21 September 2004 Internal T.I. 2004-0076591I7 - At-risk amount

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.

Principal Issues: Whether at-risk amount can be claimed as an income or capital loss by limited partner in final year of the partnership.

Position: Neither.

Reasons: No provision in the Act to allow such a deduction.

ITA REFERENCE: 96(2.2); 96(2.1); 127(8.1); 66.8(1)
HAA: 8074-5
SECURITY: For distribution

		September 21, 2004

	Toronto Call Centre	HEADQUARTERS
	Toronto Centre Taxation Services Office	B.G. Dodd
(613) 957-8954

Mr. Andrew Wicherkiewicz, RO, Team Quebec

		2004-007659

Limited Partner's At-risk Amount

We are writing in reply to your facsimile transmission of May 14, 2004 concerning the treatment of a limited partner's at-risk amount as reported on form T5013.

In particular, you enquire whether the amount reported in box 45 of form T5013 ("Limited partner's at-risk amount") may be claimed by the limited partner as an income loss rather than a capital loss given that the information reported on the T5013 reflects the final year of the limited partnership in question.

Our Comments

The "at-risk amount" is defined in subsection 96(2.2) of the Income Tax Act (the Act"). It is used, for example, in subsection 96(2.1) of the Act to restrict the amount that a limited partner may deduct in respect of limited partnership losses from a business or property. The at-risk amount is similarly used in subsection 127(8.1) of the Act to restrict the amount of investment tax credit that a limited partner may claim. However, the at-risk amount itself is not deductible by a limited partner as any form of loss.

As a general matter, where an interest in a partnership is held as a capital property, its disposition may give rise to a capital gain or loss. This would be computed with reference to the adjusted cost base of the partnership interest. Various other provisions of the Act, such as subsections 98(1) and 100(2), may also be relevant. More definitive comments would necessitate a review of all the relevant facts.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you from Mrs. Jackie Page at (819) 994-2898, who will send the severed copy to you for delivery to the client.

We hope this will be of assistance.

Wayne Antle, CGA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch