Income Tax Severed Letters

Principal Issues: 1. Whether limited partners can be reassessed beyond the normal reassessment period for their 2011 taxation year to include any amount in respect of the disposition of their partnership units, given that no determination of the partnership was made for 2011 under subsection 152(1.4), and 2011 was also not part of the period discussed in the Minutes of Settlement.
2. If the 2011 reassessments of the limited partners are permitted, whether the Minister authorized to reassess the entire capital gain, or the authority of paragraph 152(1.7)(b) is limited to a consequential adjustment of the increased gain resulting from the increased losses redetermined over the 2001 to 2010 taxation years of the limited partners.

Position: 1. Yes.
2. The full capital gain may be (re)assessed.

Reasons: 1. In our view, subsection 152(1.4) authorizes the Minister to determine the correct ACB per LP unit of a member of LP, as it is an amount that is relevant in determining the taxable income of a member of LP for “any taxation year,” including the year in which the member realizes a taxable capital gain (or deemed taxable capital gain) with respect to their interest in LP.
2. Given that the redetermination issued to the partnership under subsection 152(1.4) encompasses a redetermination of the ACB of a unit of the partnership, and a member’s revised at-risk amount includes the initial capital contributed by the member, it is our view that it is reasonable to conclude that the Minister has the authority under paragraph 152(1.7)(b) to (re)assess the entire taxable capital gain in 2011, calculated in accordance with the Act.