

(i) $XXXXXXXXXX; and

(ii) XXXXXXXXXX times the gross revenue of the Partnership of its financial exercise ending on XXXXXXXXXX, divided by the number of Units then outstanding.

The foregoing computation of the purchase price per Unit payable by ParentCo in shares of its capital stock is subject to subsection 25(3) of the CBCA, which provides:

" A share shall not be issued until the consideration for the share is fully paid in money or in property or past services that are not less in value than the fair equivalent of the money that the corporation would have received if the share had been issued for money."

The completion of the purchase of the Units under the Call Option will occur on such date that is determined by ParentCo, which date shall not be more than XXXXXXXXXX days following the date of the notice by ParentCo of the exercise of the Call Option.

Other

35. No representations have been made nor will be made in connection with the Units that the amount of losses (if any) incurred by the Partnership would equal or exceed the cost to persons holding a Unit or a General Partner of their respective interest in the Partnership less any benefits described in subparagraph (b)(ii) of the definition Tax Shelter.

PURPOSE OF THE PROPOSED TRANSACTIONS

The purpose of the proposed transaction is to provide the Partnership with the necessary funds to carry on its business and to implement an aggressive market development strategy relating to its business.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure with respect to all of the relevant warranties in paragraphs (i) to (vi) on page 1 of this advance income tax ruling as well as all of the relevant facts, proposed transactions and purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our ruling is as set forth below:

A. Neither the Partnership nor a Unit will be a "Tax Shelter", a Tax Shelter within the meaning assigned by subsection 18.1(1) of the Act, nor a "Tax Shelter Investment".

B. Expenses incurred by the Partnership in a taxation year in respect of the Brokerage Fee as described in paragraph 12 above will be deductible by the Partnership, to the extent that such expenses are not incurred as consideration for services to be rendered after a particular taxation year of the Partnership, pursuant to paragraph 20(1)(e) of the Act in the computation of the income or loss of the Partnership for the particular taxation year and subsequent taxation years in an amount equal to the lesser of:

(a) that proportion of 20% of the Brokerage Fee that the number of days in the year is of 365; and

(b) the amount of such Brokerage Fees less amounts deductible in respect of such fees in computing the income of the Partnership in preceding taxation years.

C. Each person that is a Limited Partner at the end of a fiscal period of the Partnership shall be required to include in computing his or her income for the taxation year during which that fiscal period ended that person's share of the income of the Partnership.

D. Losses for a taxation year of the Partnership which are allocated by the Partnership to a Limited Partner, in accordance with the terms of the Limited Partnership Agreement referred to in paragraph 18 above, will be deductible in computing the income or loss of such Limited Partner for the Limited Partner's taxation year in which such taxation year of the Partnership ends, to the extent of the at-risk amount (within the meaning of subsection 96(2.2) of the Act) of such Limited Partner in respect of the Partnership at the end of that taxation year.

E. The Royalty payable to ParentCo, for that taxation year, under the License Agreement will, subject to subsection 18(9) of the Act, be deductible in the computation of the Partnership's income or loss for the relevant taxation year in which the Royalty is payable, pursuant to section 9 of the Act, to the extent that:

(i) such reporting is not inconsistent with established case law principles or rule of law and with well-accepted business principles;

(ii) the outlays and expenses are reasonable in amount and are not on account of capital; and

(iii) the outlays and expenses are made or incurred for the purpose of gaining or producing income from a business with a reasonable expectation of profit.

F. The Operating Fee payable to ParentCo for that taxation year, under the Operating Agreement will, subject to subsection 18(9) of the Act, be deductible in the computation of the Partnership's income or loss for the relevant taxation year in which the Operating Fee is payable, pursuant to section 9 of the Act, to the extent that:

(i) such reporting is not inconsistent with established case law principles or rule of law and with well-accepted business principles;

(ii) the outlays and expenses are reasonable in amount and are not on account of capital; and

(iii) the outlays and expenses are made or incurred for the purpose of gaining or producing income from a business with a reasonable expectation of profit.

G. The Outsourcing Fee payable to ParentCo, for that taxation year, under the Outsourcing Agreement will, subject to subsection 18(9) of the Act, be deductible in the computation of the Partnership's income or loss for the relevant taxation year in which the Outsourcing Fee is payable, pursuant to section 9 of the Act, to the extent that:

(i) such reporting is not inconsistent with established case law principles or rule of law and with well-accepted business principles;

(ii) the outlays and expenses are reasonable in amount and are not on account of capital; and

(iii) the outlays and expenses are made or incurred for the purpose of gaining or producing income from a business with a reasonable expectation of profit.

H. Subject to the application of paragraphs 96(2.2)(b), (b.l) and (c) of the Act, the at-risk amount, within the meaning of subsection 96(2.2) of the Act, of a Limited Partner in respect of the Partnership, at the end of the XXXXXXXXXX taxation year of the Partnership, will be equal to the amount of the subscription price paid by that Limited Partner for his or her investment in Units, as described in paragraph 13 above, to the extent such Limited Partner or a person with whom such Limited Partner does not deal at arm's length, does not receive or obtain any amount or benefit referred to in paragraph 96(2.2)(d) of the Act, other than an amount or benefit excluded by one of subparagraphs (i), (iii), (vi) or (vii) thereof. Paragraph 13 states that a Subscriber may choose to pay the subscription price in three equal instalments. Consequently, reference is also made to Ruling M, below.

I. For the purposes of paragraph 18.1(15)(a) of the Act, no portion of the Royalty will reasonably be considered to have been paid to another taxpayer, or to a person with whom the other taxpayer does not deal at arm's length, to acquire the right to receive production in respect of the Royalty from the other taxpayer.

J. Pursuant to subparagraph 18.1(15)(a)(i) of the Act, subject to subsections 18.1(1) and (14) of the Act, section 18.1 of the Act will not apply to the Royalty.

K. Pursuant to subparagraph 18.1(15)(a)(i) of the Act, subject to subsections 18.1(1) and (14) of the Act, section 18.1 of the Act will not apply to the Operating Fee.

L. Pursuant to subparagraph 18.1(15)(a)(i) of the Act, subject to subsections 18.1(1) and (14) of the Act, section 18.1 of the Act will not apply to the Outsourcing Fee.

M. Paragraph 96(2.2)(c) will apply to a Limited Partner at any time to the amount of the subscription price described in paragraph 13 above that remains owing by a Limited Partner to the Partnership at that time.

N. To the extent that a Unit represents capital property of a particular Limited Partner, the existence of the Call Option as described in paragraphs 32 to 34 above or its exercise by ParentCo will not, in and by itself, affect the status of the Unit as "capital property" as defined in section 54 of the Act.

O. The arrangement under which the Call Option Agreement described in paragraph 32 above is provided to the Limited Partners will not, in and by itself, result in a reduction of the at-risk amount under the provisions of paragraph 96(2.2)(d) of the Act.

P. Subject to the application of subsections 18(9) and (9.2) to (9.8) of the Act, interest paid in a taxation year or payable in respect of a taxation year by the Partnership (depending upon the method regularly followed by the Partnership in computing income) in connection with a Loan described in paragraph 26 above will be deductible by the Partnership in computing income in that taxation year in accordance with paragraph 20(1 )(c) of the Act, to the extent that the amount thereof is reasonable and paid pursuant to a legal obligation to pay interest on borrowed money used for the purpose of earning income from a business or property with a reasonable expectation of profit.

Q. Subject to the application of subsections 18(9) and (9.2) to (9.8) of the Act, interest paid in a taxation year or payable in respect of a taxation year by a Partner (depending upon the method regularly followed by the Partner in computing income) in connection with a Loan described in paragraph 15 above will be deductible by the Partner in computing income in that taxation year in accordance with paragraph 20(1)(c) of the Act, to the extent that the amount thereof is reasonable and paid pursuant to a legal obligation to pay interest on borrowed money used for the purpose of earning income from a business or property with a reasonable expectation of profit.

R. Subsection 245(2) of the Act will not apply to redetermine the tax consequences described in the rulings above.

CAVEATS

The above rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R4 (the "Circular") issued by the CCRA on January 29, 2001, and are binding provided the proposed transactions are completed on or before

XXXXXXXXXX. These rulings are based on the draft documents provided to us and are based on the Act in its present form and do not take into account the effect of any proposed amendments. Except as expressly stated, our rulings do not imply acceptance, approval or confirmation of any income tax implications of the facts or proposed transactions. In particular, nothing in this letter should be interpreted as confirming, either expressly or implicitly:

(a) whether the Partnership will have a reasonable expectation of profit;

(b) the reasonableness or fair market value of any expenditures referred to in this letter;

(c) the proper reporting, based on established case law principles or rules of law, or well-accepted business principles, applicable in the determination of the timing of the deduction of the Royalty (see Ruling E, above), the Operating Fee (see Ruling F, above), or the Outsourcing Fee (see Ruling G, above) incurred by the Partnership;

(d) whether ParentCo will be acting as a legal agent for the Partnership;

(e) the GST implications of any of the proposed transactions;

(f) the applicability or non-applicability of paragraph 96(2.2)(d) of the Act, including whether or not it may apply if the Call Option is exercised, other than as expressly stated in this ruling;

(g) whether a Unit held by a Partner is held on income or capital account and whether an outlay or expense is on account of capital; and

(h) any other tax consequences of the proposed transactions or of related transactions or events that are not described herein.

Yours truly,

XXXXXXXXXX
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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