2006 Ruling 2006-0167921R3 - XXXXXXXXXX

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.

Principal Issues: See Ruling and Statement of Principal Issues.

Position: See Ruling and Statement of Principal Issues.

Reasons: See Ruling and Statement of Principal Issues

XXXXXXXXXX 								2006-016792

XXXXXXXXXX , 2006

Dear XXXXXXXXXX :

Re : XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling Request

This is in reply to your letter of XXXXXXXXXX in which you request an Advance Income Tax Ruling on behalf of the above named taxpayers. We also acknowledge the information provided in subsequent correspondence in connection with your request.

We understand that, to the best of your knowledge and that of the taxpayers involved, none of the issues involved in this Ruling request:

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

(ii) is being considered by a Tax Services Office or Taxation Center in connection with a previously filed tax return of the taxpayers or a related person;

(iii) is under objection by the taxpayers or a related person; or

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

The issues involved herein are the subjects of Ruling # E 2004-009549 issued in respect of the above-named taxpayers. This Ruling is no longer binding on the Canada Revenue Agency (the "CRA") given that the proposed transactions contemplated therein were not completed within the time limit specified in the Ruling.

This document is based solely on the facts and proposed transactions described below. The documentation submitted with your request does not form part of the facts and proposed transactions and any references thereto are provided solely for the convenience of the reader.

Our understanding of the facts, proposed transactions and purposes of the proposed transactions is as follows:

Definitions

The following definitions apply in respect of this Ruling request:

"Act" means the Income Tax Act R.S.C. 1985 (5th Supp.), c. 1, and the regulations thereto, both as amended from time to time and any legislation enacted in substitution for the Act and its regulations;

"Annual Budget" means the annual budget prepared by Council for the administrative expenses relating to the implementation of the Treaty Entitlement Agreement in accordance with the provisions of Article XXXXXXXXXX of the Trust Agreement;

"Canada" means Her Majesty the Queen in Right of Canada and includes all departments of the Government of Canada;

"Chief" means the chief of XXXXXXXXXX from time to time;

"Community Approval Process" means the process by which the eligible voting Members of XXXXXXXXXX will authorize and direct:

(a) the Council to execute the Treaty Entitlement Agreement;

(b) the Initial Trustees to execute the Trust Agreement; and

(c) the Council and the Initial Trustees, and their successors, to execute all other documents to give effect to the Treaty Entitlement Agreement and the Trust Agreement;

"Community Fund Account" means the account created for Community Purposes into which the Trustees will deposit the sum of XXXXXXXXXX dollars from the amounts paid to XXXXXXXXXX by Canada in accordance with the Treaty Entitlement Agreement;

"Community Fund Trustees" initially means the members of Council on the date of the establishment of the Trust, and thereafter any individual elected or appointed to fill a vacancy in the office of the Community Fund Trustees in accordance with the provisions of Article XXXXXXXXXX of the Trust Agreement, and a "Community Fund Trustee" means any one of them;

"Community Purposes" means those objects and purposes more particularly described in paragraph XXXXXXXXXX of the Trust Agreement;

"Council" means the "council of the band" as defined in the Indian Act for XXXXXXXXXX , comprising the Chief and the Councillors of XXXXXXXXXX , from time to time;

"Council Resolution" means a resolution passed by a majority decision of the Council at a duly convened meeting of the Council;

"Councillors" means the elected Members of the Council, and "Councillor" means any one of them;

"DIAND" means the Department of Indian Affairs and Northern Development of the Government of Canada or its successor, as established pursuant to the Department of Indian Affairs and Northern Development Act;

"Expenditures Beneficial to the Beneficiary" means applications of the Trust Property by the Financial Trustees:

(a) to or for the benefit of XXXXXXXXXX for Implementation Purposes as determined by Council; or

(b) to or for the benefit of XXXXXXXXXX for Community Purposes as determined by:

(i) the Community Fund Trustees, by Ordinary Resolution, for applications of amounts up to XXXXXXXXXX dollars;

(ii) the Council, by Council Resolution, upon the recommendation of the Community Fund Trustees, for applications of amounts between XXXXXXXXXX dollars and XXXXXXXXXX dollars; and

(iii) the Members, by Ordinary Resolution, upon the recommendation of the Community Fund Trustees and concurrence of the Council, for applications of amounts over XXXXXXXXXX dollars;

as the case may be, all in accordance with the general principles and specific guidelines contained in Articles XXXXXXXXXX of the Trust Agreement;

"Federal Payment" means the anticipated amount of XXXXXXXXXX dollars to be paid by Canada to XXXXXXXXXX in accordance with Section XXXXXXXXXX of the Treaty Entitlement Agreement;

"Financial Trustees" initially means the members of Council on the date of the establishment of the Trust and thereafter any individual appointed or elected to fill a vacancy in the office of the Financial Trustees in accordance with the provisions of Article XXXXXXXXXX of the Trust Agreement, and a "Financial Trustee" means any one of them;

"Funding Direction" means a written direction from the Council, in respect of Expenditures Beneficial to the Beneficiary for Implementation Purposes, or from the Community Fund Trustees, in respect of Expenditures Beneficial to the Beneficiary for Community Purposes, delivered to the Financial Trustees, for a distribution of funds from the Trust Property, which contains the following information, as applicable:

(a) in respect of Expenditures Beneficial to the Beneficiary for Implementation Purposes in relation to costs of implementation and administration of the Treaty Entitlement Agreement:

