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: Where subsection 98(5) applies on the transfer of all of the property of a partnership to one of the partners, it is not clear whether subsection 13(21.2) would apply.
Position: Question of fact, but no in the circumstances.
Reasons: Although there is no specific rule in the Act that provides an exception to the application of subsection 13(21.2) in the case of a rollover under subsection 98(5), this provision would not apply to the particular circumstances set out in the ruling.
XXXXXXXXXX 2009-034730
XXXXXXXXXX , 2010
Dear XXXXXXXXXX :
Re: Advance Income Tax Ruling
XXXXXXXXXX (the "Limited Partnership")
and XXXXXXXXXX ("LPCo")
We are writing in response to your letter of XXXXXXXXXX , in which you requested an advance income tax ruling on behalf of the Limited Partnership and LPCo (collectively the "Taxpayers"). We also acknowledge the information provided in various emails and telephone conversations (XXXXXXXXXX ).
To the best of your knowledge and that of the Taxpayers, none of the issues involved in the ruling request is:
i. in an earlier return of one of the Taxpayers or a related person;
ii. being considered by a tax services office or a tax centre in connection with a tax return already filed by one of the Taxpayers or a related person;
iii. under objection by one of the Taxpayers or a related person;
iv. before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; and
v. the subject of a ruling previously issued by the Directorate to one of the Taxpayers or a related person.
Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definitions unless otherwise indicated.
Our understanding of the facts, the proposed transactions and the purpose of the proposed transactions is as follows:
Definitions
The following definitions have been used in this letter:
(a) "ACB" means "adjusted cost base" as defined under section 54 of the Act;
(b) "CCPC" means a "Canadian-controlled private corporation" as defined under subsection 125(7) of the Act;
(c) "CRA" refers to the Canada Revenue Agency;
(d) "Debt" refers to the amount owing from the Limited Partnership to LPCo;
(e) "GPCo" refers to XXXXXXXXXX ., which is the general partner of Limited Partnership;
(f) "Income" refers to the Partnership's income or loss for a particular Taxation Year as computed under subsection 96(1) of the Act;
(g) "LP Units" refers to the limited partnership units in Limited Partnership;
(h) "Province" means the Province of XXXXXXXXXX ;
(i) "Related Persons" has the meaning assigned by subsection 251(2) of the Act;
(j) "TCC" refers to a "taxable Canadian corporation" as defined under subsection 89(1) of the Act;
(k) "Taxation Year" means the Partnership's taxation year for income tax purposes which is defined in paragraph 96(1)(b) of the Act as the Partnership's fiscal period; and
(l) "UCC" refers to the "undepreciated capital cost" as defined in subsection 13(21) of the Act.
Facts
1. The Limited Partnership is a XXXXXXXXXX limited partnership that carries on business in the Province. It has one limited partner, LPCo, and one general partner, GPCo. Its address is XXXXXXXXXX .
2. The information returns for the Limited Partnership and the T2 corporation income tax returns for LPCo are filed with the XXXXXXXXXX Tax Centre, and the Taxpayers deal with the XXXXXXXXXX Tax Services Office.
3. The Taxpayers have Taxation Years that end XXXXXXXXXX .
4. LPCo and the GPCo hold respectively XXXXXXXXXX % (XXXXXXXXXX units) and XXXXXXXXXX % (XXXXXXXXXX units) of the LP Units.
5. GPCo is a wholly owned subsidiary of LPCo and has no other assets other than XXXXXXXXXX units of Limited Partnership.
6. Limited Partnership owns a large number of depreciable assets which have been included in different classes on its capital cost allowance schedule (T5013 SCH 8).
7. On XXXXXXXXXX , the amount of the Debt owing to LPCo by the Limited Partnership was $XXXXXXXXXX .
Proposed Transactions
8. The Debt will be converted into LP Units.
9. GPCo will be wound up into LPCo pursuant to subsection 88(1) of the Act.
10. Immediately after the wind-up in paragraph 9 above, Limited Partnership will be dissolved and all of its property and liabilities will be distributed to LPCo, its only remaining partner, which will continue to carry on the business that was carried on by the Limited Partnership using the property that was the property of Limited Partnership immediately before the Limited Partnership ceased to exist. These transactions will be governed by subsection 98(5) of the Act.
Purpose of the Proposed Transactions
The purpose of the proposed transactions is to simplify the corporate structure and to merge all of the activities of LPCo and the Limited Partnership into one entity without incurring any immediate income tax consequences, including any reduction to the UCC of the property currently held by Limited Partnership.
Ruling Provided
Provided that
(a) the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and the purposes of the proposed transactions,
(b) the proposed transactions are completed in the manner described above, and
(c) there are no other transactions which may be relevant to the rulings requested,
we rule that subsection 13(21.2) of the Act will not apply to the disposition of Limited Partnership's property to LPCo as described in paragraph 10 above.
This ruling is given subject to the limitations and qualifications set out in Information Circular 70-6R5 issued by the CRA on May 17, 2002, and are binding on the CRA provided that the proposed transactions are implemented on or before XXXXXXXXXX . This ruling is based on the Act in its present form and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.
Nothing in this letter should be construed as implying that the CRA has agreed to or accepted any of the tax consequences relating to the facts and proposed transactions described above except as expressly stated in the ruling. In particular, nothing in this letter should be interpreted as confirming, either expressly or implicitly, that the CRA has agreed to or accepted the fair market value or reasonableness of any amounts, including the fair market value of the Debt, whether the Limited Partnership is a partnership or a limited partnership at law, and whether the Debt is on account of capital or income.
Yours truly,
XXXXXXXXXX
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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