4 June 1998 External T.I. 9722945 - 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:

when do adjustments to ACB of partnership interest take palce. Will there be admin relief to allow such adjustments in same year that forgiven amount ocurs.

Position:

No admin relief. Delay in year end need only be for 1 day.

Reasons: law

		972294
XXXXXXXXXX 	S.J. Tevlin

Attention: XXXXXXXXXX

June 4, 1998

Dear Sirs:

Re: Determination of Adjusted Cost Base of a Partnership Interest

We are writing in response to your letter dated August 25, 1997 wherein you requested our opinion with respect to the above noted subject.

The situation described in your letter is an actual fact situation and written confirmation of the tax implications inherent in proposed transactions are given by this Directorate only where the transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3 ("IC-70-6R3").

Consequently, we can only offer the following general comments.

You have described a situation where as a result of a partnership obligation having been settled there is an income inclusion to the debtor partnership pursuant to subsection 80(13) of the Act. It is intended that the partners will make an election pursuant to subsection 80(15) of the Act to treat the income inclusion allocated to each partner as a personal debt forgiveness subject to the debt forgiveness rules in section 80.

You have asked us to confirm that we will administratively allow all adjustments to the adjusted cost base of the partnership interest resulting from the applications of sections 53 and 80 to occur at the year-end of the partnership.

It is our opinion that the situation described in your letter would not be the type to which administrative relief would apply since the winding-up of the partnership could be, as you have noted, delayed by one day into the next fiscal period. As such, the partnership interest would still exist immediately after the end of the fiscal period in which the forgiveness occurred and the unapplied portion of the partner’s forgiven amount could be applied pursuant to subsection 80(9) of the Act.

The foregoing comments are given in accordance with the practice referred to in paragraph 21 of IC-70-6R3, and are not binding on Revenue Canada, Taxation.

We apologize for the lengthy delay in responding to your request.

Yours truly,

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

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