CRA rules on transferring already-earned profits to an affiliate through use of a partnership

It may be possible to transfer profits which already have been earned to a Lossco in the same group in order to access Lossco’s non-capital losses. CRA has ruled on a transaction in which (to simplify somewhat) the units of an LP which already has earned profits for the year will be transferred to the Lossco before the fiscal year end of the LP – so that most of those LP profits will be allocated to Lossco. The partnership agreement for LP will be amended "to clarify that it allocates its income for income tax purposes only to those partners that are partners at the end of its fiscal period."

Neal Armstrong. Summaries of 2014 Ruling 2013-0516071R3 under s. 111(1)(a), s. 34.2(14) and s. 96(1)(f).