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10 December 2014 Internal T.I. 2014-0533151I7- Qualified Donee- XXXXXXXXXX-- summary under Paragraph 149(1)(c) Summary Under Tax Topics- Income Tax Act- Section 149- Subsection 149(1)- Paragraph 149(1)(c) Park needs to demonstrate it is performing municipal-type services A Park was established to encourage an appreciation and use of natural and recreational resources, was authorized under its constituting [Statute?] ... A review of the Park's financial statements fails to show any significant expenditure on infrastructure such as roadways, buildings, and sewer systems it claims to be providing. … In addition, while the Park… has not provided any evidence to support that they have in fact passed bylaws. … Other evidence to support that the Park is performing a function of government may include: a copy of an agreement with a neighboring municipality to provide fire protection or waste removal services, invoices from organizations subcontracted to provide the municipal type services on behalf of the Park, and the name of the municipality that is charged with collecting taxes on behalf of the Park and the agreement that governs the relationship. ...

. … [W]hen a foreign trust grants funds to other organizations…the recipient organization would have to be considered “charitable” according to Canadian common law.... [W]hen the charitable activities are carried out by an intermediary…the activities and the underlying resources provided must be subject to the direction and control of the trust…. ...

Aco, a wholly-owned Canadian mining and exploration subsidiary, has four “unproven resource properties” (the “Properties”) at a stage such that exploration expenses incurred thereon would still qualify as Canadian exploration expense (“CEE”). ... Rulings Re qualification of expenditures under CEE – (f) and non-application of s. 245(4), and that s. 66(12.71) will not apply to prevent Bco from renouncing CEE provided that it is carrying on business in Canada. ...

Aco, a wholly-owned Canadian mining and exploration subsidiary, has four “unproven resource properties” (the “Properties”) at a stage such that exploration expenses incurred thereon would still qualify as Canadian exploration expense (“CEE”). ... Rulings Including re qualification of expenditures under CEE – (f). ...

. … The onus is on the taxpayer to provide support for the calculation of safe income that can reasonably be viewed as contributing to the capital gain on a share. The CRA expects the supporting documentation to be organized as an accumulation of year-by-year computations. … …[W]here…the taxpayer offers an alternative proxy such as the accounting retained earnings or adjusted retained earnings balance…the CRA auditor might conclude that retained earnings is a fair proxy for safe income on hand but only after a very stringent validation process. ... …[W]hen a taxpayer makes a request to the CRA to obtain a copy of income tax returns and/or notices of assessment, the CRA will attempt, in regards to available resources, to provide the requested documentation. ...

2012 Ruling 2012-0460811R3- Public Company Spin-Off Butterfly-- summary under Distribution Summary Under Tax Topics- Income Tax Act- Section 55- Subsection 55(1)- Distribution standard spin-off by public resource co Under the proposed transactions for a spin-off butterfly of Spinco by DC (a public corporation and principal business corporation as defined in s. 66(15)): no dissent rights were exercised Spinco, which is a taxable Canadian corporation and whose common shares have been conditionally accepted for listing but which will not issue any shares until the time of transfer to it below of the DC Butterfly Shares, will elect to be a public corporation by filing the T2073 prescribed form each DC shareholder will exchange each of its DC common shares for one DC New Common Share (having the same rights as the old common shares except that the DC New Common Shares will give the holders thereof the right to vote, to the exclusion of any other class of shares of DC, for the election of directors at any meeting of shareholders called for that purpose) and one DC Butterfly Share (which will be non-voting and redeemable and retractable for the "Butterfly Proportion" of the fair market value of an old DC common share immediately before such reorganization) each DC stock option holder will exchange its options for new DC stock options and Spinco stock options ("The issuance by Spinco of the Spinco Stock Options will be in anticipation of the [butterfly] distribution... and will form part of the non-share consideration relating to such transfer." – para. 29) each DC Butterfly Shares will be transferred to Spinco in consideration for one Spinco common share, with the Spinco common shares being listed on a designated stock exchange the net FMV of each of the three types of property of DC will be determined on a consolidated basis (and where the property of DC is a share of a corporation over which DC has a significant influence, the net FMV of the share of the particular corporation will be multiplied by the proportion that the net FMV of that type of property of the particular corporation is of the net FMV of all the property of the particular corporation- and following the allocation of current liabilities to each cash or near cash property, any remaining net FMV of any accounts receivable, inventories and prepaid expenses of a particular corporation will be reclassified as business property and excluded from cash or near cash property, to the extent that such property will be collected, sold or used by the particular corporation in the ordinary course of the business to which such property relates) DC will transfer to Spinco each transferred asset such that following the transfer the net FMV of each type of transferred property will approximate the Butterfly Proportion; and in consideration therefor Spinco will issue the Spinco Stock Options and Spinco Redemption Shares; DC and Spinco will make a joint s. 85(1) election Spinco and DC will redeem the Spinco Redemption Shares and DC Butterfly Shares for redemption notes (making a s. 89(14) designation respecting the resulting deemed dividend), and will each satisfy its note by transferring the other note to its debtor Rulings: s. 86 rulings re exchange of DC common shares for new common shares and DC Butterfly Shares s. 85.1(1) rulings re transfer of DC Butterfly Shares to Spinco cross-cancellation of notes will not give rise to gain or forgiven amounts ...

The Opcos held timber resource properties, Canadian real property, other properties not listed in the definition of TCP and, in some cases, shares of lower tier Opcos. After referencing its established position that the gross asset (rather than net asset) value method should be used to determine whether more than 50% of the FMV of the share of a corporation was derived directly or indirectly from relevant Canadian properties (“RCP”), such as real property situated in Canada and that “the proportionate value approach should be used to determine the proportion of the FMVs of the shares of the Opcos that derived from RCP for the purpose of applying the gross asset value method to the shares of the NRCos in order to determine whether more than 50% of the FMV of the share of an NRCo was derived directly or indirectly from one, or any combination of, RCP,” the Rulings Directorate stated: [A]ny intercompany receivable balance pertaining to a loan made downstream is not…a distinct asset of the particular parent corporation but, rather, its value increases the relevant FMV of its asset that is shares of a particular wholly-owned subsidiary. … [I]ncluding the value of an intercompany receivable balance pertaining to a loan made upstream as a distinct asset when determining the FMV of the wholly-owned lending subsidiary’s assets would result in the double counting… because when carrying out the gross asset value test for the parent corporation the value of the related intercompany payable balance is…ignored while the funds the parent received from the upstream loan would be included as a distinct asset of the parent…. ...