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:
Whether or not paragraph 181.2(3)(g) applies to include an interest in a second tier partnership
Position TAKEN:
Yes
Reasons FOR POSITION TAKEN:
Specific wording of paragraph 181.2(3)(g)
XXXXXXXXXX 951105
Attention: XXXXXXXXXX
May 26, 1995
Dear Sirs:
This is in reply to your facsimile of April 20, 1995 wherein you requested our opinion on the interpretation of paragraph 181.2(3)(g) of the Income Tax Act ("Act") and the computation of the capital of a corporate partner which is a member of a partnership which has an interest in a second tier partnership. You are of the view that "a first tier partnership which has an interest in a second tier partnership is not required to include in its taxable capital its proportionate share of the taxable capital of the second tier partnership."
We disagree with your interpretation. In our view, paragraph 181.2(3)(g) of the Act specifically deals with the inclusion of an interest in such a second tier partnership in the computation of the capital of the corporate member. Paragraph 181.2(3)(g) of the Act refers to "the total of all amounts... that would be determined under this paragraph and paragraphs (b) to (f) in respect of the partnership...". Because of the underlined words paragraph 181.2(3)(g) of the Act as well as paragraphs 181.2(3)(b) to (f) will have application at the partnership level. As a result, the corporate member would include in its capital the amounts referred to in paragraphs (b) to (f) of the first tier partnership which would also include the amounts referred to in paragraphs (b) to (f) of the second tier partnership as required by the reference in paragraph 181.2(3)(g) of the Act.
We trust our comments will be of assistance to you.
Yours truly,
F. Lee Workman
Section Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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