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.
941401
XXXXXXXXXX C. R. Brown
Attention: XXXXXXXXXX
June 13, 1994
Dear Sirs:
Re: Proposed Legislation on Negative Adjusted Cost Base
This is in reply to your facsimile transmission of May 27, 1994.
You have requested our opinion on the following situation.
XXXXXXXXXX
Resolution 6 of the Notice of Ways and Means Motion to amend the Income Tax Act, contained in the federal budget released on February 22, 1994, provides that a gain will be realized where, at the end of a fiscal period, a limited partner or, in certain conditions, a passive partner, holds a partnership interest that has a negative adjusted cost base. This general rule does not apply where;
(a)at the end of the relevant fiscal period, the partnership continued to carry on the business that was carried on by it on February 22, 1994;
(b)the limited partner or passive partner held the partnership interest on February 22, 1994; and
(c)there has been no substantial contribution of capital to the partnership or substantial partnership borrowings after February 21, 1994 (other than in certain limited circumstances).
On March 30, 1994, the Minister of Finance issued a news release (the "Release") which clarifies the operation of the transitional relief set out in (a), (b) and (c) above (collectively referred to as the "Relief").
Assuming that the legislation is enacted substantially in the form of the Relief and all the other requirements are met, it is our opinion that the Relief would be available based on the wording of clause 1 A (b) of the Release only to the extent that all or substantially all of the partnership's properties are Canadian productions (the episodes) the principal photography of which commences before 1995 and is completed before March 1995. Thus, it is not sufficient under the Relief that the principal photography of an episode is completed before March 1995. Such an episode would not be eligible for the purpose of the condition provided in clause 1 A (b) of the Release if the principal photography of that episode did not commence before 1995.
However, as you will appreciate, a final determination will depend on the specific wording of the legislation when it is introduced.
The above opinion is not a ruling and accordingly it is not binding on Revenue Canada, Customs, Excise and Taxation.
We trust that these comments will be of assistance.
Yours truly,
for Director
Manufacturing Industries, Partnerships
and Trusts Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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