(i) a description of the Expenditures Beneficial to the Beneficiary, in respect of which the proposed distribution will be applied;

(ii) a description of the manner in which the funds will be applied, including when and to whom funds will be paid, the anticipated completion date of any project to which the funds will be applied, the amount and source of other funds which will be applied in respect of the same matter, a description of any charges or security arrangements which may arise in respect of any project to which the funds may be applied; and

(iii) a Council Resolution approving any Expenditures Beneficial to the Beneficiary for Implementation Purposes;

(b) in respect of Expenditures Beneficial to the Beneficiary for Implementation Purposes for the purchase or other acquisition of land or an interest in land:

(i) a copy of an executed offer to purchase or other agreement to purchase or otherwise acquire land or an interest in land;

(ii) the name of the lawyer for XXXXXXXXXX retained to complete the acquisition of land on behalf of XXXXXXXXXX , to whom the Financial Trustees will send the funds required to complete the purchase or other acquisition; and

(iii) a Council Resolution approving any Expenditures Beneficial to the Beneficiary for Implementation Purposes; or

(c) in respect of Expenditures Beneficial to the Beneficiary for Community Purposes:

(i) a description of the Expenditures Beneficial to the Beneficiary, in respect of which the proposed distribution will be applied;

(ii) a description of the manner in which the funds will be applied, including when and to whom funds will be paid, the anticipated completion date of any project to which the funds will be applied, the amount and source of other funds which will be applied in respect of the same matter, a description of any charges or security arrangements which may arise in respect of any project to which the funds may be applied;

(iii) an Ordinary Resolution by the Community Fund Trustees approving or recommending any Expenditures Beneficial to the Beneficiary for Community Purposes;

(iv) in the event the proposed expenditure is between XXXXXXXXXX dollars and XXXXXXXXXX dollars, a Council Resolution approving any Expenditures Beneficial to the Beneficiary recommended for Community Purposes by the Community Fund Trustees;

(v) in the event the proposed expenditure exceeds XXXXXXXXXX dollars:

(A) a Council Resolution approving any Expenditures Beneficial to the Beneficiary for Community Purposes recommended by the Community Fund Trustees; and

(B) an Ordinary Resolution of the Members approving any Expenditure Beneficial to the Beneficiary for Community Purposes recommended by the Community Fund Trustees; and

(vi) in the event security arrangements must be implemented in connection with the proposed expenditure, the name of the lawyer to whom funds will be paid in connection with the completion of those security arrangements;

"Implementation Account" means the account created for Implementation Purposes into which the Trustees will deposit, subject to any adjustments provided in Section XXXXXXXXXX of the Treaty Entitlement Agreement, the sum of XXXXXXXXXX dollars from the amounts paid to XXXXXXXXXX by Canada in accordance with the Treaty Entitlement Agreement;

"Implementation Payment" means the anticipated amount of XXXXXXXXXX dollars to be paid by Canada to XXXXXXXXXX in accordance with Section XXXXXXXXXX of the Treaty Entitlement Agreement;

"Implementation Purposes" means those objects and purposes more particularly described in paragraph XXXXXXXXXX of the Trust Agreement;

"Income" means for each Taxation Year of the Trust the income or loss of the Trust for such year computed in accordance with the provisions of the Act (other than subsections 75(2) and 104(6) thereof) regarding the calculation of income for the purposes of determining the "taxable income" of the Trust and shall, for greater certainty, include taxable capital gains, net of allowable capital losses, and any notional or deemed amounts required to be included in computing the taxable income of the Trust, but shall exclude capital dividends and the non-taxable portion of capital gains;

"Indian Act" means the Indian Act R.S.C. 1985, c. I-5, and the regulations thereto, both as amended from time to time and any legislation enacted in substitution for the Indian Act and its regulations;

"Initial Trustees" means the Financial Trustees and Community Fund Trustees first named at the beginning of the Trust Agreement, and "Initial Trustee" means any one of them;

"Land Acquisition Payment" means the amount of XXXXXXXXXX dollars to be paid by Canada to XXXXXXXXXX in accordance with Section XXXXXXXXXX of the Treaty Entitlement Agreement;

"Land Selection Study" means the study that has been commenced and will be completed by XXXXXXXXXX in accordance with Subsection XXXXXXXXXX of the Treaty Entitlement Agreement;

"XXXXXXXXXX " means Her Majesty the Queen in Right of XXXXXXXXXX and includes all departments of the Government of XXXXXXXXXX ;

"Member" means an individual whose name appears on the "band list", as defined in the Indian Act, of XXXXXXXXXX , whether or not such individual is resident on any Reserve, and "Members" means more than one Member;

"Negotiation Costs" means the contribution of Canada towards the costs incurred, or anticipated to be incurred by XXXXXXXXXX in the negotiation of the Treaty Entitlement Agreement, including legal fees;

"Net Amount" means those portions of the Total Amount allocated, in accordance with Section XXXXXXXXXX of the Treaty Entitlement Agreement, to the Federal Payment, the Land Acquisition Payment, the Third Party Interest Payment and the Implementation Payment, and anticipated to be XXXXXXXXXX dollars;

"Ordinary Resolution" means:

(a) in respect of Community Fund Trustees, a resolution passed by at least XXXXXXXXXX Community Fund Trustees who voted in respect of that resolution at a duly convened meeting of Community Fund Trustees or a written resolution signed by all the Community Fund Trustees entitled to vote on the resolution;

(b) in respect of Financial Trustees, a resolution passed by at least XXXXXXXXXX Financial Trustees who voted in respect of that resolution at a duly convened meeting of Financial Trustees or a written resolution signed by all the Financial Trustees entitled to vote on the resolution;

(c) in respect of Members, a resolution passed by a majority of the votes cast by the Members who voted in respect of that resolution at a duly convened meeting of Members held upon XXXXXXXXXX days' written notice of the meeting specifying, among other things, the place, date and time of the meeting and any matter referred to in the Trust Agreement that is to be dealt with at the general meeting, posted in the administrative offices of XXXXXXXXXX and published in at least one (1) issue of a newspaper having a general circulation in XXXXXXXXXX ; and

(d) in respect of the Trustee Nominating Committee, a resolution passed by at least XXXXXXXXXX members of the Trustee Nominating Committee who voted in respect of that resolution at a meeting of the Trustee Nominating Committee held upon XXXXXXXXXX days' written notice of the meeting specifying the place, date and time of the meeting, unless all members of the Trustee Nominating Committee agree to such shorter notice in writing of the meeting or waive such notice in writing of the meeting or a written resolution signed by all members of the Trustee Nominating Committee entitled to vote on the resolution;

"XXXXXXXXXX " means the XXXXXXXXXX , a "band" as that term is defined in

subsection 2(1) of the Indian Act, as represented by its Chief and Council;

"XXXXXXXXXX Provision" means the following written provision of XXXXXXXXXX

XXXXXXXXXX

"Primary Income for a Taxation Year of the Trust" means such part of the Income for a Taxation Year of the Trust which arises from property received by the Trust from XXXXXXXXXX , including the XXXXXXXXXX dollars received to initially settle the Trust and funds paid by Canada at the direction of XXXXXXXXXX to the Financial Trustees pursuant to the Treaty Entitlement Agreement, or from any property substituted therefor;

"Promissory Note" means a demand promissory note issued by the Financial Trustees and delivered to XXXXXXXXXX as absolute payment, without interest, of the unpaid amount of Secondary Income for a Taxation Year of the Trust earned in either the Implementation Account or the Community Account, as the case may be, and "Promissory Notes" means more than one Promissory Note;

"Reserve" means the XXXXXXXXXX Indian Reserve XXXXXXXXXX , any land added to that Reserve from time to time, and any other land that may be reserved or set apart as "reserve", as defined in the Indian Act, for XXXXXXXXXX from time to time;

"Secondary Income for a Taxation Year of the Trust" means Income for a Taxation Year of the Trust other than Primary Income for a Taxation Year of the Trust;

"Taxation Year of the Trust" means a calendar year, unless the fiscal period in respect of which the Trust is required annually to compute its income for Canadian federal income tax purposes changes, in which event the new fiscal period shall become the Taxation Year of the Trust;

"Third Party Interest Payment" means the anticipated amount of XXXXXXXXXX dollars to be paid by Canada to XXXXXXXXXX in accordance with Section XXXXXXXXXX of the Treaty Entitlement Agreement;

"Total Amount" means the amount of XXXXXXXXXX dollars being the total of all payments and contributions to be paid and contributed by Canada to XXXXXXXXXX in accordance with Section XXXXXXXXXX of the Treaty Entitlement Agreement;

"XXXXXXXXXX Agreement" means the "XXXXXXXXXX " between Canada and XXXXXXXXXX ;

"Treaty Entitlement Agreement" means that certain agreement to be entered into and made among XXXXXXXXXX , Canada and XXXXXXXXXX , pursuant to which, among other things, XXXXXXXXXX will be entitled to select and acquire up to XXXXXXXXXX acres of additional land to be set apart as Reserve and Canada will be required to pay and contribute the Total Amount to XXXXXXXXXX , the latest draft of which was attached to the Ruling request;

"Treaty XXXXXXXXXX " means Treaty XXXXXXXXXX entered into between Canada and XXXXXXXXXX ;

"Trust" means the trust named the XXXXXXXXXX to be created pursuant to the Trust Agreement;

"Trust Agreement" means that certain trust agreement to be entered into and made between XXXXXXXXXX and the Initial Trustees, pursuant to which the Trustees will agree to hold and invest the Net Amount received by XXXXXXXXXX from Canada pursuant to the Treaty Entitlement Agreement for the exclusive benefit of XXXXXXXXXX , the latest draft of which, dated XXXXXXXXXX , was provided;

"Trust Property" means all monies at any time on deposit in the Trust and, without limitation, includes:

(a) the Net Amount paid by Canada to the Initial Trustees at the direction of XXXXXXXXXX in accordance with the Treaty Entitlement Agreement;

(b) all investments authorized by the Trust Agreement in which those monies may from time to time be invested by the Financial Trustees, or into which those monies may be converted by the Financial Trustees at any time or from time to time, as well as any additions or accretions thereto;

(c) any sums repaid to the Financial Trustees in accordance with the Trust Agreement;

(d) any sums received by the Trust from Canada in accordance with Section XXXXXXXXXX of the Treaty Entitlement Agreement; and

all other monies, securities, property and assets which XXXXXXXXXX or Canada at the direction of XXXXXXXXXX or any other person may pay, donate, sell, lend or otherwise transfer, cause to be transferred to, vest or cause to be vested in the Financial Trustees for the use and benefit of XXXXXXXXXX , and includes any substituted or additional property held in trust, together with all accretions to any property held in trust and all income derived from any property held in trust, less any amounts which have been paid or disbursed from any property held in trust (whether out of capital or income) in the normal course of the administration of the Trust or pursuant to the provisions of the Trust Agreement;

"Trustee Nominating Committee" means the committee appointed by Council under Article XXXXXXXXXX of the Trust Agreement; and

"Trustees" means the Financial Trustees and the Community Fund Trustees from time to time acting under the Trust Agreement, and includes the Initial Trustees, and "Trustee" means any one of them.

Facts

1. XXXXXXXXXX , through the Council, has governmental authority with respect to Members and the geographic area of the Reserve and has the power to make by-laws in accordance with the Indian Act.

2. XXXXXXXXXX has passed a number of by-laws pursuant to section 81 of the Indian Act, including by-laws for the following purposes:

* the regulation of traffic;

* the observance of law and order;

* the protection against and prevention of trespass by cattle and other domestic animals, the establishment of pounds and the appointment of pound-keepers;

* to provide for disposal of garbage and waste;

* to provide for the control of business establishments on the Reserve; and

* to provide veterinary services to domestic animals.

3. XXXXXXXXXX provides and administers an extensive list of public works, social services and infrastructure programs for the Members, including but not limited to:

* education programs;

* health programs;

* housing programs;

* garbage disposal services;

* water and sewage services;

* fire protection services;

* maintenance of infrastructure programs, including roads, sanitation and landfill;

* recreation and social programs;

* social services; and

* financial management and economic development.

4. PXXXXXXXXXX guis, formerly known as the XXXXXXXXXX , is one of the XXXXXXXXXX that was a party to Treaty XXXXXXXXXX entered into with Canada on XXXXXXXXXX

5. XXXXXXXXXX

6. XXXXXXXXXX

7. XXXXXXXXXX

8. In XXXXXXXXXX submitted a claim to DIAND alleging that the lands set aside as XXXXXXXXXX Indian Reserve XXXXXXXXXX were not sufficient to fulfill XXXXXXXXXX land entitlement pursuant to Treaty XXXXXXXXXX (hereinafter referred to as the "TLE Claim"). XXXXXXXXXX

9. XXXXXXXXXX

10. XXXXXXXXXX

11. XXXXXXXXXX

12. XXXXXXXXXX

13. XXXXXXXXXX

14. XXXXXXXXXX

15. XXXXXXXXXX

16. XXXXXXXXXX

17. XXXXXXXXXX

18. XXXXXXXXXX

19. XXXXXXXXXX

20. XXXXXXXXXX

21. XXXXXXXXXX

22. Canada and XXXXXXXXXX have agreed that the obligation of Canada to provide land of sufficient area to XXXXXXXXXX to fulfill the requirements of the XXXXXXXXXX Provision of Treaty XXXXXXXXXX will be addressed in the manner and to the extent provided in the Treaty Entitlement Agreement.

23. Canada and XXXXXXXXXX have agreed that XXXXXXXXXX will satisfy in part its obligations to Canada under paragraph XXXXXXXXXX of the XXXXXXXXXX Agreement in the manner and to the extent provided in the Treaty Entitlement Agreement.

Proposed Transactions

24. Canada, XXXXXXXXXX and XXXXXXXXXX have completed negotiations on the matters arising from and in relation to XXXXXXXXXX outstanding right to additional land for Reserve in accordance with the XXXXXXXXXX Provision of Treaty XXXXXXXXXX and wish to enter into the Treaty Entitlement Agreement in order to achieve a settlement of the TLE Claim.

25. After the Treaty Entitlement Agreement has been ratified by the Members in accordance with the Community Approval Process, XXXXXXXXXX , Canada and XXXXXXXXXX will execute the Treaty Entitlement Agreement.

26. Pursuant to the Treaty Entitlement Agreement, XXXXXXXXXX will select and acquire up to XXXXXXXXXX acres of additional land.

27. Pursuant to the Treaty Entitlement Agreement, Canada will make the following payments and contributions, totalling XXXXXXXXXX dollars, which together represent the Total Amount:

(a) a contribution toward Negotiation Costs in the amount of XXXXXXXXXX dollars;
(b) a contribution toward the costs incurred by XXXXXXXXXX in undertaking and completing the Community Approval Process in the amount of XXXXXXXXXX dollars;
(c) a Federal Payment in the amount of XXXXXXXXXX dollars;
(d) a Land Acquisition Payment in the amount of XXXXXXXXXX dollars;
(e) a Third Party Interest Payment in the amount of XXXXXXXXXX dollars;
(f) an Implementation Payment in the amount of XXXXXXXXXX dollars; and
(g) a contribution towards the costs incurred, or anticipated to be incurred by XXXXXXXXXX in completing the Land Selection Study in the amount of XXXXXXXXXX dollars.

28. At any time after the date of execution of the Treaty Entitlement Agreement, but before the payment and contribution by Canada of the Total Amount, XXXXXXXXXX will be entitled to adjust the allocation of the Total Amount set out in subparagraphs 27(a), (c), (e) and (f) hereof, provided that the final amount allocated toward Negotiation Costs may not be less than XXXXXXXXXX dollars and the amount adjusted from the Federal Payment, the Third Party Interest Payment and the Implementation Payment may not, in total, exceed XXXXXXXXXX dollars. A Council Resolution will be required to confirm the adjustment of the allocation.

29. Pursuant to the Treaty Entitlement Agreement, Canada has agreed:

(a) to set-off and deduct the amount of XXXXXXXXXX dollars from the Total Amount to be paid by Canada to XXXXXXXXXX as a contribution by Canada towards the Negotiation Costs and towards the costs incurred by XXXXXXXXXX in undertaking and completing the Community Approval Process; and
(b) subject to any adjustment of the allocation of the Total Amount referred to in paragraph 28 hereof, to advance the amount of XXXXXXXXXX dollars representing the balance of Canada's contribution towards Negotiation Costs that remains outstanding (following the repayment of the loans by way of set-off referred to in paragraph 29(a) hereof) and its contribution towards the costs incurred or anticipated to be incurred by XXXXXXXXXX in completing the Land Selection Study, such amount to be advanced by Canada to XXXXXXXXXX out of the Total Amount within thirty (30) days of:

(i) the date on which the Treaty Entitlement Agreement is executed by the last of the parties thereto; or
(ii) in the event XXXXXXXXXX adjusts the allocation of the Total Amount, the date Canada receives the Council Resolution referred to in paragraph 28 hereof.

30. After the repayment of loans and deduction of the advances described in paragraph 29 hereof, and subject to any adjustments described in paragraph 28 hereof, the net amount anticipated to be paid by Canada to XXXXXXXXXX pursuant to the Treaty Entitlement Agreement is XXXXXXXXXX dollars, which represents the Net Amount.

31. In consideration of Canada entering into the Treaty Entitlement Agreement and assuming the various obligations set out therein, XXXXXXXXXX will forever release and discharge Canada from all claims, obligations, promises, undertakings and liabilities related to the TLE Claim settled, as more fully set out in Sections XXXXXXXXXX of the Treaty Entitlement Agreement.

32. In consideration of XXXXXXXXXX entering into the Treaty Entitlement Agreement, Canada will forever release and discharge XXXXXXXXXX from and against all claims, liabilities and demands relating to the obligations of XXXXXXXXXX arising out of paragraph XXXXXXXXXX of the XXXXXXXXXX Agreement, as more fully set out in Section XXXXXXXXXX of the Treaty Entitlement Agreement.

33. Under the Treaty Entitlement Agreement, XXXXXXXXXX has agreed to create the Trust to use, manage and administer the Net Amount anticipated to be paid by Canada to XXXXXXXXXX , in a manner consistent with the Treaty Entitlement Agreement, and to administer other assets which may be contributed to the trust from time to time, all for the exclusive benefit of XXXXXXXXXX , in accordance with the terms and provisions of the Trust Agreement.

34. Upon approval of the Treaty Entitlement Agreement and the Trust Agreement by the Members in accordance with the Community Approval Process and authorization and direction provided by the Members to Council, XXXXXXXXXX and the Initial Trustees will execute the Trust Agreement.

35. XXXXXXXXXX , in its capacity as settler of the Trust, will pay the sum of XXXXXXXXXX dollars to the Initial Trustees to settle the Trust. XXXXXXXXXX will be the sole beneficiary of the Trust. Under the terms of the Trust Agreement, the Trust will be a non-discretionary inter vivos trust.

36. Pursuant to the Treaty Entitlement Agreement, XXXXXXXXXX will irrevocably authorize and direct Canada to advance to the Initial Trustees the Net Amount to be added to the Trust Property and to be held for the benefit of XXXXXXXXXX .

37. The financial administration of the Trust Property will be the sole responsibility of the Financial Trustees. The Financial Trustees must engage professional financial management services to assist them in performing their duties under the Trust Agreement. The Financial Trustees will apply or distribute the Trust Property in accordance with Funding Directions received by the Council or the Community Fund Trustees, as the case may be.

38. The Community Fund Trustees will have no responsibility under the Trust Agreement for the financial administration of the Trust Property. The Community Fund Trustees will identify and determine or recommend to Council or to Council and the Members, as required, Expenditures Beneficial to the Beneficiary for Community Purposes, in accordance with the general principles and specific guidelines contained in Articles XXXXXXXXXX of the Trust Agreement and provide the Financial Trustees with Funding Directions.

39. All legal right, title and interest in the Trust Property will be vested exclusively in the Financial Trustees.

40. All beneficial right, title, interest, and benefit in the Trust Property will be vested exclusively in XXXXXXXXXX , as the sole beneficiary of the Trust, and XXXXXXXXXX will be the sole entity entitled to enforce the obligations assumed by the Trustees under the Trust Agreement.

41. The head office of the Trust will be located at XXXXXXXXXX Indian Reserve XXXXXXXXXX , or at any other place in Canada on any Reserve, as the Financial Trustees may from time to time designate.

42. The Council, for Implementation Purposes, and the Community Fund Trustees, for Community Purposes, will be entitled to cause the Financial Trustees to distribute Trust Property to or for the benefit of XXXXXXXXXX at the times and in the amounts as the Council or the Community Fund Trustees, as the case may be, consider appropriate in connection with Expenditures Beneficial to the Beneficiary by delivering a Funding Direction to the Financial Trustees.

43. Upon receipt of a Funding Direction, the Financial Trustees will be required to pay or apply from the Implementation Account or Community Fund Account, as the case may be, so much of the Trust Property, as is specified in the Funding Direction, to or for the benefit of XXXXXXXXXX in connection with Expenditures Beneficial to the Beneficiary. Subject to the provisions of the Trust Agreement permitting anticipatory distributions from the Trust Property, such payments will be made firstly out of Secondary Income for a Taxation Year of the Trust, secondly, by repayment of Promissory Notes, and thirdly, out of Primary Income for a Taxation Year of the Trust or out of the capital of the Trust Property, as the Financial Trustees will determine. Notwithstanding the foregoing, the Financial Trustees will be entitled, prior to the end of a Taxation Year of the Trust, to make anticipatory distributions from the Trust Property. The annual audit for that Taxation Year of the Trust will reflect the proper allocation of any such anticipatory distributions among Secondary Income for a Taxation Year of the Trust, repayment of Promissory Notes, Primary Income for a Taxation Year of the Trust and the capital of the Trust Property. Except pursuant to a Funding Direction from the Council or the Community Fund Trustees in accordance with subparagraph XXXXXXXXXX of the Trust Agreement or an Annual Budget submitted by Council in accordance with Article XXXXXXXXXX of the Trust Agreement, the Financial Trustees will not distribute Primary Income for a Taxation Year of the Trust to XXXXXXXXXX .

44. Unless and until the amount of additional land set apart as Reserve has been increased by XXXXXXXXXX acres of land as a result of the implementation of the Treaty Entitlement Agreement, the amount of capital retained in the Implementation Account will not be less than the amount determined by the following formula:

(A - B)
where
"A" is the amount of the Land Acquisition Payment as this term is defined in the Treaty Entitlement Agreement, being XXXXXXXXXX dollars; and
"B" is the total of all amounts disbursed from the Trust for the purpose of permitting XXXXXXXXXX , or any person acting for or on behalf of XXXXXXXXXX , to acquire Other Land as this term is defined in the Treaty Entitlement Agreement.

45. No distribution of any portion of the Trust Property from the Implementation Account, other than distributions of Secondary Income for a Taxation Year of the Trust and payment on account of Promissory Notes, will be made which would, if made, reduce the net realizable value of the Trust Property in the Implementation Account, other than land, less outstanding Promissory Notes and other liabilities of the Trust, below XXXXXXXXXX dollars at any time before the date that is XXXXXXXXXX years after the date of the Trust Agreement.

46. No distribution of Trust Property, from the Community Fund Account, other than distributions of Secondary Income for a Taxation Year of the Trust and payment on account of Promissory Notes, will be made which would, if made, reduce the net realizable value of the Trust Property in the Community Fund Account, less outstanding Promissory Notes and other liabilities of the Trust, below the aggregate of the following amounts:

(a) XXXXXXXXXX dollars; and
(b) XXXXXXXXXX % of the value of any transfers of the Trust Property from the Implementation Account to the Community Fund Account under paragraphs 48 and 49 hereof and any additions made to the Trust Property under paragraph 52 hereof.

47. Any amount to be distributed by the Financial Trustees in accordance with paragraph 43 hereof will be reduced by the total of all amounts paid in cash or kind to XXXXXXXXXX in whole or partial payment of an amount owing under:

(a) in the case of an amount to be distributed pursuant to a Funding Direction for Implementation Purposes, any Promissory Note issued and delivered to XXXXXXXXXX in payment of the obligation of the Financial Trustees to pay the Secondary Income for a Taxation Year of the Trust recorded in the Implementation Account that has not been paid to XXXXXXXXXX in the Taxation Year of the Trust; or
(b) in the case of an amount to be distributed pursuant to a Funding Direction for Community Purposes, any Promissory Note issued and delivered to XXXXXXXXXX in payment of the obligation of the Financial Trustees to pay the Secondary Income for a Taxation Year of the Trust recorded in the Community Fund Account that has not been paid to XXXXXXXXXX in the Taxation Year of the Trust;

that has not previously reduced an amount to be distributed by the Financial Trustees under paragraph 43 hereof in accordance with this paragraph.

48. The Council will, not later than XXXXXXXXXX months after the date that is XXXXXXXXXX years following the date of the execution of the Trust Agreement, and at all times thereafter as provided in paragraph 49 hereof, call a special public meeting of Members for the purpose of making a decision, by Ordinary Resolution of the Members, on one of the following options:

(a) to retain all of the Trust Property in the Implementation Account for at least the next XXXXXXXXXX years;
(b) subject to paragraph 44 above, to retain a portion of the Trust Property in the Implementation Account and to transfer the remaining portion of the Trust Property in the Implementation Account to the Community Fund Account; or
(c) subject to paragraph 44 above, to transfer all of the Trust Property deposited in the Implementation Account to the Community Fund Account.

49. For so long as there remains Trust Property in the Implementation Account, the Council will call a special public meeting of Members XXXXXXXXXX years after the date of the special public meeting of Members provided for in paragraph 48 hereof, and every XXXXXXXXXX years thereafter, for the purpose of making a decision, by Ordinary Resolution of the Members, on one of the three options set out in paragraph 48 hereof.

50. Any income of the Trust Property earned in the Implementation Account which forms the basis for determining Primary Income for a Taxation Year of the Trust not distributed in the Taxation Year of the Trust in which it arises, or within XXXXXXXXXX days of the end of that year, will be added to the capital of the Trust Property in the Implementation Account.

