Interpretation Bulletin IT-413R, Election by Members of a Partnership under subsection 97(2), July 7,1989

Transferor taxpayer may itself be a partnership

3. Where the "taxpayer" referred to in subsection 97(2) that disposes of property to a partnership is itself a partnership (the first partnership), that part of the joint election required by subsection 97(2) to be made by the "taxpayer" must be made or executed by a member of that first partnership on behalf of all members of that first partnership, including the member making or executing the election and the member who makes or executes the election must have authority to act on behalf of the members of that partnership.

S. 102(2) is for greater certainty

1. Paragraph 102(b) clarifies that the rules in subdivision j (sections 96 to 103) apply to a partnership which is a member of another partnership. Although paragraph 102(b) applies after February 25, 1986 its enactment merely recognizes the Department's previous position in respect of subdivision j and does not involve a change in that position.

Handling of election in 2-tier structures

2. Paragraph 96(3)(a) provides that where a person who is a member of a partnership has made an election under subsection 97(2), the election is not valid unless it was made or executed on behalf of that person and each other person who was a member of the partnership and that person had authority to act for the partnership. Where a partnership disposes of property which is the subject of an election under subsection 97(2), the manner in which the requirements of paragraph 96(3)(a) apply to the part of the joint election to be made on behalf of the members of the disposing partnership is discussed in 3 below. Where a partnership is a member of another partnership which acquires property that is the subject of an election under subsection 97(2), the manner in which the requirements of paragraph 96(3)(a) apply to the part of the joint election to be made on behalf of the members of the acquiring partnership is discussed in 4 below.

3. Where the "taxpayer" referred to in subsection 97(2) that disposes of property to a partnership is itself a partnership (the first partnership), that part of the joint election required by subsection 97(2) to be made by the "taxpayer" must be made or executed by a member of that first partnership on behalf of all members of that first partnership, including the member making or executing the election and the member who makes or executes the election must have authority to act on behalf of the members of that partnership.

4. Generally, that part of the joint election in respect of all other members of the partnership that is acquiring the property must be made by a member of that partnership on behalf of that member and of each other person who was a member of the partnership and that member must have the authority to act for the partnership. In a situation where a partnership (the first partnership) is a member of the partnership (the second partnership) that is acquiring the property, that part of the joint election required by subsection 97(2) to be made by "all other members of the partnership" must be made or executed by a member of the second partnership on behalf of each member of the first partnership and each member of the second partnership, including the member making or executing the election and the member making or executing the election must have the authority to act on behalf of the members of the first partnership as well as on behalf of the members of the second partnership.