25 January 1993 Income Tax Severed Letter 923385A - Loss Transfer to a 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.

923385
XXXXXXXXXX W.P. Guglich
(613) 957-2102

Attention: XXXXXXXXXX

January 25, 1993

Dear Sirs:

Re: Loss Transfer to a Partnership

This is in reply to your letter of November 9, 1992 wherein you request our views regarding the transfer of a loss business to a partnership.

Question No. 1

A loss corporation transfers all its existing business to a partnership of which it is a general partner. The partnership will acquire no other assets, except for cash, from the other partners. Would the loss corporation, as partner, be considered to be carrying on "that business" carried on by the partnership for purposes of subsection 111(5) of the Act?

It is your view that the partner would be considered to be carrying on "that business" carried on by the partnership.

Question 2

Does it make any difference if, in Question No. 1, the loss corporation was a limited rather than a general partner of the partnership?

It is your view that the limited partner would still be considered to be carrying on the business of the partnership. Our Views

The Department's views regarding this issue are described in Question # 37 of the Revenue Canada Round Table at the 1989 CTF Conference wherein we stated:

• "It is our view that a corporate partner would normally be carrying on the business carried on by a partnership. However, the addition of other assets upon the introduction of other partners may result in a different business being carried on by the partnership. Also, as discussed in paragraph 8 of Information Circular 88-2 (dated October 21, 1988), subsection 245(2) may have application depending on the facts and circumstances of a particular situation."

The above comments would apply to both general and limited partners.

The foregoing comments represent our general views with respect to the subject matter of your letter. The facts of a particular situation may lead to different conclusions. The foregoing opinions are not rulings and, in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.

Yours truly,

R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch