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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether an election under subsection 97(2) of the Income Tax Act would be available in respect of the exchange of limited partnership units for general partnership units of the same partnership.
Position: Depends on whether there is a disposition of the limited partnership units to the partnership.
Reasons: Question of fact and of law.
XXXXXXXXXX 2002-018000
J. Gibbons, CGA
March 21, 2003
Dear XXXXXXXXXX:
We are replying to your letter of December 16, 2002, in which you requested our views concerning the exchange of limited partnership units ("LP Units") for general partnership units ("GP Units") of the same partnership. Specifically, you asked if an election under subsection 97(2) of the Income Tax Act (Canada) (the "Act") would be available in this situation.
In your letter, you asked us to assume that the exchange of units is undertaken for business reasons and that there would be no resulting change in the fair market value of any partner's interest. Further, you asked us to assume that the limited partners deal with each other at arm's length.
Our comments are of a general nature only since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular IC 70-6R5.
An election under subsection 97(2) is available when a taxpayer disposes of certain property to a partnership that is, immediately thereafter, a Canadian partnership of which the taxpayer is a member. In the circumstances described in your letter, a subsection 97(2) election will be available if, as a result of the exchange, there is a disposition of the LP Units to the partnership. Assuming that a disposition occurs, we would be prepared to accept that the LP Units were disposed of to the partnership for the purpose of applying subsection 97(2).
We trust that these comments will be of assistance.
Yours truly,
Daryl Boychuk, LL.B.
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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