14 February 1990 Ministerial Correspondence 59394 F - Partnership Capital Gains

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.

February 14, 1990

Dear Sirs:

Re:  Partnership Capital Gains Section 110.6 of the Income Tax Act (Canada) (the "Act")

This is in reply to your letter of January 9, 1990 in which you requested our views as to whether capital gains realized by a partnership and allocated to partners who are individuals resident in Canada are eligible for the deduction in section 110.6 of the Act (the "capital gains exemption").

Your concern is that in these circumstances it would be the partnership and not the individual partner who would dispose of property as appears to be required under, for example, subsection 110.6(3) of the Act.  Furthermore, you note that draft proposed amendments to the Act released April 13, 1988 proposed to deem, for purposes of section 110.6, a partner to have disposed of property where a partnership allocated a capital gain to him. Such proposed amendment was never adopted.

Opinions

In our view, where a partnership allocates a capital gain to a partner, the partner is not precluded from claiming the capital gains exemption solely by virtue of the fact that there is no provision in the Act which deems the partner to have disposed of property in respect of the gain so allocated to him.  This view is supported by the existence of subsection 110.6(11) which expressly contemplates that capital gains allocated by a partnership to an individual partner may be eligible for the capital gains exemption.  The eligibility of the individual partner to claim the capital gains exemption in respect of the gain will be determined by the specific provisions of section 110.6, including subsection 110.6(11).

In accordance with the paragraph 24 of Information Circular 70-6R, the above comments are only expressions of opinion and are not binding on Revenue Canada, Taxation.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch