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: Use of limited partnership losses in a tiered partnership situation.
Position: Allocation of losses of bottom partnership unavailable to members of top partnership.
Reasons: (Same as 2004-006280) Subsection 102(2) deems the top partnership to be a taxpayer only for purposes of division j and therefore any loss of the bottom tier could not be a carry forward loss of the top tier.
XXXXXXXXXX 2004-010798
Shaun Harkin, CMA
February 25, 2005
Dear XXXXXXXXXX:
Re: Technical Interpretation Request: Limited Partnership Loss
We are writing in reply to your letter of December 9, 2004, concerning the deductibility of limited partnership losses ("LPL") in a multi-tiered partnership arrangement. It is your view that the LPL of a partnership that is a member of a limited partnership is not deductible from its income but rather is allocated to the members of the partnership.
Our Comments
Since a partnership is not a taxpayer for purposes of paragraph 111(1)(e) of the Income Tax Act (the "Act"), we agree with your view that the LPL of a partnership that is a member of a limited partnership cannot be used by the partnership. However, we do not agree that this LPL is allocated to the members of the partnership.
It is our view that the losses allocated by a limited partnership to each of its members, including another partnership (as a result of subsection 102(2) of the Act), will be deductible by each member, to a maximum of each member's (including the member partnership's) at-risk amount. The excess of the loss over the member's at-risk amount is deemed to be a member's LPL by virtue of paragraph 96(2.1)(e) of the Act. However, this LPL cannot be used by the member partnership because a partnership is not a taxpayer for purposes of paragraph 111(1)(e) of the Act. Also, subsection 96(1) of the Act does not allow the transfer of a LPL to its members.
The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency. Our practice is to make this disclaimer in all instances in which we provide an opinion.
We trust the above comments are of assistance.
Yours truly,
Wayne Antle, CGA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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