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.
Revenue Canada Round Table
Institute of Chartered Accountants of Alberta
May 12, 1994
Question No. 18
PARTNERSHIPS
Consider the following situation: all of the partners to a partnership, the assets of which are composed primarily of Canadian resource properties and related tangibles, enter into an agreement whereby all of the partnership's assets will be distributed in a manner such that each partner receives a pro-rata undivided interest in those assets immediately prior to the dissolution of the partnership; the fair market value of the assets of the partnership is generally less than the cost amount thereof. If an election under subsection 98(3) of the Income Tax Act (the "Act") is not made,
(a)at what point is each partner considered to have disposed of its partnership interest?
(b)will each partner obtain the increase in the adjusted cost base of its partnership interest pursuant to subparagraph 53(1)(e)(viii) and subsection 66.4(6) of the Act before the partner is considered to have disposed of his partnership interest?
Department's Position
(a)Provided the assets of the partnership are distributed such that each of the partners has received the appropriate pro-rata undivided interest therein before dissolution of the partnership, the partners will be considered to have disposed of their partnership interest upon dissolution based upon the terms of the partnership agreement, the relevant provincial law and the particular facts of the case.
(b)Where an amount in respect of proceeds of disposition of the type referred to in clause 66.4(5)(b)(v)(A) of the Act has arisen to a partnership by virtue of subsection 98(2) at a time prior to the partners disposing of their partnership interest upon dissolution, it is our view that the provisions of subsection 66.4(6) of the Act would be applicable at that time such that a partner's share of that amount would be added in computing the adjusted cost base of that partner's interest in the partnership prior to its disposition upon dissolution.
Author:A.A. Cameron
File:940958
Date:June 7, 1994
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