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: Does clause 110.6(14)(f)(ii)(B) apply to a partial disposition of an interest in a partnership?
Position: Yes.
Reasons: The person is still disposing of an interest in a partnership.
2004-010176
XXXXXXXXXX Karen Power, CA
(613) 957-8953
March 21, 2005
Dear XXXXXXXXXX:
Re: Clause 110.6(14)(f)(ii)(B)
We are writing in reply to your email of November 4, 2004, requesting our comments on the interpretation of clause 110.6(14)(f)(ii)(B) of the Income Tax Act (the "Act").
Written confirmation of the tax implications applicable to particular transactions is given by this Directorate only if the transactions are proposed and are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5. However, we are prepared to offer the following general comments.
Paragraph 110.6(14)(f) of the Act provides that shares issued by a corporation after June 13, 1988 are deemed to have been owned immediately before their issue by a person not related to the person or partnership to whom the shares were issued, unless the shares were issued in specific circumstances described therein. Subparagraph 110.6(14)(f)(ii) provides in part that shares issued "as part of a transaction or series of transactions in which the person ..... disposed of property to the corporation that consisted of ...(B) an interest in a partnership all or substantially all the assets of which were used in an active business carried on by the members of the partnership" are not subject to this deeming rule.
In the situation that you describe, we would agree that clause 110.6(14)(f)(ii)(B) of the Act could apply to shares issued as part of a transaction or series of transactions in which a person disposes of a portion of their partnership interest to a corporation, provided that all or substantially all the partnership's assets are used in an active business carried on by the members of the partnership.
We trust that our comments are of assistance to you.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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