27 March 1992 Income Tax Severed Letter 9205705 - CCA Claims - Foreign 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Subject: CCA CLAIMS BY FOREIGN PARTNERSHIP Section(s): REG 1100(12), 245(2)]

March 27, 1992

ISSUE SHEET

XXX John Chan 5-920570 March 27, 1992

This enquiry involved 2 issues pertaining to a fact situation. Our response is in the form of general comments only.

The first issue is whether a corporate partner, whose only asset is an interest in a partnership which owns a U.S. rental building, would meet the requirements of Regulation 1100(12)(a) as a corporation whose principal business was, inter alia, rental of real property owned by it. This is necessary in order for the partnership to fall within the exception provided to partnerships at Reg. 1100(12)(b) from the restriction in Reg. 1100(11), i.e., the restriction that CCA on rental properties cannot be used to create or increase a rental loss. This issue has been the subject of several enquiries in the past and our answer is accordingly being given in the affirmative.

Ref: - August 17, 1988 letter to XXX (file # 5-6101). - May 27, 1988 letter to XXX (file # 5-5667). - October 20, 1987 letter XXX (file # 5-3691).

XXX explained during telephone conversations that the second issue illustrated by the calculation of CCA in their February 18, 1992 letter is to clarify whether the corporate partner would claim CCA on the U.S. rental building on its pro rata share of the cost of the building or whether it is the partnership that claims the CCA. In this regard, it has always been the Department's position that it is the partnership, not the partner, which claims CCA on depreciable property owned by the partnership. There is no provision in the Act or the Regulations which permits a partner to claim CCA on partnership property.

Ref.: - May 21, 1991 memo by Cal Brown to North York DO (file # 910870). - March 6, 1991 memo by G. Arsenault to Tax Avoidance, H.O. (file # 902789). - April 6, 1989 letter by O. Laurikainen to XXX (file # 5-6376).

XXX

Applicability of GAAR to the above concern was addressed by G. Arsenault in a memo dated March 6, 1991 to Head Office Tax Avoidance (file # 902789). He wrote that it would be a question of fact whether a partner became a partner in the foreign partnership primarily to claim losses created by CCA of the partnership, XXX

He also stated that it is not readily apparent that any of the provisions of the Act relating to CCA are being misused or abused because IT-205, inter alias, suggests that the CCA claims in these cases are in accordance with the provisions of the Act.

XXX