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:
partner draw as loan
Position:
more than likely to be perceived as draw and cause negative acb.
Reasons:
nature of arrangement
XXXXXXXXXX 971748
Attention: XXXXXXXXXX
September 4, 1997
Dear Sirs:
Re: Partnerships and Subsection 40(3.1) of the Income Tax Act (the "Act")
We are writing in response to your letter dated June 24, 1997 wherein you asked for our opinion with respect to the above noted subject matter.
Although the Directorate provides technical interpretations of the law, we do not provide opinions on the application of subsection 245(2) of the Act to a particular situation. Whether the Department considers a transaction to be an avoidance transaction can only be confirmed in the context of an advance ruling request submitted in the manner set out in Information Circular 70-6R3 ("IC-70-6R3") dated December 30, 1996.
As a consequence we can only offer the following general comments.
We concur with the comments in your letter that there is a likelihood that in the situation described the "loans" could be construed as being a draw by the limited partner which would result in a negative adjusted cost base of the partnership interest.
The foregoing comments are given in accordance with the practice referred to in paragraph 22 of IC-70-6R3 and are not binding on Revenue Canada.
Yours truly,
for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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