18 February 1997 External T.I. 9531855 - ACB OF PARTNERSHIP INTEREST

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:

Effects of the Department's change in position on timing of the adjustment to the ACB of a partnership interest for current year's partnership income or loss.

Position:

Favourable consideration may be given in certain situations.

Reasons:

To avoid anomalous results, such as double taxation.

953185
XXXXXXXXXX B.G. Dodd
(613) 957-8953
Att: XXXXXXXXXX

February 18, 1997

Dear Sirs:

Re: Adjusted Cost Base of Partnership Interests

We are writing in connection with your facsimile transmission of December 5, 1995. We apologize for the delay.

You refer to the Department's revised position regarding the timing of certain adjustments, notably a partner's share of the current year's income or loss of the partnership, to the adjusted cost base ("ACB") of his partnership interest as set out in Income Tax Technical News No. 5, dated July 28, 1995. You are concerned with the dissolution of a partnership under subsection 98(3) of the Income Tax Act (the "Act") and a residual interest under subsection 98.1(1) of the Act and the effect the revised position may have on these areas in the specific examples outlined in your letter.

Where anomalous results such as those described in your letter would otherwise occur, as indicated at the November 1996 conference of the Canadian Tax Foundation, the Department is of the view that the current year's income or loss of the partnership should be included in the calculation of the ACB of the partnership interest at the relevant time.

We hope this will be of assistance to you.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch