CRA confirms that the ACB increase under s. 53(1)(e)(vi) for a negative ACB gain does not occur until immediately after rather than at the partnership year end

2009-0349911E5 dealt with a limited partnership (“LP”) which, in February 2008, realized a capital gain, of which $100,000 was allocable to a limited partner, whose interest had an ACB at the beginning of the (calendar) 2008 fiscal period of LP of $10,000. $100,000 was withdrawn by the limited partner in March 2008, producing a negative ACB gain of $90,000. CRA indicated that this negative ACB gain was added back to that negative ACB, so as to increase it to nil “as at December 31, 2008”, and that the capital gain allocated to the limited partner increased the ACB of its interest to $100,000 on January 1, 2009.

When now asked about this, CRA effectively acknowledged that the quoted date of the ACB increase pursuant to s. 53(1)(e)(vi) was incorrect, and that “the addition of $90,000 under subparagraph 53(1)(e)(vi) should be made on January 1, 2009.” (Otherwise, there presumably would be circularity issues, since the negative ACB gain under s. 40(3.1) is triggered as at the fiscal period year end.)

Neal Armstrong. Summary of 5 August 2024 External T.I. 2024-1031811E5 under s. 53(1)(e)(vi).