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.
Principal Issues:
1.Information requested on the proposed rules concerning capital gains exemption (February 22, 994 budget).
2.Tax treatment of losses
Position TAKEN:
1. Overview of the rules
2. We are unable to reply on this issue. Question of facts.
Reasons FOR POSITION TAKEN:
N/A
5-942295
XXXXXXXXXX Robert Gagnon
October 26, 1994
Dear Sir:
Re: Interest in a Limited Partnership
This is in reply to your letter of August 26, 1994 wherein you requested information concerning the deemed disposition of capital assets and a technical interpretation concerning the tax treatment of losses that you incurred as partner in a limited partnership.
Written confirmation of the tax implications inherent in particular transactions are given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request. Where the particular transactions are completed, as in your case, the enquiry should be addressed to the relevant District Office, which is responsible for the review of taxpayers income tax returns. Moreover, it would be inappropriate for this directorate to comment on your question dealing with partnership losses since your lawyers have already advised you on the subject and no facts nor pertinent written contracts or agreements have been made available to us.
Due to the technical complexity of the provisions of the Income Tax Act ("Act") and the proposed amendments to the capital gains exemption, the following comments are meant only to provide an overview of some rules and under no circumstances are they to be considered to be either comprehensive or all inclusive.
The February 22, 1994 federal budget proposes to eliminate the capital gains exemption for gains accruing after February 1994. However, pursuant to the budget proposals, individuals will have the opportunity, when filing their 1994 income tax returns, to make an election for capital property owned on February 22, 1994, to recognize pre-budget accrued capital gains up to their unused $100,000 exemption. The election will deem the properties selected by the individual as having been disposed of on February 22, 1994 and immediately reacquired. This election will be available with respect to partnership interests.
It is proposed that where an individual will elect in respect of an interest in a partnership, the gain recognized on the deemed disposition of the interest will not increase its adjusted cost base. Instead, the gain will be added to a special account that is defined as the "exempt capital gains balance" of the individual in respect of the partnership. This exempt capital gains balance can be used before 2005 to shelter a capital gain realized on a later disposition of the interest in the partnership or capital gains of the partnership that are attributed to the individual.
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.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
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