2001 Ruling 2000-0034763 - Divisive Reorganization

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:

Delay of XXXXXXXXXX months in the redemption of the transferees' shares issued on the "butterfly"

Position: Accepted

Reasons:

Redemption carried out in the course of the reorganization which included the "butterfly" - XXXXXXXXXX

XXXXXXXXXX 2000-003476

XXXXXXXXXX, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX ("XXXXXXXXXX/Aco")
XXXXXXXXXX ("XXXXXXXXXX/Bco")
XXXXXXXXXX (the "Partnership")
XXXXXXXXXX ("XXXXXXXXXX/Cco")
Advance Income Tax Ruling

We are writing in response to your letter of XXXXXXXXXX in which you requested advance income tax rulings on behalf of the above-noted taxpayers. We acknowledge your letters of XXXXXXXXXX and our telephone conversations in connection herewith.

To the best of your knowledge, and that of the taxpayers named herein, none of the issues involved in this advance income tax ruling request is under objection or appeal or is being considered by any tax services office or taxation centre of the CCRA in connection with any income tax return already filed.

DEFINITIONS

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

(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph, subparagraph or clause is a reference to the relevant provision of the Act;

(b) "ACB" means the expression "adjusted cost base" as defined in section 54;

(c) "agreed amount" in respect of a property means the amount that the transferor and transferee of the property have agreed upon in their election under subsection 85(1) in respect of the property;

(d) XXXXXXXXXX;

(e) XXXXXXXXXX;

(f) "CCRA" means, on or after November 1, 1999, the Canada Customs and Revenue Agency, and before November 1, 1999, Revenue Canada, Taxation;

(g) "Canadian-controlled private corporation" has the meaning assigned by subsection 125(7);

(h) "capital dividend account" has the meaning assigned by subsection 89(1);

(i) "capital property" has the meaning assigned by section 54;

(j) "cost amount" has the meaning assigned under subsection 248(1);

(k) "depreciable property" has the meaning assigned by subsection 13(21);

(l) "distribution" has the meaning assigned by subsection 55(1);

(m) "dividend rental arrangement" has the meaning assigned by subsection 248(1);

(n) "eligible capital property" has the meaning assigned by section 54;

(o) "eligible property" has the meaning assigned by subsection 85(1.1);

(p) "guarantee agreement" has the meaning assigned by subsection 112(2.2);

(q) "ineligible property" has the meaning assigned by paragraph 88(1)(c);

(r) "legal paid-up capital" in respect of a share means the paid-up capital in respect of the share without reference to the provisions of the Act;

(s) "New Shares" means collectively, the new shares received by each transferor in the exchanges of shares described in paragraphs 59, 60 and 61 below;

(t) "Old Shares" means collectively, the shares of XXXXXXXXXX/Gco, XXXXXXXXXX/Ico and XXXXXXXXXX/Fco exchanged for the New Shares in the exchanges of shares described in paragraphs 59, 60 and 61 below;

(u) "paid-up capital" has the meaning assigned by subsection 89(1);

(v) "private corporation" has the meaning assigned by subsection 89(1);

(w) "PST" means XXXXXXXXXX Provincial Sales Tax;

(x) "RDTOH" means "refundable dividend tax on hand" which has the meaning assigned by subsection 129(3);

(y) "Registrar" means the Registrar of Companies under the XXXXXXXXXX;

(z) "Regulations" means the Income Tax Regulations;

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

(aa) "safe income on hand" in respect of the shares of a corporation at a particular time means the portion of the unrealized gain inherent in the shares at that time that cannot be reasonably be considered to be attributable to anything other than income earned or realized (as defined in paragraph 55(5)(c)) by the corporation and its subsidiaries after 1971 and before the safe-income determination time for the series of transactions that includes the proposed transactions described herein;

(bb) "safe income determination time" has the meaning assigned by subsection 55(1);

(cc) "series of transactions or events" has the meaning assigned by subsection 248(10);

(dd) "specified financial institution" and "restricted financial institution" have the meanings assigned under subsection 248(1);

(ee) "specified investment business" has the meaning assigned by subsection 125(7);

(ff) "taxable Canadian corporation" has the meaning assigned by subsection 89(1);

(gg) "taxable dividend" has the meaning assigned by subsection 89(1);

(hh) "taxable preferred share" has the meaning assigned by subsection 248(1); and

(ii) "UCC" means the expression "undepreciated capital cost" as defined in subsection 13(21).

FACTS

1. The corporations described below are Canadian-controlled private corporations incorporated under the laws of a province of Canada. The relevant facts regarding these corporations are summarized below:

Name of Date of Fiscal Corporate
Corporation Controlling shareholder(s) incorporation year end account #

XXXXXXXXXX/Aco XXXXXXXXXX

XXXXXXXXXX/Cco XXXXXXXXXX/Aco XXXXXXXXXX

XXXXXXXXXX/Bco XXXXXXXXXX

XXXXXXXXXX XXXXXXXXXX Mr. A XXXXXXXXXX

("XXXXXXXXXX/Gco")

XXXXXXXXXX XXXXXXXXXX Mr. B XXXXXXXXXX

("XXXXXXXXXX/Ico")

XXXXXXXXXX XXXXXXXXXX Mr. C XXXXXXXXXX

("XXXXXXXXXX/Hco")

XXXXXXXXXX XXXXXXXXXX /Mr. A XXXXXXXXXX

("XXXXXXXXXX/Dco")

XXXXXXXXXX XXXXXXXXXX/Mr. B XXXXXXXXXX

("XXXXXXXXXX/Eco")

XXXXXXXXXX XXXXXXXXXX/Mr. C XXXXXXXXXX

("XXXXXXXXXX/Fco")

* Date of amalgamation

All the corporations described herein file their corporate tax returns at the XXXXXXXXXX Taxation Centre and deal with the XXXXXXXXXX Tax Services Office regarding their tax affairs.

2. The principal business activity of the companies described in paragraph 1 above are as follows:

XXXXXXXXX/Dco, XXXXXXXXXX /Eco Holding companies and providers of and XXXXXXXXXX/Fco management services.

XXXXXXXXXX/Aco The company carries on business as a member of the Partnership.

XXXXXXXXXX/Bco Holds real property that is leased to the Partnership and used by the Partnership in its active business.

XXXXXXXXXX/Cco Wholly-owned subsidiary of XXXXXXXXXX/Bco.

XXXXXXXXXX/Cco carries on business as a member of the Partnership.

XXXXXXXX/Gco, XXXXXXXX/Hco. The companies carry on business as members of and XXXXXXXX/Ico the Partnership.

3. XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco (referred to collectively as the "Holding Companies") are all Canadian-controlled private corporations incorporated under the laws of the province of XXXXXXXXXX. Each of the Holding Companies has an XXXXXXXXXX taxation year-end.

4. The authorized share capital of each of the Holding Companies consists of:

(a) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each;

(b) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each;

(c) XXXXXXXXXX common shares with no par value;

(d) XXXXXXXXXX shares with a par value of $XXXXXXXXXX each, redeemable and retractable at $XXXXXXXXXX each (or the fair market value of any non-cash consideration received for their issue) with a non-cumulative dividend rate that does not exceed the Royal Bank's prime commercial rate;

(e) XXXXXXXXXX shares with a par value of $XXXXXXXXXX each, redeemable and retractable at $XXXXXXXXXX each (or the fair market value of any non-cash consideration received for their issue) with a non-cumulative dividend rate that does not exceed the Royal Bank's prime commercial rate; and

(f) XXXXXXXXXX shares with a par value of $XXXXXXXXXX each, redeemable and retractable at $XXXXXXXXXX each (or the fair market value of any non-cash consideration received for their issue) with a non-cumulative dividend rate that does not exceed the Royal Bank's prime commercial rate.

5. The issued share capital of XXXXXXXXXX /Dco, including the ACB and paid-up capital thereof, is as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/Mr. A XXXXXXXXXX

XXXXXXXXXX/Mrs. A XXXXXXXXXX

XXXXXXXXXX/Mr. A and XXXXXXXXXX/Mrs. A are husband and wife and both are residents of Canada for purposes of the Act.

6. The issued share capital of XXXXXXXXXX /Eco, including the ACB and paid-up capital thereof, is as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/XXXXXXXXXX

Mr. B

XXXXXXXXXX/XXXXXXXXXX

Mrs. B

XXXXXXXXXX/Mr. B and XXXXXXXXXX /Mrs. B are husband and wife and both are residents of Canada for purposes of the Act.

7. The issued share capital of XXXXXXXXXX/Fco, including the ACB and paid-up capital thereof, is as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/Mr. C XXXXXXXXXX

XXXXXXXXXX/Mr. C is a resident of Canada for purposes of the Act.

8. The authorized share capital of XXXXXXXXXX/Bco consists of XXXXXXXXXX common shares with no par value. The shares of XXXXXXXXXX/Bco are held as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/Dco XXXXXXXXXX
XXXXXXXXXX/Eco XXXXXXXXXX
XXXXXXXXXX/Fco XXXXXXXXXX

9. XXXXXXXXXX/Bco's primary asset is a commercial rental property which is used in the active business operations of the Partnership (the "Real Property"). XXXXXXXXXX /Bco's primary liabilities are a mortgage on the real property and a payable to the Partnership.

10. XXXXXXXXXX/Gco, XXXXXXXXXX/Ico and XXXXXXXXXX /Hco (known collectively, as the "Partner Companies") each has a XXXXXXXXXX taxation year-end.

11. The authorized share capital of each Partner Company consists of:

(a) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each;

(b) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each;

(c) XXXXXXXXXX shares with a par value of $XXXXXXXXXX each, redeemable and retractable at $XXXXXXXXXX each (or the FMV of any non-cash consideration received for their issue), with a non-cumulative dividend rate that is not less than XXXXXXXXXX of the prescribed rate;

(d) XXXXXXXXXX shares with a par value of $XXXXXXXXXX each, redeemable and retractable at $XXXXXXXXXX each (or the FMV of any non-cash consideration received for their issue), with a non-cumulative dividend rate that is not less than XXXXXXXXXX of the prescribed rate; and

(e) XXXXXXXXXX shares with a par value of $XXXXXXXXXX each, redeemable and retractable at their par value (or the FMV of any non-cash consideration received for their issue), with a non-cumulative dividend rate that is not less than XXXXXXXXXX of the prescribed rate.

12. The issued share capital of XXXXXXXXXX/Gco is held as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/Mr. A XXXXXXXXXX

XXXXXXXXXX/Mrs. A XXXXXXXXXX

XXXXXXXXXX/Aco XXXXXXXXXX

13. The issued share capital of XXXXXXXXXX/Ico is held as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/XXXXXXXXXX

Mr. B

XXXXXXXXXX/XXXXXXXXXX

Mrs. B

XXXXXXXXXX/XXXXXXXXXX
Son B

XXXXXXXXXX/XXXXXXXXXX
Daughter B

XXXXXXXXXX/Aco XXXXXXXXXX

XXXXXXXXXX/Son B and XXXXXXXXXX/Daughter B are adult children of XXXXXXXXXX/Mr. B and XXXXXXXXXX/Mrs. B. XXXXXXXXXX/Son B and XXXXXXXXXX/Daughter B are residents of Canada for purposes of the Act.

14. The issued share capital of XXXXXXXXXX/Hco is held as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/Mr. C XXXXXXXXXX

XXXXXXXXXX/Aco XXXXXXXXXX

15. The authorized share capital of XXXXXXXXXX/Cco is the same as each Partner Company described in paragraph 11 above.

16. The issued share capital of XXXXXXXXXX/Cco is held as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/Aco XXXXXXXXXX

17. XXXXXXXXXX/Cco's primary assets are its interest in the Partnership and its investment in XXXXXXXXXX/Aco. XXXXXXXXXX/Cco's primary liabilities are payables to XXXXXXXXXX/Dco, XXXXXXXXXX/Eco, and XXXXXXXXXX/Fco.

XXXXXXXXXX/Cco has a XXXXXXXXXX taxation year-end.

18. On XXXXXXXXXX/Aco acquired control of XXXXXXXXXX/Cco through the acquisition of all the issued and outstanding shares of XXXXXXXXXX/Cco for $XXXXXXXXXX from XXXXXXXXXX who deal at arm's length with XXXXXXXXXX/Aco. XXXXXXXXXX/Aco also acquired a loan in the amount of $XXXXXXXXXX payable by XXXXXXXXXX/Cco to XXXXXXXXXX, a corporation related to XXXXXXXXXX/Cco at that time, from XXXXXXXXXX for a price of $XXXXXXXXXX.

At the time of the acquisition of the XXXXXXXXXX/Cco shares by XXXXXXXXXX/Aco, the properties of XXXXXXXXXX/Cco included a partnership interest in the Partnership.

On XXXXXXXXXX, each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco acquired:

(a) a third of all the issued and outstanding shares of XXXXXXXXXX for a total purchase price of $XXXXXXXXXX ($XXXXXXXXXX each); and

(b) a third of a loan payable in the amount of $XXXXXXXXXX from XXXXXXXXXX/Bco to XXXXXXXXXX. Each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco paid an amount of $XXXXXXXXXX to acquire their respective portion of XXXXXXXXXX/Bco' loan payable to XXXXXXXXXX.

19. The authorized share capital of XXXXXXXXXX/Aco consists of:

(a) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each;

(b) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each; and

(c) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each.

20. The issued share capital of XXXXXXXXXX/Aco is held as follows:

Shareholder Shares ACB paid-up capital

XXXXXXXXXX/Hco XXXXXXXXXX
XXXXXXXXXX/Ico XXXXXXXXXX
XXXXXXXXXX/Cco XXXXXXXXXX
XXXXXXXXXX/Gco XXXXXXXXXX

21. XXXXXXXXXX/Aco' primary assets are its interest in the Partnership and its investments in XXXXXXXXXX/Gco, XXXXXXXXXX/Ico, XXXXXXXXXX/Hco, and XXXXXXXXXX/Cco. XXXXXXXXXX/Aco' principal liabilities are payables to XXXXXXXXXX/Dco, XXXXXXXXXX /Eco, XXXXXXXXXX/Fco, XXXXXXXXXX/Gco, XXXXXXXXXX/Ico, XXXXXXXXXX/Hco, and XXXXXXXXXX/Cco.

22. The Partnership is a Canadian partnership having a XXXXXXXXXX fiscal year-end. The Partner Companies each have a 1/3 interest in the Partnership comprised of their direct interest in the Partnership and their indirect interests in the Partnership held through XXXXXXXXXX/Aco and XXXXXXXXXX/Cco.

The Partnership is primarily engaged in the XXXXXXXXXX business.

PRELIMINARY TRANSACTIONS COMPLETED

23. Three new corporations have been incorporated under the XXXXXXXXXX as follows:

(a) XXXXXXXXXX/Gco incorporated XXXXXXXXXX

(b) XXXXXXXXXX/Ico incorporated XXXXXXXXXX and

(c) XXXXXXXXXX/Hco incorporated XXXXXXXXXX

Each of the above corporations is a private corporation and a taxable Canadian corporation.

24. The authorized share capital of each of XXXXXXXXXX consists of:

(a) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each;

(b) XXXXXXXXXX preferred shares without par value. Each share will be redeemable and retractable at an amount equal to the redemption amount of the share at that time.

The rights and restrictions of the preferred shares include the following:

(i) the redemption amount for each preferred share is to be fixed at an amount equal to the fair market value of the consideration received less the amount of liabilities assumed, divided by the number of shares issued at the time;

(ii) the legal paid-up capital is to be fixed by special resolution at an amount determined by the directors at the time of their issue not to exceed the ACB, or in the case of depreciable property the UCC, to the company of property received for their issue;

(iii) price adjustment to the redemption/retraction amount under certain circumstances where the fair market value of the property paid for their issue is subsequently determined to be different from the amount originally agreed to;

(iv) for the purposes of the "specified amount" in subsection 191(4), the amount specified will be designated by a resolution of the directors at the time of their issue, not to exceed the fair market value of the consideration received for their issue. The amount so specified will not be described by reference to a formula or subject to change thereafter. In this regard the "specified amount" will not be subject to the price adjustment clause described in paragraph (iii) above; and

(v) fixed annual non-cumulative dividend rate, to be fixed by resolution of the directors at the time of issue, expressed as a percentage of the redemption amount.

On incorporation, XXXXXXXXXX issued 1 common share to XXXXXXXXXX/Gco; XXXXXXXXXX issued 1 common share to XXXXXXXXXX/Ico; and XXXXXXXXXX issued 1 common share to XXXXXXXXXX/Hco. The subscription price for the common shares issued, in each case, was $XXXXXXXXXX cash. To comply with the requirement in the XXXXXXXXXX that the initial share be issued to an individual on incorporation, legal counsel subscribed for the above noted shares as agent and bare trustee for the respective beneficial owner.

25. The shareholders of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco, and XXXXXXXXXX/Fco, passed a special resolution authorizing the respective company's memorandum and articles be amended to create two new classes of preference shares. A certified copy of the special resolution, and amended memorandum and articles was filed with the Registrar as required under the XXXXXXXXXX. The number and class of new preferred shares authorized and their special rights and restrictions are as follows:

(a) XXXXXXXXXX preferred shares with a par value of $XXXXXXXXXX each;

(b) XXXXXXXXXX preferred shares with a par value of $XXXXXXXXXX each;

The rights and restrictions of the preferred shares include the following:

(i) each preferred share is redeemable and retractable at an amount equal to the redemption amount of the share at that time. The redemption amount of each issued preferred share will be fixed at the time of issue at an amount equal to the fair market value of the consideration received less the amount of liabilities assumed divided by the number of shares issued at the time;

(ii) a price adjustment to the redemption/retraction amount under certain circumstances where the fair market value of the property paid for their issue is subsequently determined to be different from the amount originally agreed to;

(iii) the XXXXXXXXXX preferred shares will, for the purposes of the "specified amount" in subsection 191(4), specify an amount, to be designated by a resolution of the directors at the time of their issue, not to exceed the fair market value of the consideration received for their issue. The amount so specified will not be described by reference to a formula or subject to change thereafter. In this regard the "specified amount" will not be subject to the price adjustment clause described in paragraph (ii) above; and

(iv) a fixed annual dividend rate, to be fixed by resolution of the directors at the time of issue, expressed as a percentage of the redemption amount.

All classes of shares of each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco that are entitled to dividends, will have rights and restrictions attached thereto that will ensure that dividends cannot be paid on the shares if to do so would reduce the value of the net assets of the particular company to less than the aggregate of the redemption amounts of all the issued fifth preference shares of that particular company.

26. The shareholders of XXXXXXXXXX/Gco, XXXXXXXXXX/Ico and XXXXXXXXXX/Hco passed a special resolution authorizing the respective company's memorandum and articles be amended to create one new class of common and two new classes of preference shares. A certified copy of the special resolution and amended memorandum and articles was filed with the Registrar as required under the XXXXXXXXXX. The number and class of new shares authorized and their special rights and restrictions is as follows:

(a) XXXXXXXXXX common shares with a par value of $XXXXXXXXXX each. These shares are entitled to dividends and have liquidation rights equal to all other classes of common shares issued and outstanding;

(b) XXXXXXXXXX preferred shares with a par value of $XXXXXXXXXX each. These shares have identical rights and restrictions as the XXXXXXXXXX preferred shares described in paragraph 25 above; and

(c) XXXXXXXXXX preferred shares with a par value of $XXXXXXXXXX each. These shares will have identical rights and restrictions as the XXXXXXXXXX preferred shares described in paragraph 25 above.

27. The shareholders of XXXXXXXXXX/Bco passed a special resolution authorizing the company's memorandum and articles be amended to create a new class of common shares. A certified copy of the special resolution and altered memorandum and articles was filed with the Registrar as required under the XXXXXXXXXX. The amendment provided for the creation of XXXXXXXXXX common shares with a par value of $XXXXXXXXXX per share. The XXXXXXXXXX common shares are entitled to dividends and have liquidation rights equal to all other classes of common shares issued and outstanding.

PROPOSED TRANSACTIONS

28. The shareholders of XXXXXXXXXX /Aco will pass a special resolution authorizing the amendment of the company's memorandum and articles to create 3 new classes of common shares ("XXXXXXXXXX"). A certified copy of the special resolution, and amended memorandum and articles will be filed with the Registrar as required under the XXXXXXXXXX. The authorized capital of the XXXXXXXXXX common shares of XXXXXXXXXX /Aco will each consist of XXXXXXXXXX shares with no par value.

The XXXXXXXXXX common shares (hereinafter referred to as the "New Common Shares") will participate pari passu in respect to dividends and liquidation rights. The special rights and restrictions of these shares will provide that the amount to be added to the legal paid-up capital of the new common shares will be an amount determined by a resolution of the directors of XXXXXXXXXX/Aco not to exceed the legal paid-up capital of any other class of shares of XXXXXXXXXX/Aco, issued and outstanding at the time, for which the new common shares are issued in exchange therefor. Also, the legal paid-up capital of the new common shares may be increased by way of special resolution passed by the directors of the company to the extent of XXXXXXXXXX/Aco's retained earnings and contributed surplus at the particular time.

29. Each of XXXXXXXXXX/Gco, XXXXXXXXXX/Ico, and XXXXXXXXX /Hco will exchange its XXXXXXXXXX common shares or XXXXXXXXXX common shares of XXXXXXXXXX/Aco, as the case may be, for an equal number of New Common Shares. XXXXXXXXXX /Hco will exchange its XXXXXXXXXX common shares for XXXXXXXXXX common shares; XXXXXXXXXX/Ico will exchange its XXXXXXXXXX common shares for XXXXXXXXXX common shares and XXXXXXXXXX/Gco will exchange its XXXXXXXXXX common shares for XXXXXXXXXX common shares.

XXXXXXXXXX/Aco will add an amount to the legal paid-up capital of its XXXXXXXXXX common shares, XXXXXXXXXX common shares and XXXXXXXXXX common shares equal to the paid-up capital of the XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be, for which the New Common Shares are issued.

30. Following the share exchanges described in paragraph 29 above, through one or more increases in legal paid-up capital, XXXXXXXXXX/Aco will increase the legal paid-up capital of its XXXXXXXXXX common sharesXXXXXXXXXX common shares and XXXXXXXXXX common shares by amounts that will not exceed the amount of the safe income on hand in respect of the XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be, held by XXXXXXXXXX/Gco, XXXXXXXXXX/Ico or XXXXXXXXXX/Hco, as the case may be, at the safe income determination time in respect of the transaction or event or series of transactions or events that includes the proposed transactions described herein.

31. XXXXXXXXXX/Aco will wind up XXXXXXXXXX/Cco. The directors of XXXXXXXXXX/Cco will pass director's resolutions calling for and authorizing the disposition of all of XXXXXXXXXX/Cco's assets and the payment or assumption of XXXXXXXXXX/Cco's liabilities (if any) as a preliminary step to the voluntary dissolution of XXXXXXXXXX/Cco pursuant to XXXXXXXXXX. Concurrently, shareholders of XXXXXXXXXX/Cco will pass special consent resolutions pursuant to XXXXXXXXXX approving the disposition of all of the assets of XXXXXXXXXX/Cco as proposed by XXXXXXXXXX/Cco's directors.

32. In the course of the wind-up of XXXXXXXXXX/Cco:

(a) XXXXXXXXXX/Cco will either pay in full all its current liabilities to the extent of available cash on hand or they will be assumed by XXXXXXXXXX/Aco. XXXXXXXXXX /Cco's long-term liabilities, if any, will be assumed by XXXXXXXXX/Aco;

(c) XXXXXXXXXX/Cco will estimate the amount of its tax liability, if any, for its last taxation year and set aside sufficient funds to meet this liability;

(d) XXXXXXXXXX/Cco's remaining property will be distributed to XXXXXXXXXX/Aco. Included in the property to be distributed will be shares of XXXXXXXXXX/Aco. On acquiring its own shares from XXXXXXXXXX/Cco, XXXXXXXXXX/Aco will hold the shares in treasury for at least one day before taking the necessary procedures to cancel them; and

(e) XXXXXXXXXX/Cco will request a Clearance Certificate pursuant to subsection 159(2).

33. XXXXXXXXXX/Aco will elect, pursuant to subsection 80.01(4), in prescribed form and within the time provided in subsection 80.01(4) to have any inter-company indebtedness between XXXXXXXXXX/Cco and XXXXXXXXXX/Aco that is settled as a result of the wind up of XXXXXXXXXX/Cco deemed to be settled by an amount paid equal to the cost amount (read without reference to paragraph (e) of the definition of "cost amount") to the holder of the debt obligation.

XXXXXXXXXX/Aco will also file a designation of an amount under paragraph 88(1)(d) in respect of any capital property other than ineligible property of XXXXXXXXXX/Cco.

34. Upon receipt of the Clearance Certificate pursuant to subsection 159(2), Articles of Dissolution of XXXXXXXXXX/Cco will be filed with the Registrar to have XXXXXXXXXX /Cco struck from the corporate register.

35. [Reserved]

36. Each of the principal shareholders will subscribe for additional common shares of their respective holding company for cash consideration of $XXXXXXXXXX per share. XXXXXXXXXX/Mr. A will subscribe for an additional XXXXXXXXXX common shares of XXXXXXXXXX/Dco, XXXXXXXXXX /Mr. B will subscribe for an additional XXXXXXXXXX common shares of XXXXXXXXXX/Eco and XXXXXXXXXX/Mr. C will subscribe for an additional XXXXXXXXXX common shares of XXXXXXXXXX/Fco.

The XXXXXXXXXX common shares of the Holding Companies are non-participating and have a nominal value. The purpose of the subscription for these additional common shares is to allow each of XXXXXXXXXX/Mr. A, XXXXXXXXXX/Mr. B and XXXXXXXXXX/Mr. C to retain control of their respective holding companies following the issuance of the XXXXXXXXXX preferred shares by each holding company described in Paragraph 53.

37. XXXXXXXXXX/Gco will transfer its XXXXXXXXXX common shares of XXXXXXXXXX/Aco to XXXXXXXXXX. As sole consideration for such transfer, XXXXXXXXXX will issue to XXXXXXXXXX/Gco XXXXXXXXXX common shares.

XXXXXXXXXX/Ico will transfer its XXXXXXXXXX common shares of XXXXXXXXXX/Aco to XXXXXXXXXX. As sole consideration for such transfer, XXXXXXXXXX will issue to XXXXXXXXXX/Ico XXXXXXXXXX common shares.

XXXXXXXXXX/Hco will transfer its XXXXXXXXXX common shares of XXXXXXXXXX/Aco to XXXXXXXXXX. As sole consideration for such transfer, XXXXXXXXXX will issue to XXXXXXXXXX/Hco XXXXXXXXXX common shares.

XXXXXXXXXX will each add to the legal paid-up capital of their respective common shares an amount equal to the paid-up capital of the common shares issued in exchange for the shares of XXXXXXXXXX/Aco.

38. In connection with each transfer of shares described in paragraph 37 above, the transferor and the transferee will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) applied to the transfer. The agreed amount in respect of the shares so transferred will, in each case, be equal to the ACB to the particular transferor, immediately before the transfer, which amount will be less than the fair market value of such shares.

39. The types of property for the purposes of a distribution of XXXXXXXXXX/Aco and XXXXXXXXXX/Bco, immediately before the transfers of property described in paragraphs 40 and 52 below ("Butterfly Transfer 1" and "Butterfly Transfer 2", respectively), will be determined on a consolidated look-through basis by including the appropriate pro-rata share of the assets of any corporation or partnership over which XXXXXXXXXX/Aco or XXXXXXXXXX/Bco, as the case may be, has the ability to exercise significant influence and will be properties of the following types:

(a) cash or near-cash property comprising of all of the current assets of each corporation including any cash, deposits, accounts receivable, inventory, and rights arising from prepaid expenses (hereinafter referred to as "prepaid expenses");

(b) business property, comprising of all of the assets of each corporation, other than cash or near-cash property, any income from which would, for the purposes of the Act, be income from a business other than a specified investment business; and

(c) investment property, comprising of all of the assets of each corporation, other than cash or near-cash property, any income from which would, for the purposes of the Act, be income from property or from a specified investment business.

For this purpose, XXXXXXXXXX/Aco or XXXXXXXXXX /Bco, as the case may be, will be considered to have significant influence over a corporation or partnership if it has the ability to exercise significant influence, within the guidelines provided by section 3050 of the CICA Handbook, over that corporation or partnership or over any corporation or partnership which has significant influence over that corporation or partnership.

Butterfly Transfer 1 and Butterfly Transfer 2 will be carried out on a gross fair market value basis.

For greater certainty:

(a) any tax accounts, such as the balance of any RDTOH or capital dividend account of XXXXXXXXXX/Aco or XXXXXXXXXX /Bco, as the case may be, will not be considered property for purposes of the proposed transactions described herein; and

(b) any shares of XXXXXXXXXX /Aco held by its shareholders and any shares of XXXXXXXXXX/Gco, XXXXXXXXXX/Ico or XXXXXXXXXX/Hco held by XXXXXXXXXX /Aco will be determined on a consolidated look-through basis for the purpose of determining the types of property held in XXXXXXXXXX /Aco immediately before Butterfly Transfer 1.

40. XXXXXXXXXX/Aco will transfer, at fair market value, to each of XXXXXXXXXX, 1/3 of its interest in the Partnership and a portion of its remaining cash and near-cash property, business property and investment property. As part of the distribution by XXXXXXXXXX/Aco, each of XXXXXXXXXX will acquire the preferred shares of its respective parent held by XXXXXXXXXX/Aco. As a result of such transfers, the fair market value of the cash and near-cash property, business property and investment property, determined in the manner described in paragraph 39 above, received by each transferee will be equal to the proportion of the fair market value of the cash and near-cash property, business property and investment property, respectively, owned by XXXXXXXXXX/Aco immediately before Butterfly Transfer 1, that:

(a) the fair market value, immediately before Butterfly Transfer 1, of all the shares of the capital stock of XXXXXXXXXX/Aco owned by that particular transferee at that time

is of

(b) the fair market value, immediately before Butterfly Transfer 1, of all the issued and outstanding shares of the capital stock of XXXXXXXXXX/Aco at that time.

41. As consideration for such transfers, each transferee will:

(a) assume liabilities of XXXXXXXXXX/Aco equal to the proportion described in paragraph 40 above, in respect of the particular transferee, of all the liabilities of XXXXXXXXXX/Aco immediately before Butterfly Transfer 1; and

(b) issue to XXXXXXXXXX/Aco XXXXXXXXXX preferred shares of that particular transferee having an aggregate redemption amount and aggregate fair market value equal to the amount by which the aggregate fair market value of the cash or near-cash property, business property and investment property so transferred exceeds the liabilities assumed by the particular transferee.

The liabilities assumed by each transferee will be allocated (based on their principal amount) to specific properties transferred by XXXXXXXXXX/Aco to that particular transferee. The principal amount of liabilities to be allocated to a property in respect of which an election under subsection 85(1) will be made, as described in paragraph 42 below, will not exceed the elected amount in respect of the particular property. The principal amount of liabilities allocated to other property will not exceed the fair market value of the particular property.

Each particular transferee will add to the legal paid-up capital of its preferred shares an amount equal to the aggregate of the cost amounts of the properties transferred less the amount of the liabilities assumed by that particular transferee.

XXXXXXXXXX/Aco will own more than 10% of the issued shares of each of XXXXXXXXXX having full voting rights under all circumstances and will own shares of each of XXXXXXXXXX having a fair market value of more than 10% of the fair market value of all the issued shares of each of XXXXXXXXXX.

For the purposes of subsection 191(4), the directors of XXXXXXXXXX, respectively, will pass a resolution specifying an amount per share as required under the terms and conditions of the preferred shares so issued, equal to the fair market value of the consideration for which the share is issued. For greater certainty, the specified amount will not be subject to adjustment or described by reference to a formula.

42. Each of XXXXXXXXXX will jointly elect with XXXXXXXXXX/Aco, in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of each property of XXXXXXXXXX /Aco that is an eligible property transferred. The agreed amount for the purposes of subsection 85(1) in respect of such property will be:

(a) where the particular property is inventory or capital property (other than depreciable property of a prescribed class), the lesser of the cost amount of the property to XXXXXXXXXX/Aco immediately before the transfer and the fair market value of such property; and

(b) where the particular property is depreciable property of a prescribed class, the least of the amounts specified in subparagraphs 85(1)(e)(i), (ii) or (iii).

The fair market value of each property transferred will equal or exceed the agreed amount in respect thereof.

For purposes of the joint elections described herein, the reference to "...the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition" found in paragraph 85(1)(e)(i) shall be interpreted to mean that proportion of the undepreciated capital cost to the taxpayer of all of the property of that class that the fair market value of the assets that are transferred immediately before the disposition is of the fair market value of all property of that class immediately before the disposition.

43. XXXXXXXXXX/Aco will purchase for cancellation all its common shares held by each of XXXXXXXXXX respectively. In consideration, XXXXXXXXXX/Aco will issue to each of XXXXXXXXXX, respectively, an interest-bearing promissory note payable on demand having a principal amount equal to the aggregate of the fair market value of the common shares so purchased as were held by XXXXXXXXXX (the "XXXXXXXXXX/Aco Note 1", "XXXXXXXXXX/Aco Note 2" and the "XXXXXXXXXX/Aco Note 3", respectively).

Each of XXXXXXXXXX will be entitled to receive interest on the principal amount of the XXXXXXXXXX/Aco Note 1, XXXXXXXXXX/Aco Note 2 or XXXXXXXXXX/Aco Note 3, as the case may be, at a rate equivalent to the prescribed rate of interest in effect from time to time, such interest to be paid monthly in arrears.

44. XXXXXXXXXX/Aco will issue a single share to XXXXXXXXXX/Mr. A for the sole purpose of qualifying XXXXXXXXXX/Mr. A as a director while the company's affairs are being wound-up as described in paragraph 50 below.

45. In order to qualify for an exemption from PST on the transfer of tangible personal property (TPP) by XXXXXXXXXX/Aco, pursuant to the XXXXXXXXXX/Aco must receive shares of the transferee as sole consideration for the transfer of the TPP and the shares received must be held by XXXXXXXXXX/Aco for a period of not less than XXXXXXXXXX months.

On a monthly basis, while the preferred shares of XXXXXXXXXX held by XXXXXXXXXX/Aco are outstanding, each of XXXXXXXXXX will pay dividends to XXXXXXXXXX/Aco and XXXXXXXXXX/Aco will pay interest on the XXXXXXXXXX/Aco Note 1, XXXXXXXXXX/Aco Note 2 and XXXXXXXXXX/Aco Note 3, in accordance with the respective conditions of the preferred shares and notes described herein.

After XXXXXXXXXX months, but not more than XXXXXXXXXX months, following the distribution, each of XXXXXXXXXX will redeem all of its preferred shares held by XXXXXXXXXX/Aco. In consideration, each of XXXXXXXXXX will issue to XXXXXXXXXX/Aco a non-interest-bearing promissory note payable on demand having a principal amount equal to the aggregate redemption amount of the preferred shares so redeemed (the "XXXXXXXXXX Note", the "XXXXXXXXXX Note" and the "XXXXXXXXXX Note", respectively).

46. Each of XXXXXXXXXX will be wound up into its respective parent, XXXXXXXXXX/Gco, XXXXXXXXXX/Ico and XXXXXXXXXX/Hco, pursuant to the provisions of the XXXXXXXXXX.

47. In the course of the winding up of XXXXXXXXXX:

(a) each of XXXXXXXXXX will either pay in full all its current liabilities, except the promissory note due to XXXXXXXXXX/Aco issued on the redemption of its preferred shares which will assumed by the respective parent, to the extent of available cash on hand or they will be assumed by the parent. Any long-term liabilities will be assumed by the parent;

(b) each of XXXXXXXXXX will estimate the amount of its tax liability, if any, for its last taxation year and set aside sufficient funds to meet this liability;

(c) all of the remaining property of XXXXXXXXXX will be distributed to the respective parent; and

(d) each of XXXXXXXXXX will request a Clearance Certificate pursuant to subsection 159(2).

48. Upon receipt of the Clearance Certificate pursuant to subsection 159(2), but not before XXXXXXXXXX months from the time each of XXXXXXXXXX had distributed its assets to its respective parent, Articles of Dissolution will be filed with the Registrar for the dissolution of each of XXXXXXXXXX.

49. The XXXXXXXXXX Note will be set off against the XXXXXXXXXX/Aco Note 1, the XXXXXXXXXX Note will be set off against the XXXXXXXXXX/Aco Note 2 and the XXXXXXXXXX Note will be set off against the XXXXXXXXXX/Aco Note 3 and all the notes will be cancelled.

50. XXXXXXXXXX/Aco will be wound up and in the course of the winding-up:

(a) XXXXXXXXXX/Aco will pay in full all its liabilities; and

(b) request a Clearance Certificate pursuant to subsection 159(2).

51. Upon receipt of the Clearance Certificate pursuant to subsection 159(2), Articles of Dissolution will be filed with the Registrar for the dissolution of XXXXXXXXXX /Aco.

52. XXXXXXXXXX/Bco will transfer, at fair market value, to each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco, 1/3 of its interest in its real property and a portion of its remaining cash and near-cash property, business property and investment property. As a result of such transfers, the fair market value of the cash and near-cash property, business property and investment property, determined in the manner described in paragraph 39 above, received by each transferee will be equal to the proportion of the fair market value of the cash and near-cash property, business property and investment property, respectively, owned by XXXXXXXXXX/Bco immediately before Butterfly Transfer 2, that:

(a) the fair market value, immediately before Butterfly Transfer 2, of all the shares of the capital stock of XXXXXXXXXX/Bco owned by that particular transferee corporation at that time

is of

(b) the fair market value, immediately before Butterfly Transfer 2, of all the issued and outstanding shares of the capital stock of XXXXXXXXXX/Bco at that time.

53. As consideration for such transfers, each transferee will:

(a) assume liabilities of XXXXXXXXXX/Bco equal to the proportion described in paragraph 52 above, in respect of the particular transferee, of all the liabilities of XXXXXXXXXX /Bco immediately before Butterfly Transfer 2; and

(b) issue to XXXXXXXXXX/Bco XXXXXXXXXX preferred shares with a par value of $XXXXXXXXXX per share, having an aggregate redemption amount equal to the aggregate fair market value of the property received from XXXXXXXXXX/Bco less the amount of XXXXXXXXXX/Bco' liabilities assumed by the particular transferee.

The liabilities assumed by each transferee will be allocated (based on their principal amount) to specific properties transferred by XXXXXXXXXX/Bco to that particular transferee. The principal amount of liabilities to be allocated to a property in respect of which an election under subsection 85(1) will be made, as described in paragraph 50 below, will not exceed the elected amount in respect of the particular property. The principal amount of liabilities allocated to other property will not exceed the fair market value of the particular property.

Each particular transferee corporation will add to the legal paid-up capital of its Fourth preferred shares an amount equal to the aggregate amount of the par value of the issued shares.

XXXXXXXXXX/Bco will own more than 10% of the issued shares of each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco having full voting rights under all circumstances and will own shares of each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco having a fair market value of more than 10% of the fair market value of all the issued shares of each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco.

For the purposes of subsection 191(4), the directors of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco, respectively, will pass a resolution specifying an amount per share as required under the terms and conditions of the XXXXXXXXXX preferred shares so issued, equal to the fair market value of the consideration for which the share is issued. For greater certainty, the specified amount will not be subject to adjustment or described by reference to a formula.

Following the transfer of the beneficial interests in the real properties to the transferee corporations, XXXXXXXXXX/Bco will continue to hold legal title to such properties as bare trustee. The purpose of having XXXXXXXXXX/Bco hold legal title is so that the transferee corporations may claim exemption from tax XXXXXXXXXX.

54. Each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco will jointly elect with XXXXXXXXXX/Aco, in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of each property of XXXXXXXXXX/Bco that is an eligible property transferred. The agreed amount for the purposes of subsection 85(1) in respect of such property will be:

(a) where the particular property is inventory or capital property (other than depreciable property of a prescribed class), the lesser of the cost amount of the property to XXXXXXXXXX/Bco immediately before the transfer and the fair market value of such property; and

(b) where the particular property is depreciable property of a prescribed class, the least of the amounts specified in subparagraphs 85(1)(e)(i), (ii) or (iii).

The fair market value of each property transferred will equal or exceed the agreed amount in respect thereof.

For purposes of the joint elections described herein, the reference to "...the undepreciated capital cost to the taxpayer of all property of that class immediately before the disposition" found in paragraph 85(1)(e)(i) shall be interpreted to mean that proportion of the undepreciated capital cost to the taxpayer of all of the property of that class that the fair market value of the assets that are transferred immediately before the disposition is of the fair market value of all property of that class immediately before the disposition.

55. Each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco will subscribe for 1 XXXXXXXXXX common share of XXXXXXXXXX/Bco for cash of $XXXXXXXXXX per share.

56. Each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco will redeem all of its preferred shares held by XXXXXXXXXX/Bco. In consideration, each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco, will issue to XXXXXXXXXX/Bco a non-interest-bearing promissory note payable on demand having a principal amount equal to the aggregate redemption amount of the preferred shares so redeemed ("the "XXXXXXXXXX/Dco Note", the "XXXXXXXXXX/Eco Note" and the "XXXXXXXXXX/Fco Note").

57. XXXXXXXXXX/Bco will purchase for cancellation all its common shares, except the XXXXXXXXXX common issued as described in paragraph 55 above, held by each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco. In consideration, XXXXXXXXXX/Bco will issue to each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco, respectively, a non-interest-bearing promissory note payable on demand having a principal amount equal to the aggregate of the fair market value of the common shares so purchased from the holders (the "XXXXXXXXXX Note 1", the "XXXXXXXXXX Note 2" and the "XXXXXXXXXX Note 3").

58. The XXXXXXXXXX/Dco Note will be set off against the XXXXXXXXXX/Bco Note 1, the XXXXXXXXXX/Eco Note will be set off against XXXXXXXXXX/Bco Note 2 and the XXXXXXXXXX/Fco Note will be set off against the XXXXXXXXXX Note 3 and all the notes will be cancelled.

59. XXXXXXXXXX/Mr. A will exchange his XXXXXXXXXX common shares of XXXXXXXXXX/Gco for XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX/Gco. At the same time, XXXXXXXXXX/Mrs. A will exchange her XXXXXXXXXX common shares of XXXXXXXXXX/Gco for XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX/Gco. The aggregate fair market value of the XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX /Gco received by XXXXXXXXXX/Mr. A and XXXXXXXXXX/Mrs. A will be equal to the fair market value of the XXXXXXXXXX common shares of XXXXXXXXXX/Gco at the time of the exchange.

XXXXXXXXXX/Gco will add to its legal paid-up capital in respect of its XXXXXXXXXX preference shares and XXXXXXXXXX common shares an aggregate amount equal to the paid-up capital of the XXXXXXXXXX common shares so exchanged. The amount of the paid-up capital of the XXXXXXXXXX common shares of XXXXXXXXXX/Gco will be allocated between the XXXXXXXXXX preference shares and XXXXXXXXXX common shares based on the proportion that the fair market value of the XXXXXXXXXX preference shares and the fair market value of the XXXXXXXXXX common shares, as the case may be, is of the fair market value of all such shares issued by XXXXXXXXXX/Gco.

No elections under subsection 85(1) will be filed in respect of the share exchanges described herein.

60. XXXXXXXXXX/Mr. B will exchange his XXXXXXXXXX common shares of XXXXXXXXXX/Ico for XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX/Ico. At the same timeXXXXXXXXXX/Mrs. B will exchange her XXXXXXXXXX common shares of XXXXXXXXXX/Ico for XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX/Ico. The aggregate fair market value of the XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX/Ico received by XXXXXXXXXX/Mr. B and XXXXXXXXXX/Mrs. B will be equal to the fair market value of the XXXXXXXXXX common shares of XXXXXXXXXX /Ico at the time of the exchange.

XXXXXXXXXX/Ico will add to its legal paid-up capital in respect of its XXXXXXXXXX preference shares and XXXXXXXXXX common shares an aggregate amount equal to the paid-up capital of the XXXXXXXXXX common shares so exchanged. The amount of the paid-up capital of the XXXXXXXXXX common shares of XXXXXXXXXX/Ico will be allocated between the XXXXXXXXXX preference shares and XXXXXXXXXX common shares based on the proportion that the fair market value of the XXXXXXXXXX preference shares and the fair market value of the XXXXXXXXXX common shares, as the case may be, is of the fair market value of all such shares issued by XXXXXXXXXX/Ico.

No elections under subsection 85(1) will be filed in respect of the share exchanges described herein.

61. XXXXXXXXXX/Mr. C will exchange his XXXXXXXXXX common shares of XXXXXXXXXX/Hco for XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX/Fco. The aggregate fair market value of the XXXXXXXXXX preference shares and XXXXXXXXXX common shares of XXXXXXXXXX/Hco received by XXXXXXXXXX/Mr. C will be equal to the fair market value of the XXXXXXXXXX common shares of XXXXXXXXXX/Hco at the time of the exchange.

XXXXXXXXXX/Hco will add to its legal paid-up capital in respect of its XXXXXXXXXX preference shares and XXXXXXXXXX common shares an aggregate amount equal to the paid-up capital of the XXXXXXXXXX common shares so exchanged. The amount of the paid-up capital of the XXXXXXXXXX common shares of XXXXXXXXXX/Hco will be allocated between the XXXXXXXXXX preference shares and XXXXXXXXXX common shares based on the proportion that that the fair market value of the XXXXXXXXXX preference shares and the fair market value of the XXXXXXXXXX common shares, as the case may be, is of the fair market value of all such shares issued by XXXXXXXXXX/Hco.

No elections under subsection 85(1) will be filed in respect of the share exchanges described herein.

62. XXXXXXXXXX/Mr. A will transfer his XXXXXXXXXX common shares and XXXXXXXXXX common shares of XXXXXXXXXX/Gco to XXXXXXXXXX/Dco. In consideration, XXXXXXXXXX/Dco will issue to XXXXXXXXXX/Mr. A XXXXXXXXXX preference shares and XXXXXXXXXX common shares. At the same time, XXXXXXXXXX/Mrs. A will transfer her XXXXXXXXXX common shares of XXXXXXXXXX /Gco to XXXXXXXXXX /Dco. In consideration, XXXXXXXXXX/Dco will issue to XXXXXXXXXX/Mrs. A XXXXXXXXXX preference shares.

The directors of XXXXXXXXXX/Dco will pass a resolution to fix the redemption amount of each issued XXXXXXXXXX preference share of XXXXXXXXXX/Dco at the amount of the fair market value of the XXXXXXXXXX/Gco shares received divided by the number of XXXXXXXXXX preference shares issued as consideration for the transfers. XXXXXXXXXX/Dco will add to its legal paid-up capital of its XXXXXXXXXX preference shares an amount equal to the aggregate amount of the par value ($XXXXXXXXXX per share) of the XXXXXXXXXX preference shares issued. XXXXXXXXXX/Dco will also add to its legal paid-up capital of its XXXXXXXXXX common shares an amount equal to the aggregate amount of the par value ($XXXXXXXXXX per share) of the XXXXXXXXXX common shares issued.

63. In connection with transfer of shares described in paragraph 58 above, each of the transferors and the transferee will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) applied to each of the transfers. The agreed amount in respect to the shares so transferred will be equal to the ACB to the transferor, immediately before the transfer, which amount will be less than the fair market value of such shares.

64. XXXXXXXXXX/Mr. B will transfer his XXXXXXXXXX common shares and XXXXXXXXXX common shares of XXXXXXXXXX Ico to XXXXXXXXXX/Eco. In consideration, XXXXXXXXXX/Eco will issue to XXXXXXXXXX/Mr. B XXXXXXXXXX preference shares and XXXXXXXXXX common shares. At the same time, XXXXXXXXXX/Mrs. B will transfer her XXXXXXXXXX common shares of XXXXXXXXXX/Ico to XXXXXXXXXX/Eco. In consideration, XXXXXXXXXX/Eco will issue to XXXXXXXXXX/Mrs. B XXXXXXXXXX preference shares.

The directors of XXXXXXXXXX Eco will pass a resolution to fix the redemption amount of each issued XXXXXXXXXX preference share of XXXXXXXXXX/Eco at the amount of the fair market value of the XXXXXXXXXX/Ico shares received divided by the number of XXXXXXXXXX preference shares issued as consideration for the transfers. XXXXXXXXXX/Eco will add to its legal paid-up capital of its XXXXXXXXXX preference shares an amount equal to the aggregate amount of the par value ($XXXXXXXXXX per share) of the XXXXXXXXXX preference shares issued. XXXXXXXXXX/Eco will also add to its legal paid-up capital of its XXXXXXXXXX common shares an amount equal to the aggregate amount of the par value ($XXXXXXXXXX per share) of the XXXXXXXXXX common shares issued.

65. In connection with transfer of shares described in paragraph 61 above, each of the transferors and the transferee will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) applied to each of the transfers. The agreed amount in respect to the shares so transferred will be equal to the ACB to the transferor, immediately before the transfer, which amount will be less than the fair market value of such shares.

66. XXXXXXXXXX/Mr. C will transfer his XXXXXXXXXX common shares and XXXXXXXXXX common shares of XXXXXXXXXX/Hco to XXXXXXXXXX/Fco. In consideration, XXXXXXXXXX/Fco will issue to XXXXXXXXXX/Mr. C XXXXXXXXXX preference shares.

The directors of XXXXXXXXXX/Fco will pass a resolution to fix the redemption amount of each issued XXXXXXXXXX preference share of XXXXXXXXXX/Fco at the amount of the fair market value of the XXXXXXXXXX/Hco shares received divided by the number of XXXXXXXXXX preference shares of XXXXXXXXXX/Fco as consideration for the transfer. XXXXXXXXXX/Fco will add to its legal paid-up capital of its XXXXXXXXXX preferred shares an amount equal to the aggregate amount of the par value ($XXXXXXXXXX per share) of the XXXXXXXXXX preference shares issued.

67. In connection with transfer of shares described in paragraph 63 above, the transferor and the transferee will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) applied to the transfer. The agreed amount in respect to the shares so transferred will be equal to the ACB to the transferor, immediately before the transfer, which amount will be less than the fair market value of such shares.

ADDITIONAL INFORMATION

68. None of the shares described in the Proposed Transactions have been or will be the subject of a guarantee agreement.

69. None of the shares described in the Proposed Transactions have been or will be issued or acquired as part of a transaction or event or series of transactions or events of the type described in subsection 112(2.5).

70. None of the corporations described herein is or will be a specified financial institution.

71. None of the corporations described herein has entered, or will enter at any time prior to the completion of the proposed transactions, into a dividend rental arrangement.

72. There are no transactions, other than those disclosed herein, that form part of a series of transactions or events that include the Proposed Transactions.

PURPOSES OF THE PROPOSED TRANSACTIONS

73. The purposes of the proposed transactions are to achieve the following objectives:

(a) simplify the current corporate structure and eliminate the filing requirements of three corporations;

(b) creditor-proof each partner's equity in the Partnership by protecting certain assets from the risks of the active business in the Partnership. The new structure would permit the income of the Partnership that is not reinvested in the Partnership to be moved to the Partner Companies and invested at the discretion of the particular Partner Company independently of another partner; and

(c) estate planning of the principal shareholders. This will allow for family members of the shareholders and employees to subscribe for growth shares in the Holding Companies and Partner Companies. In addition, each of the Holding Companies can retain its own life insurance policies and adjust the amount of coverage, according to the needs of each shareholder in the Holding Companies or the beneficiaries of their respective estates.

RULINGS

Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, proposed transactions and the purposes of the proposed transactions, we confirm the following:

A. The provisions of subsection 85(1) will apply to the transfer:

(i) by XXXXXXXXXX/Gco of its common shares of XXXXXXXXXX/Aco to XXXXXXXXXX as described in paragraph 37 above;

(ii) by XXXXXXXXXX/Ico of its common shares of XXXXXXXXXX/Aco to XXXXXXXXXX as described in paragraph 37 above;

(iii) by XXXXXXXXXX/Hco of its common shares of XXXXXXXXXX/Aco to XXXXXXXXXX as described in paragraph 37 above;

(iv) by XXXXXXXXXX/Aco of its properties that are eligible properties to each of XXXXXXXXXX described in paragraph 40 above;

(v) by XXXXXXXXXX/Bco of its properties or interest therein that are eligible properties to each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXX/Fco described in paragraph 52 above;

(vi) by XXXXXXXXXX/Mr. A and XXXXXXXXXX/Mrs. A of their common shares of XXXXXXXXXX/Gco to XXXXXXXXXX XXXXXXXXXX/Dco as described in paragraph 62 above;

(vii) by XXXXXXXXXX/Mr. B and XXXXXXXXXX/Mrs. B of their common shares of XXXXXXXXXX/Ico to XXXXXXXXXX/Eco as described in paragraph 64 above; and

(viii) by XXXXXXXXXX/Mr. C of his common shares of XXXXXXXXXX/Hco to XXXXXXXXXX/Fco as described in paragraph 66 above

such that, the agreed amount in respect of each transfer of eligible property will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a) and in respect of depreciable property, the transferee's capital cost of each such property will be determined in accordance with subsection 85(5).

For greater certainty, paragraph 85(1)(e.2) will not apply to the transfers.

B. Provided that each of XXXXXXXXXX/Mr. A, XXXXXXXXXX/Mrs. A, XXXXXXXXXX /Mr. B, XXXXXXXXXX/Mrs. B and XXXXXXXXXX/Mr. C hold their respective Old Shares as capital property, the provisions of subsection 86(1) will apply to the exchange:

(i) by XXXXXXXXXX and XXXXXXXXXX/Mrs. A of their XXXXXXXXXX common shares of XXXXXXXXXX/Gco for XXXXXXXXXX common shares and XXXXXXXXXX preference shares as described in paragraph 59 above;

(ii) by XXXXXXXXXX and XXXXXXXXXX/Mrs. B of their XXXXXXXXXX common shares of XXXXXXXXXX/Ico for XXXXXXXXXX common shares and XXXXXXXXXX preference shares as described in paragraph 60 above; and

(iii) by XXXXXXXXXX/Mr. C of his XXXXXXXXXX common shares of XXXXXXXXXX/Fco for XXXXXXXXXX common shares and XXXXXXXXXX preference shares as described in paragraph 61 above

such that the transferor's proceeds of disposition of the Old shares and ACB in the New Shares will be deemed to be the transferor's ACB in the Old shares.

For greater certainty, subsection 86(2) will not apply to the exchange of shares described above.

C. The paid-up capital, immediately after their issuance, of the shares issued as consideration for the transfers of property described in paragraphs 37, 52, 62, 64 and 66 above and on the exchange of shares described in paragraphs 59, 60 and 61 above will be the par value thereof.

D. The paid-up capital of the shares issued as consideration for the transfer of property described in paragraph 40 will be the amount determined under subsection 85(2.1).

E. The provisions of subsection 84(1) will not apply to the issuance of shares described in paragraphs 37, 40, 52, 59, 62, 64, and 66 above.

F. On the redemption of:

(i) the preferred shares of XXXXXXXXXX described in paragraph 45 above;

(ii) the preferred shares of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco held by XXXXXXXXXX/Bco described in paragraph 56 above;

and on the purchase for cancellation of:

(iii) the common shares of XXXXXXXXXX/Aco held by each of XXXXXXXXXX described in paragraph 43 above;

(iv) the common shares of XXXXXXXXXX/Bco held by each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco described in paragraph 57 above

the amount, if any, by which the amount paid to redeem or purchase the particular shares exceeds the paid-up capital of the particular shares immediately before the redemption or purchase for cancellation:

(i) will be deemed pursuant to paragraph 84(3)(a) to be a dividend paid by the issuer of such shares; and

(ii) will be deemed pursuant to paragraph 84(3)(b) to be a dividend received by the holder of such shares;

and

(iii) to the extent that a dividend described in (ii) above is a taxable dividend, such a dividend will, pursuant to subsection 112(1), be deductible in computing the taxable income of the recipient for the year in which the dividend is deemed to have been received, and for greater certainty, such deduction will not be precluded by any of subsections 112(2.1), (2.2), (2.3) or (2.4);

(iv) by virtue of the application of paragraph (j) of the definition of "proceeds of disposition" in section 54, the amount of a deemed dividend described in (ii) above will be excluded from the proceeds of disposition of the share, and any loss arising from the disposition of the share will be reduced by the amount of such dividends pursuant to subsection 112(3); and

(v) no taxes in respect of Part IV of the Act will be payable in respect to the dividends described in (ii) above except to the extent of the amount, if any, determined under paragraph 186(1)(b).

G. Part IV.1 of the Act will not apply to the deemed dividends described in Ruling D above because the dividends will be excepted dividends pursuant to paragraph (c) of the definition of "excepted dividend" in section 187.1.

H. Provided that the amount paid on the redemption of the preferred shares of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco is equal to the amount specified in respect of such shares as described in paragraphs 41 or 53 above, as the case may be, the dividends described in subparagraphs (i) and (ii) in Ruling D above will not be subject to tax under Part VI.1 of the Act on the basis that each such dividend will be deemed by paragraph 191(4)(d) to be an "excluded dividend" as defined in subsection 191(1).

Part VI.1 of the Act will not apply to the deemed dividends described in subparagraphs (iii) and (iv) in Ruling D above because the dividends will be excluded dividends pursuant to paragraph (a) of the definition of "excluded dividend" in subsection 191(1).

J. The settlements by way of set off of the XXXXXXXXXX Note and the XXXXXXXXXX/Aco Note 1, the XXXXXXXXXX Note and the XXXXXXXXXX/Aco Note 2, the XXXXXXXXXX Note and the XXXXXXXXXX/Aco Note 3 described in paragraph 49 above, and the XXXXXXXXXX/Dco Note and the XXXXXXXXXX/Bco Note 1, the XXXXXXXXXX/Eco Note and the XXXXXXXXXX/Bco Note 2, and the XXXXXXXXXX /Fco Note and the XXXXXXXXXX Note 3 described in paragraph 58 above will not give rise to a forgiven amount.

K. Provided that the properties acquired as consideration for the assumption of the liabilities of:

(i) XXXXXXXXXX/Aco by XXXXXXXXXX as described in paragraph 40; and

(ii) XXXXXXXXXX/Bco by XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco as described in paragraph 52

continue to be used by each transferee for the purpose of gaining or producing income, and provided that interest on the assumed liabilities was deductible in computing the income of the respective transferor before the assumption, an amount paid or payable by each transferee (depending on the method regularly followed by each transferee in computing its income), not in excess of a reasonable amount, in respect of a year pursuant to a legal obligation to pay interest on the liabilities to be assumed by each transferee will be deductible in computing the transferee's income for tax purposes in that year in accordance with the provisions of paragraph 20(1)(c).

L. Pursuant to subsection 1102(14) of the Regulations, each property which, immediately before the transfers described in paragraph 52 above is depreciable property of a prescribed class or separate prescribed class of XXXXXXXXXX/Bco and which is acquired by XXXXXXXXXX/Dco, XXXXXXXXXX/Eco or XXXXXXXXXX/Fco, as the case may be, on the transfers described in paragraph 52 will be depreciable property of the same prescribed class or separate prescribed class, as the case may be, of each of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco or XXXXXXXXXX/Fco, as the case may be.

M. Provided that the condition specified in paragraph 1100(2.2)(f) of the Regulations is satisfied, paragraph 1100(2.2)(h) of the Regulations will apply such that no amount will be included by XXXXXXXXXX/Dco, XXXXXXXXXX/Eco or XXXXXXXXXX/Fco, as the case may be, under paragraph 1100(2)(a) of the Regulations in respect of depreciable property of a prescribed class that is property acquired by XXXXXXXXXX/Dco, XXXXXXXXXX/Eco or XXXXXXXXXX/Fco, as the case may be, on the transfers described in paragraph 52 above.

N. The cost of the promissory notes issued in the transactions described in paragraphs 43, 45, 56 and 57 above will be equal to their respective principal amounts.

O. Provided that as part of the series of transactions or events that includes the proposed transactions described herein, there is no:

(i) disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(ii) acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);

(iii) acquisition of shares in the circumstances described in subparagraph 55(3.l)(b)(iii);

(iv) acquisition of property in the circumstances described in paragraph 55(3.1)(c); or

(v) acquisition of property in the circumstances described in paragraph 55(3.l)(d)

which has not been described herein, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in the Ruling in F above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

P. The provisions of subsection 88(1) will apply, subject to the application of subsection 69(11), to the wind-up of XXXXXXXXXX/Cco, as described in paragraph 31 above, and of each of XXXXXXXXXX, as described in paragraphs 46 above, such that:

(i) pursuant to subparagraph 88(1)(a)(iii) XXXXXXXXXX/Cco and each of XXXXXXXXXX (also referred to hereinafter each as the "subsidiary") will be deemed to have disposed of its property (except their interest in the Partnership), to their respective parent companies for proceeds equal to their cost amount immediately before the winding-up;

(ii) pursuant to paragraph 88(1)(a.2), each subsidiary will be deemed not to have disposed of its interest in the Partnership except for the purposes of paragraph 98(5)(g); and

(iii) each of XXXXXXXXXX/Aco, XXXXXXXXXX/Gco, XXXXXXXXXX/Ico and XXXXXXXXXX/Hco (also referred to hereinafter as the "parent") will be deemed to have disposed of their shares of their respective subsidiary for proceeds equal to the greater of the amounts determined pursuant to subparagraphs 88(l)(b)(i) and (ii).

The cost to each parent of property received from its respective subsidiary on that subsidiary's winding-up will be determined under paragraph 88(1)(c) to be:

(i) in respect of the interest in the Partnership, the amount determined under subparagraph 88(1)(c)(i) and subparagraph 87(2)(e.1) as modified by paragraph 88(1)(e.2) to be the cost to the subsidiary immediately before its distribution to the parent;

(ii) in the case of all other properties, the amount determined by subparagraph 88(1)(c)(ii), being the proceeds of disposition of the subsidiary as determined by paragraph 88(1)(a); and

(iii) plus, with respect to the winding-up of XXXXXXXXXX/Cco any amount determined under paragraph 88(1)(d) in respect of capital property other than ineligible property distributed to XXXXXXXXXX/Aco referred to in subparagraph (i) and (ii) above that was owned by XXXXXXXXXX/Cco at the time that XXXXXXXXXX/Aco last acquired control of XXXXXXXXXX/Cco and thereafter without interruption until such time as it was distributed to XXXXXXXXXX/Aco on the winding-up of XXXXXXXXXX/Cco.

Q. Provided that the XXXXXXXXXX/Aco XXXXXXXXXX common shares or XXXXXXXXXX common shares are capital property to XXXXXXXXXX/Hco, XXXXXXXXXX/Ico or XXXXXXXXXX/Gco, as the case may be, and they do not make an election pursuant to subsection 85(1) with respect to the share exchanges described in paragraph 29 above, subsection 86(1) will apply to the exchange of all such shares held by such shareholders, such that:

(a) the cost of the XXXXXXXXXX common shares, XXXXXXXXXX common shares or XXXXXXXXXX common shares received by XXXXXXXXXX/Hco, XXXXXXXXXX/Ico and XXXXXXXXXX/Gco, respectively on each share exchange will be deemed by paragraph 86(l)(b) to be an amount equal to the adjusted cost base to XXXXXXXXXX/Hco, XXXXXXXXXX/Ico or XXXXXXXXXX/Gco, immediately before the exchange of that shareholder's XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be; and

(b) pursuant to paragraph 86(1)(c), XXXXXXXXXX/Hco, XXXXXXXXXX/Ico and XXXXXXXXXX/Gco will be deemed to have disposed of their XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be, for proceeds of disposition equal to the adjusted cost base to XXXXXXXXXX/Hco, XXXXXXXXXX/Ico or XXXXXXXXXX/Gco, as the case may be, immediately before the share exchange of that shareholder's XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be.

R. By virtue of subsection 84(1), XXXXXXXXXX/Aco will be deemed to have paid a dividend on its outstanding XXXXXXXXXX common shares, XXXXXXXXXX common shares and XXXXXXXXXX common shares equal to each increase in paid-up capital in respect of the particular shares described in paragraph 30 above and each such dividend deemed to have been received by the respective recipient will be deductible by that recipient, to the extent that it is a taxable dividend, in computing the taxable income for the taxation year in which such dividend is deemed to be received, pursuant to subsection 112(1).

S. The provisions of subsection 55(2) will not apply to a deemed dividend described in ruling S above, provided that the full amount of the deemed dividend does not exceed the safe income on hand of XXXXXXXXXX/Aco in respect of its XXXXXXXXXX common shares, XXXXXXXXXX common shares or XXXXXXXXXX common shares, as the case may be, immediately before the time of the dividend.

T. The provisions of subsections 15(1), 56(2), 69(1), 69(4) and 246(1) will not apply to the proposed transactions, other than the transactions described in paragraph 36 above, in and by themselves.

U. Subsection 245(2) will not be applied to the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R4 dated January 29, 2001 issued by the CCRA and are binding provided that the proposed transactions are completed before XXXXXXXXXX.

These rulings are based on the Act as it currently reads and do not take into account any future amendments, whether currently proposed or not, to the Act.

COMMENTS

1. Nothing in this ruling should be construed as confirmation, express or implied, of:

(a) the determination of the fair market value, ACB, paid-up capital or safe income on hand of any particular share referred to herein;

(b) the tax consequences of any transaction other than those described in the rulings given above.

2. You have advised in paragraphs 24 and 25 above that the share provisions relating to the preferred shares of XXXXXXXXXX, and to the XXXXXXXXXX preferred shares of XXXXXXXXXX/Dco, XXXXXXXXXX/Eco and XXXXXXXXXX/Fco will provide for a retroactive adjustment, where necessary, to the redemption price of those shares. Nothing in this letter should be construed as confirmation, express or implied, that, for the purpose of any of the rulings given above, any adjustment to the fair market value of the properties transferred and the redemption price of the shares issued as consideration, will be effective retroactively to the time of the transfer and issuance of shares. In addition, any such adjustment could affect the ruling given in Ruling O above. Furthermore, the rulings in this letter are not intended to apply to the operation of a price adjustment clause, since its coming into effect will be due to circumstances that do not constitute proposed transactions that are seriously contemplated. The general position of the CCRA with respect to price adjustment clauses is as stated in Interpretation Bulletin IT-169.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch