3 June 1992 Administrative Letter 9216226 F - Film 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.

June 3, 1992

Vancouver District OfficeManufacturing IndustriesTax Avoidance DivisionPartnerships & Trusts Division

R. Herrewynen

Attention: Mr. M. Amlani

Section 145-12      24(1)

Matching Principle of Income and Expenses

This is in reply to your facsimile dated May 27, 1992 wherein you requested that we confirm the Department's existing policy regarding certain financing arrangements, such as the one mentioned above, in which a limited partnership enters into an arrangement with another taxpayer whereby the limited partnership agrees to pay certain of the other taxpayer's expenses and claims a deduction for them in the year of the payment.

As mentioned during our recent telephone conversation (Herrewynen/Ton-That), the Department's announcement at the Annual Conference of the Canadian Tax Foundation on November 27, 1991 stated that favourable rulings would no longer be given with respect to such scheme. As a result, such limited partnerships must now follow the matching principle of recording their income and expenses. 

Prior to this announcement, the Department had not completed its thorough review of these schemes and, as such, rulings received or transactions entered into prior to November 27, 1991 are not to be affected by this announcement.

In closing, we would mention that the revenue guarantee that is excluded from the reduction of the at-risk amount to the limited partners under subparagraph 96(2.2)(d)(ii) of the Income Tax Act (the "Act") apply only to prescribed revenue guarantee in respect of a prescribed film production.  The meaning of "prescribed revenue guarantee" and "prescribed film production" are provided by Regulation 7500 of the Act. As a result, you may want to verify if this exclusion is applicable to your situation.

for DirectorManufacturing Industries,Partnerships and Trusts DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch