Creation of 2-tier partnership structure before v. after acquisition of control (p. 14)
Interestingly, if the tiered partnership structure in Devon Canada [2013 TCC 415] had been in place at the time of the acquisition of control, the lookthrough rules would not have applied and Home Oil would have been unable to deduct its successored pools. This result follows because paragraph 66.7(10)(j) applies only if at the time of the acquisition of control "the corporation was a member of a partnership that owned [resource property]." That condition is apparently satisfied only if the corporation was a direct member of the partnership that held the resource property when control was acquired.
Transfer of successored property to a partnership (pp. 14-5)
It is also interesting that the Crown did not argue subsection 66.7(16) [in Devon, 2013 TCC 415]… .
In the past, the CRA has not denied the ability of a successor corporation to deduct successored pools if it transferred successored property to a partnership of which it was a member (a transfer to which the successor rules do not apply). The CRA has said that this situation is unique: "[I]n most cases, subsection 66.7(16) will operate to deny a successor corporation the use of its successor pools following a disposition of the particular property that gave rise to those pools" (2006-0169051I7, October 10, 2006). But the CRA's comments on subsection 66.7(16) do not accurately describe its operation, and the Crown would not have prevailed if it had argued that provision in Devon Canada. Subsection 66.7(16) could have applied only if the Devon partnership was a person for the purposes of the provision, and that does not appear to be the case. Even if the Devon partnership was a person (perhaps because of subsection 66(16)), Home Oil's deduction from its successored pools would not be denied: subsection 66.7(16) is relevant only to the acquiror (the Devon partnership), not to the successor corporation (Home Oil). Thus, even if the Crown in Devon Canada had argued subsection 66.7(16), that provision should not have operated to deny Home Oil's successor pool deductions.
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