19 July 2000 General Information Letter 31839 - GENERAL INFORMATION LETTER Conversion of a General Partnership to a Limited Partnership

Dear XXXXX:

Thank you for your letter of September 17, 1999 (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the subject outlined above. We apologize for the delay in our response.

In your correspondence, you state that Question 30 of the Revenue Canada Round Table 1990 Canadian Tax Foundation Annual Conference outlined Revenue Canada's position that in certain situations (i.e. where there is no significant change in the rights and obligations of the partners other than potential liability, and where the provincial law governing the partnership cannot cause a dissolution of the general partnership when there is a conversion), the conversion of a general partnership to a limited partnership would not result in a disposition of the partnership interests by the partners (for purposes of the Income Tax Act).

You would like to receive confirmation that the limited partnership arising from such a conversion will be treated as the same employer for Canada Pension Plan and Employment Insurance purposes and as the same registrant for GST/HST purposes. In other words, where the conditions for such a conversion are met for income tax purposes, you wish to know whether the limited partnership may continue to use the same source deductions account number and the same GST/HST registration number.

It is our understanding that the Canada Pension Plan and Employment Insurance portion of your inquiry has been responded to under separate cover by the CPP/EI Eligibility Division of the Revenue Collections Directorate. As such, we will not address this portion of your inquiry.

During the course of our July 14, 2000, telephone conversation, it was clarified that you were seeking information with respect to "conversions" in general, and that the term "conversion" was used loosely in your correspondence to refer to any number of potential situations, events, transactions, or series of events/transactions. Such "conversions" might include, but would not be limited to partnership reorganizations.

Given the very general and broad nature of your inquiry, and given that no facts or analysis have been submitted for review, we are unable to provide a definitive response.

It is our view that in certain situations, a limited partnership arising from the "conversion" of a general partnership might continue to be treated as the same registrant for GST/HST purposes. Such a result is entirely dependent on the circumstances of the particular "conversion" and any such determination would need to be established on a case by case basis. An example of where a "conversion" might render this registration result would be in circumstances where the requirements of subsection 272.1(7) of the Excise Tax Act are met. Where the requirements of this provision are met, a new limited partnership would be deemed to be the continuation of and the same person as the former general partnership and would therefore be permitted to retain the general partnership's GST/HST registration number.

Given the broad nature of the "conversions" to which you have referred, it should be noted that not all "conversions" will permit the retention of the general partnership's GST/HST registration number. As discussed with you, certain reorganizations would not permit the limited partnership to retain the general partnership's registration number as the reorganization requires the simultaneous existence and registration of both partnerships, (e.g., a rollover of partnership property from a general partnership directly to the limited partnership in exchange for an undivided interest in the limited partnership, with the subsequent dissolution of the general partnership and the concurrent distribution of the undivided interest in the limited partnership to the members of the general partnership in exchange for their undivided interest in the general partnership).

In addition, a number of "conversions" may in fact generate GST/HST consequences above and beyond the need for the limited partnership to register separately from the predecessor general partnership. Such tax consequences might include the obligation to charge and remit tax on supplies made during the course of the "conversion" (e.g. tax on property distributed by the general partnership to its members in return for their interest in the general partnership).

We would be pleased to examine this issue further, in the context of a GST/HST interpretation or ruling request, should you wish to submit additional information, documentation and supporting analysis. For your convenience, please find enclosed a copy of Section 1.4 of Chapter 1 of the GST/HST Memoranda Series, which outlines the CCRA's policy with respect to the provision of GST/HST interpretations and rulings.

Should you have any further questions, please do not hesitate to contact me at 952-3413.

Yours truly,

Philippe Nault
Senior Technical Analyst
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate