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.
APFF - 1995
Question 12
Limited partnerships
A partnership (Partnership A) holds an interest in a limited partnership (Partnership B). Partnership B incurs a business loss in its tax year ending December 31, 19X1. What is the Department's position with respect to the tax treatment of losses suffered by the members of Partnership A?
Answer by the Department of Revenue
Subsection 102(2) of the Act states that for purposes of sections 96 to 103 dealing with partnerships and their members, "a reference to a person or a taxpayer who is a member of a particular partnership shall include a reference to another partnership that is a member of the particular partnership." Therefore, the rules concerning partnerships also apply to general partnerships, that is Partnership A, which is itself a member of the limited partnership (Partnership B).
Under the circumstances described above, the losses assigned by Partnership B to each of its members, including Partnership A, will be deductible by each member, to a maximum of the at-risk amount with respect to their investments in Partnership B, and the end of the tax year in which they were allocated. However, the difference of the loss over the member's at-risk amount shall be deemed to be a member's loss by Partnership A in the limited partnership (Partnership B) for the year.
This limited partnership loss of Partnership A, deemed under subsection 96(2.1) of the Act, cannot be used by Partnership A because a partnership is not a taxpayer for purposes of paragraph 111(1)(e) of the Act. Also, subsection 96(1) of the Act does not allow the transfer of the partnership loss of Partnership A to its members.
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