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.
922300
F.B. Fontaine
24(1) (613) 957-4364
Attention: 19(1)
October 30, 1992
Dear Sirs:
Re: Capital Gains Reserve
This is in reply to your letter dated July 29, 1992 concerning whether a member of a partnership can continue to claim a reserve under subparagraph 40(1)(a)(iii) of the Income Tax Act (the "Act") after wind-up of the partnership under subsection 98(3) of the Act (including those years where a reserve was claimed by the partnership).
Based on the Department's comments in paragraph 21 of Information Circular 70-6R2 regarding requests in respect of a contemplated or completed transaction, we are prepared to offer the following general comments:
Where a partnership is wound up under subsection 98(3) of the Act, it is our administrative practice to allow a reserve pursuant to subparagraph 40(1)(a)(iii) (subject to the limitations of subsection 40(2) of the Act) to be
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claimed by a former member in respect of an interest in an outstanding debt receivable that the member received in consideration for the member's partnership interest. A claim for such a reserve can only be made in respect of each former member's pro-rata share of the gain included in the partnership by virtue of subparagraph 40(1)(a)(ii) which is not due until after the deemed end of the fiscal period of the partnership and to the extent that the partnership would have been entitled to deduct the reserve had the winding-up not occurred.
These comments represent our opinion of the law as it applies generally and, accordingly, are not binding on the Department.
Yours truly,
for Director
Manufacturing Industries,
Partnerships and Trusts Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1992
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© Sa Majesté la Reine du Chef du Canada, 1992
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