Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: 1) Amendment to proposed transactions describing residence of general partner, types of limited partners, fuller description of management fees, and to amend rulings to confirm description in partnership agreement of limited partners' interests comply with Regulations and agreement as a whole does not contravene specific provisions in Regulation. 2) Can we rule that the terms of a partnership, as set out in a draft agreement, comply with the definition of "qualified limited partnership" in subsection 5000(7) of the Regulations?
Position: 1) Amendments to proposed transactions and rulings provided; 2) No.
Reasons:1) Amendments do not affect prior rulings and amendment to rulings can be provided vis-a-vis particular tax concern with specific provision; 2) A ruling will only be given on the terms of an agreement that causes a particular tax concern vis-a-vis a specific part of the definition in Regulation 5000(7).
XXXXXXXXXX
XXXXXXXXXX 2000-000628
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear Sirs:
Re: XXXXXXXXXX
Advance Income Tax Ruling 1999-000857, dated XXXXXXXXXX, 2000
This is in reply to your facsimiles of XXXXXXXXXX, wherein you requested an amendment to certain of the proposed transactions and an existing ruling described in the above-referenced Advance Income Tax Ruling (hereinafter referred to as the "Ruling Letter") and that additional rulings be added to the Ruling Letter. You have confirmed that the XXXXXXXXXX has not been established.
Any reference herein to paragraphs or rulings are references to those contained in the Ruling Letter and any defined terms used in the letter have the meanings assigned to them in the Ruling Letter.
The Ruling Letter is hereby amended as follows:
1. The reference in 4 to "XXXXXXXXXX" is hereby deleted and replaced by "province of XXXXXXXXXX".
2. The last sentence in 4 is hereby deleted and replaced by:
"These other limited partners will consist of a number of the Corporation's executives (or individuals that are related to the particular executive), who will invest in the Partnership personally, through wholly-owned taxable Canadian corporations incorporated for this purpose or through Canadian resident family trusts established for this purpose. The beneficiaries of any such Canadian resident family trusts will be an executive and/or related individuals ."
3. All of 11 is hereby deleted and replaced by:
"11. The General Partner will be responsible for managing the Partnership as described in the Partnership Agreement. As such, the General Partner will receive the following annual management fee, computed inclusive of GST, from the Partnership (the "Management Fee"):
(a) initially, XXXXXXXXXX% of Contributed Capital until the earlier of (i) the end of XXXXXXXXXX years after the initial closing of the Partnership, and (ii) when XXXXXXXXXX% of the capital has been invested or has been reserved for the investments in Investees, operating and organization expenses or Management Fees of the Partnership;
(b) thereafter, if (a)(ii) above applies and until the end of XXXXXXXXXX years after the initial closing of the Partnership, XXXXXXXXXX% of the aggregate cost basis of the investments held by the Partnership, to the extent that such investments have not been written-off; and
(c) thereafter, or if (a)(i) above applies, XXXXXXXXXX% of the aggregate cost basis of the investments held by the Partnership, to the extent that such investments have not been written-off.
Such Management Fee will be reduced by XXXXXXXXXX% of (i) any transaction, directors', consulting and closing fees paid to the General Partner by an Investee in connection with the Partnership's investment in such company; and (ii) any break-up fees paid to the General Partner in connection with the Partnership's unconsummated transactions.
The General Partner will be entitled to engage, on behalf of the Partnership, XXXXXXXXXX to perform certain of the management and administrative functions on reasonable terms and conditions, provided that any fees paid to XXXXXXXXXX (the "XXXXXXXXXX Fee") shall reduce the Management Fee payable to the General Partner as described above."
4. The references to "the Management Fee" in ruling B are hereby deleted and replaced by "each of the Management Fee and the XXXXXXXXXX Fee".
The following rulings are added to the Ruling Letter:
C. The terms of the Draft Agreement will not cause the Partnership to contravene the condition described in paragraph 5000(7)(d) of the definition of "qualified limited partnership" that the interests of limited partners are described by reference to units of the partnership that are identical in all respects.
D. The terms of the Draft Agreement will not cause the Partnership to contravene the conditions described in paragraphs 5000(7)(a), (b) and (c) of the definition of "qualified limited partnership".
The Ruling Letter is also amended by adding the following sentence immediately after the rulings:
"The above rulings are given subject to the general limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996, and are binding on the Canada Customs and Revenue Agency provided that the Partnership is established on or before XXXXXXXXXX."
Notwithstanding the above changes, we confirm that, subject to the conditions set out in the Ruling Letter as amended herein, rulings C and D above will be binding on the Canada Customs and Revenue Agency in accordance with the practice outlined in Information Circular 70-6R3, dated December 30, 1996, provided the Partnership is established on or before XXXXXXXXXX.
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy & Legislation Branch
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