51. Any income of the Trust Property earned in the Community Fund Account which forms part of the basis for determining Primary Income for a Taxation Year of the Trust that remains undistributed in the Taxation Year of the Trust in which it arises, or within XXXXXXXXXX days of the end of that year, shall be added to the capital of the Trust Property in the Community Fund Account.

52. XXXXXXXXXX or any other person at the direction of XXXXXXXXXX may add other monies, securities, property and assets to the Trust Property from any source as authorized and approved by Council Resolution or by Ordinary Resolution of the Members. Any such addition to the Trust Property will be governed by the terms of the Trust Agreement as though it was a part of the Net Amount paid by Canada at the direction of XXXXXXXXXX pursuant to the terms of the Treaty Entitlement Agreement, provided that Council, by an irrevocable Council Resolution, or the Members, by an Ordinary Resolution, prior to the receipt of an addition to the Trust Property, will designate the extent to which the whole or any part of the addition to the Trust Property will be allocated to the Implementation Account and/or the Community Fund Account, as the case may be.

53. The Financial Trustees will calculate the Secondary Income for a Taxation Year of the Trust recorded in each of the Implementation Account and the Community Fund Account.

54. All of the Secondary Income for a Taxation Year of the Trust recorded in each of the Implementation Account and the Community Fund Account that will not have been paid to XXXXXXXXXX earlier in the Taxation Year of the Trust will be payable to XXXXXXXXXX on the last day of that Taxation Year of the Trust. The Secondary Income for a Taxation Year of the Trust payable to XXXXXXXXXX will be paid by the Financial Trustees issuing to XXXXXXXXXX , within XXXXXXXXXX months from the end of the Taxation Year of the Trust in which the Secondary Income for a Taxation Year of the Trust is earned, a Promissory Note payable to XXXXXXXXXX for the unpaid Secondary Income for a Taxation Year of the Trust recorded in the Implementation Account and a Promissory Note for the unpaid Secondary Income for a Taxation Year of the Trust recorded in the Community Fund Account. Each Promissory Note will be issued as absolute payment by the Financial Trustees of the obligation to pay the unpaid Secondary Income for a Taxation Year of the Trust to XXXXXXXXXX .

55. XXXXXXXXXX will have the right to enforce the payment of the balance of the Secondary Income for a Taxation Year of the Trust on the last day of the Taxation Year of the Trust and at any time thereafter until paid. For greater certainty, the Secondary Income for a Taxation Year of the Trust will not be added to the capital of the Trust Property, but will be paid to XXXXXXXXXX in the manner provided in paragraph 54 hereof.

56. For each Taxation Year of the Trust, the Council may prepare an Annual Budget for the administrative expenses relating to the implementation of the Treaty Entitlement Agreement, including required staff, equipment, travel or other administration costs pertaining to the acquisition of land, site inspections, land appraisals, general (non-purchase related) legal services (excluding land holding costs), monitoring and Reserve creation process approved by the Council for each Taxation Year of the Trust during the implementation of the Treaty Entitlement Agreement.

57. The Council will submit the Annual Budget to the Financial Trustees, along with the Council Resolution approving the Annual Budget, and deliver a Funding Direction authorizing the Financial Trustees to distribute funds from the Trust Property deposited into the Implementation Account. Upon receipt of the Annual Budget and corresponding Funding Direction, the Financial Trustees will make payments to Council on a quarterly basis based on the Annual Budget submitted by the Council, as amended by the Council at any time and from time to time.

58. An Annual Budget for a Taxation Year of the Trust, and any amended Annual Budget for a Taxation Year of the Trust, will not exceed XXXXXXXXXX dollars (plus the estimated amount of land holding costs) in any Taxation Year of the Trust, unless the Members approve, by Ordinary Resolution, an Annual Budget for a Taxation Year of the Trust in excess of XXXXXXXXXX dollars in a given Taxation Year of the Trust.

59. Any funds paid to the Council pursuant to an Annual Budget for a Taxation Year of the Trust which are not expended in this year for expenses described in an Annual Budget for a Taxation Year of the Trust will be either:

(a) returned to the Financial Trustees and deposited in the Implementation Account; or
(b) credited towards the Annual Budget for the following Taxation Year of the Trust.

60. There will at all times be XXXXXXXXXX Community Fund Trustees elected to act under the Trust Agreement. If for any reason there are less than XXXXXXXXXX Community Fund Trustees at any time, the vacancy will be filled in accordance with the provisions of the Trust Agreement, but the Community Fund Trustees will continue to act in accordance with the provisions of the Trust Agreement. If for any reason there are less than XXXXXXXXXX Community Fund Trustees at any time, the Community Fund Trustees will be precluded from recommending or approving Expenditures Beneficial to the Beneficiary until there are at least XXXXXXXXXX Community Fund Trustees.

61. There will at all times be XXXXXXXXXX Financial Trustees of which XXXXXXXXXX will be elected and XXXXXXXXXX will be appointed to act under the Trust Agreement. If for any reason, there are less than XXXXXXXXXX Financial Trustees at any time, the vacancy will be filled in accordance with the provisions of the Trust Agreement but the Financial Trustees will continue to act in accordance with the provisions of the Trust Agreement. If for any reason, there are less than XXXXXXXXXX Financial Trustees at any time, the Financial Trustees will be precluded from making distributions of Trust Property to or for XXXXXXXXXX in respect of Expenditures Beneficial to the Beneficiary, but will preserve and protect the Trust Property until there are at least XXXXXXXXXX Financial Trustees.

62. At all times, at least XXXXXXXXXX Financial Trustees and at least XXXXXXXXXX Community Fund Trustees will be Members, of which at least XXXXXXXXXX Financial Trustees and at least XXXXXXXXXX Community Fund Trustees will ordinarily reside on Reserve during their terms of office and at least XXXXXXXXXX Financial Trustee and at least XXXXXXXXXX Community Fund Trustee will ordinarily reside off Reserve during their terms of office. At least XXXXXXXXXX Financial Trustee will be a chartered accountant and at least XXXXXXXXXX Financial Trustee will be either a corporate trustee, lawyer, engineer, school principal or other person, who is a member of a professional body which regulates his or her employment or business activities. Except for the Initial Trustees, no Trustee may be a member of Council, and no person may be both a Financial Trustee and a Community Fund Trustee at the same time.

63. The Trust will continue until terminated by a vote of the Members to terminate the Trust in which not less than XXXXXXXXXX % of the Members entitled to vote cast a vote and not less than XXXXXXXXXX % vote to approve the termination of the Trust, provided that Canada has at the date of the vote set land aside as Reserve for XXXXXXXXXX in an amount not less than XXXXXXXXXX % of the XXXXXXXXXX acres of land to which XXXXXXXXXX is entitled under the Treaty Entitlement Agreement.

64. Upon termination of the Trust, the Trust Property then remaining will be transferred to XXXXXXXXXX and will be applied by XXXXXXXXXX as determined by a vote in which not less than XXXXXXXXXX % of the Members entitled to vote cast a vote and not less than XXXXXXXXXX % vote to approve of the application of the Trust Property.

65. The Trust may be amended by Council Resolution to deal with changes in the law applicable to the Trust and provisions which are of an administrative or procedural nature that do not substantially alter the entitlements or obligations of the parties to the Trust Agreement, including the beneficial interest of XXXXXXXXXX . However, no provision of the Trust Agreement may be amended, redrafted or varied in any way that will be inconsistent with Section XXXXXXXXXX of the Treaty Entitlement Agreement.

66. All monies paid to XXXXXXXXXX or deposited in the Implementation Account or the Community Fund Account are not "Indian moneys" as defined in the Indian Act and accordingly, the provisions of the Indian Act pertaining to the management of "Indian moneys" as defined in that Act do not apply to the Total Amount paid to XXXXXXXXXX .

Purposes of the Proposed Transactions

67. The purposes of the Proposed Transactions are to provide for the settlement of the TLE Claim, including the establishment of the Trust for the benefit of XXXXXXXXXX to administer the settlement proceeds and to facilitate the objectives set out in the Trust Agreement.

Rulings given

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions, and purposes of the proposed transactions, and provided further that the proposed transactions are carried out as described above, our Rulings are as follows:

We confirm that

A. XXXXXXXXXX is a public body performing a function of government in Canada pursuant to, and for the purposes of, paragraph 149(1)(c) of the Act. As a consequence, no tax will be payable under Part I of the Act by XXXXXXXXXX on any Primary Income for a Taxation Year of the Trust in any year that is included in XXXXXXXXXX income by virtue of the application of subsection 75(2) or paragraph 12(1)(m) of the Act, or in respect of any other taxable income of XXXXXXXXXX , including the Secondary Income for a Taxation Year of the Trust paid or payable to XXXXXXXXXX .

B. The Total Amount to be paid and contributed by Canada to XXXXXXXXXX for the full settlement of the TLE Claim, as described in paragraph 27 hereof, will not be taxable to XXXXXXXXXX but will be exempt from tax pursuant to paragraph 81(1)(a) of the Act on account of the application of paragraph 87(1)(a) of the Indian Act and pursuant to paragraph 149(1)(c) of the Act.

C. The Trust will be an "inter vivos trust" as defined in subsection 108(1) of the Act.

D. The Trust will be a "personal trust" as defined in subsection 248(1) of the Act.

E. The Trust is described in paragraph (g) of the definition of "trust" in subsection 108(1) of the Act, such that the 21-year deemed disposition rules contained in the Act, including subsections 104(4), (5) and (5.2) of the Act, will not apply to the Trust.

F. Subsection 75(2) of the Act will apply to deem any Primary Income for a Taxation Year of the Trust to be the income or loss, or taxable capital gain and allowable capital loss, as the case may be, of XXXXXXXXXX . Any such Primary Income for a Taxation Year of the Trust will not be included in the computation of the income of the Trust for purposes of Part I of the Act.

G. In computing its Income for a Taxation Year of the Trust, the Trust will be entitled to deduct, pursuant to paragraph 104(6)(b) of the Act, an amount equal to the Secondary Income for that Taxation Year of the Trust.

H. XXXXXXXXXX will not be a "designated beneficiary" of the Trust as defined in section 210 of the Act. As a consequence, the Trust will not be subject to tax under Part XII.2 of the Act provided that the Trust complies with subsection 210.3(1) of the Act.

Nothing in this Advance Income Tax Ruling should be construed as implying that we are ruling on any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the Rulings given above.

The Rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 and are binding on the CRA provided that the proposed transactions are completed within eight (8) months of the date of issuance of the present letter.

Yours truly,

XXXXXXXXXX
Section Manager
For Division Director
International & Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch