3 April 2013 External T.I. 2012-0470921E5 - Multi-tier alignment election and new partnership

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 a new partnership that has as a partner an existing partnership that was subject to a multi-tier alignment election under subsection 249.1(9) can adopt the fiscal period established under the latter provision.

Position: No.

Reasons: Subsection 249.1(9) does not contemplate the subsequent addition of new partnerships.

XXXXXXXXXX
2012-047092
J. Gibbons, CGA

April 3, 2013

Dear XXXXXXXXXX:

Re: Multi-Tier Alignment Election

This is in response to your email dated November 23, 2012, concerning the "multi-tier alignment election" under subsection 249.1(9) of the Income Tax Act (the "Act").

In particular, you described a situation where a new partnership (the "New Partnership") is formed on October 1, 2012, by a partnership (the "Existing Partnership"), which holds a 90% interest, and a corporation, which holds the remaining 10% interest. Since the Existing Partnership is part of a group of multi-tier partnerships (the "Multi-Tier Group") that elected under subsection 249.1(9) of the Act to adopt a May 31 fiscal period end, you wish to know whether the New Partnership can adopt this same fiscal period or whether it must end its fiscal period on December 31 pursuant to paragraph 249.1(1)(c) of the Act.

Our comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Also, where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Nonetheless, we are prepared to offer the following general comments.

In our view, since the New Partnership did not exist at the time of the multi-tier alignment election, subsection 249.1(9) and (10) of the Act cannot apply to it. First, subsection 249.1(9) states that the fiscal period must end before March 22, 2012, a day that predates the creation of the New Partnership. Further, it would not have been possible for a corporation to have had the authority to act for the New Partnership in accordance with the requirement in paragraph 249.1(10)(c) of the Act, since the New Partnership did not exist at the relevant time.

Based on the foregoing, paragraph 249.1(1)(c) of the Act would apply to the New Partnership such that it would be required to end its fiscal period on December 31. As a further consequence, the original Multi-Tier Group would now fail the requirement in paragraph 249.1(9)(a) of the Act since the New Partnership is now part of the Multi-Tier Group that must have coinciding fiscal period ends. As a result, all of the partnerships in the Multi-Tier Group would be required to end their fiscal periods on December 31 pursuant to paragraph 249.1(1)(c) of the Act.

We trust these comments will be of assistance.

Yours truly,

G. Moore
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch