CRA finds that an accrued loss on shares of an LLC can be recognized by converting it to an LP

Headquarters accepted that the conversion of a Delaware LLC into a Delaware LP (under a procedure that looks similar to a continuance) resulted in a disposition of the LLC units (and an acquisition of the new LP units), so that a capital loss was realized by the LLC unitholder for FAPI purposes. Not surprisingly, Headquarters went on to find that the LLC and LP units were not identical property, so that s. 40(3.4) did not apply to suspend the loss.

As in 2004-0104691E5, no comment was made on how the new LP determined the cost of its property.

Neal Armstrong. Summary of 2015-0588791I7 under s. 40(3.3).