30 November 1995 Ruling 9634393 - INCORPORATION OF 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.

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:

Are Class XXXXXXXXXX shares of a XXXXXXXXXX acquired in the ordinary course of business by XXXXXXXXXX?

Position:

No.

Reasons:

Very unusual structure. See orginal ruling letter #953315 and issue sheet as this document reflects changes in facts and time extension of original ruling. Not material to the original issues involved.

XXXXXXXXXX							963439
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Re: Advance Income Tax Ruling #953315 (the "Ruling Letter")
XXXXXXXXXX

This is in reply to your letters dated XXXXXXXXXX, wherein you requested certain changes to the proposed transactions as originally outlined in the above noted Ruling Letter that was issued on XXXXXXXXXX, 1996. You have advised that these changes are the result of

XXXXXXXXXX

You further advise that these changes, while numerous, do not affect the original substance, intent, or our understanding of the proposed transactions as set out in the Ruling Letter and that none of the proposed transactions have been carried out prior to this time.

We confirm that the above noted Ruling Letter is hereby cancelled in its entirety and replaced with the following:

You have advised that to the best of your knowledge and that of all the taxpayers involved, none of the issues raised in this letter are being considered by any Tax Services Office and/or Taxation Centre in connection with any tax return already filed, nor are any of these issues under objection or appeal.

Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (Canada), R.S.C. 1985 (5th Supp.) c.1, as amended from time to time and consolidated to the date of this letter (herein referred to as the "Act").

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is set out as follows:

FACTS

1. XXXXXXXXXX.

2. XXXXXXXXXX.

3. XXXXXXXXXX.

4. XXXXXXXXXX.

5.Both XXXXXXXXXX deal at arms length with XXXXXXXXXX within the meaning of section 251 of the Act.

6. XXXXXXXXXX.

7. XXXXXXXXXX.

8. XXXXXXXXXX.

PROPOSED TRANSACTIONS

9. XXXXXXXXXX.

10. XXXXXXXXXX.

11.The attributes of the Common Shares of XXXXXXXXXX are set forth in the By-laws XXXXXXXXXX the terms of which may be summarized as follows:

(a)XXXXXXXXXX no such share may be issued or transferred to any person without the approval of XXXXXXXXXX Board of Directors (the "Board);

(b)entitled to one (1) vote for each Common Share issued, however, voting must be in accordance with the Voting Agreement (discussed in 29 below);

(c)entitled to receive dividends as and when declared, but subject to the restrictions described in 32(a) below; and

(c)entitled to receive any residual value XXXXXXXXXX on dissolution (see 25 below).

XXXXXXXXXX

XXXXXXXXXX

12. XXXXXXXXXX.

The principal attributes of the Class XXXXXXXXXX Shares are set forth in the By-laws XXXXXXXXXX the terms of which may be summarized as follows:

(a)may only be owned by a Common Shareholder of XXXXXXXXXX (i.e., XXXXXXXXXX);

(b)have no voting rights;

(c)share equally with the Common Shares on dividends and on dissolution (see 32(a) and 25 below); and

(d) XXXXXXXXXX

XXXXXXXXXX

13.The attributes of the Class XXXXXXXXXX Shares of XXXXXXXXXX are set forth in the By-laws XXXXXXXXXX the terms of which may be summarized as follows:

(a)Class XXXXXXXXXX Shares may only be owned

XXXXXXXXXX

(b)entitled to one (1) vote per share but, as is the case with the Common Shares, voting must be in accordance with the Voting Agreement (discussed in 29 below); and

(c)entitled to receive dividends as and when declared by the Board, but subject to the restrictions described in 32(b) below;

(d)entitled to share any residual value XXXXXXXXXX on dissolution with the Common shareholders, however, the Class XXXXXXXXXX shareholders' entitlement is limited to the total amount of their stated capital account and paid as described in 25 below.

XXXXXXXXXX

14. XXXXXXXXXX.

15. XXXXXXXXXX.

XXXXXXXXXX

16. XXXXXXXXXX.

17. XXXXXXXXXX.

XXXXXXXXXX

18.XXXXXXXXXX the Common Shareholders' of XXXXXXXXXX will have the option, at any time, to purchase the Class XXXXXXXXXX Shares from XXXXXXXXXX for their issue price of XXXXXXXXXX plus any declared and unpaid dividends; subject to the following restrictions:

(a) XXXXXXXXXX;

(b)any Class XXXXXXXXXX Shares purchased by a Common Shareholder must be converted to either Common Shares, or Class XXXXXXXXXX Shares, as circumstances may require, and as determined by the board of XXXXXXXXXX. The number of Common Shares, and/or Class XXXXXXXXXX Shares, issued on such conversion depends on the fair value of the Common and/or Class XXXXXXXXXX Shares of XXXXXXXXXX, as the case may be, at that time;

(c) XXXXXXXXXX.

XXXXXXXXXX

19. XXXXXXXXXX.

20. XXXXXXXXXX.

21. XXXXXXXXXX.

22. XXXXXXXXXX.

23. XXXXXXXXXX.

24. XXXXXXXXXX.

25. XXXXXXXXXX.

26. XXXXXXXXXX.

27. XXXXXXXXXX.

28. XXXXXXXXXX.

29.XXXXXXXXXX, each Common Shareholder must execute the Voting Agreement. The principal purposes of the Voting Agreement are:

(a) XXXXXXXXXX

(b) XXXXXXXXXX

(c) XXXXXXXXXX

30. XXXXXXXXXX.

31. XXXXXXXXXX.

32. XXXXXXXXXX.

33. XXXXXXXXXX.

34. XXXXXXXXXX.

35. XXXXXXXXXX.

PURPOSE OF PROPOSED TRANSACTIONS

37. XXXXXXXXXX.

RULINGS GIVEN

Provided the foregoing statements constitute a complete and accurate disclosure of all the relevant facts and proposed transactions, we confirm the following:

A.The Class XXXXXXXXXX Shares of XXXXXXXXXX are "term preferred shares" and "taxable preferred shares" as defined in the respective definitions of those terms in subsection 248(1) of the Act but are not "short term preferred shares" as defined in subsection 248(1) of the Act. However, the Class XXXXXXXXXX Shares of XXXXXXXXXX acquired by XXXXXXXXXX are not considered to be acquired in the ordinary of XXXXXXXXXX business, consequently, any dividends that XXXXXXXXXX receives on the Class XXXXXXXXXX Shares of XXXXXXXXXX that are otherwise be deductible in computing the taxable income of XXXXXXXXXX for the year in which dividends are received, pursuant to subsection 112(1) of the Act, will not be denied by subsection 112(2.1) of the Act.

B.Any dividends that XXXXXXXXXX receives on the Class XXXXXXXXXX Shares of XXXXXXXXXX that are otherwise deductible in computing the taxable income of XXXXXXXXXX for the year in which dividends are received, pursuant to subsection 112(1) of the Act, will not be denied by subsections 112(2.2) or 112(2.4) of the Act, by reason of the Common Shareholders' option to purchase the Class XXXXXXXXXX Shares owned by XXXXXXXXXX, as described in 18 above, or by reason of
XXXXXXXXXX

These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R2, issued on September 28, 1990 (as amended by special release dated September 30, 1992) and are binding on Revenue Canada provided the transactions are carried out by XXXXXXXXXX These rulings are based on the Act in its present form and does not take into account the effect of any proposed amendments.

COMMENTS

XXXXXXXXXX.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate