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.
Q.19 Section 80 - Application to Partnerships
It appears that the Department considers a partnership to be a taxpayer for the purposes of section 80 given the Department's comments in paragraph 17 of Interpretation Bulletin IT-138R and its responses to Questions 14 and 9 raised, respectively, at the 1988 Canadian Tax Foundation Conference and the 1989 Corporate Management Tax Conference round table sessions. Is it the Department's view that section 80 will apply to reduce the losses of a general partner where the debts of a partnership have been settled given that under the partnership laws of most jurisdictions a general partner is jointly and severally liable for all debts and obligations of the partnership?
Department's Position
It is the Department's view that the provisions of section 80 will only apply to a partnership and not to its partners in situations where the partnership settles a partnership debt for less than the amount of the obligation notwithstanding that a general partner may also be liable for that debt. As indicated in paragraph 17 of IT-138R, a partnership's gain on the settlement of debts within the meaning of section 80 is to be applied to reduce, as prescribed by regulation 5400, the partnership's capital cost of depreciable property and adjusted cost base of capital property. If any part of the gain remains, there are no provisions in the Act that specifically deal with the treatment of that excess. However, it is possible that either the general anti-avoidance rule in subsection 245(2) or subsection 246(1) regarding benefits conferred on a person may have application depending on the circumstances.
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