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.
XXXXXXXXXX 973047
F. B. Fontaine, FCCA
Attention: XXXXXXXXXX
May 21, 1998
Dear Sirs:
Re: Subsection 85(2) of the Income Tax Act (the “Act”)
This is in reply to your letter dated November 18, 1997 concerning the interpretation of the words “an interest in ... real property” as described in paragraph 85(2)(a) of the Act.
Your concern is whether an interest in a Canadian partnership that owns real property in Canada is considered to be an interest in the underlying real property such that an election under subsection 85(2) of the Act would or would not be denied in respect of a disposition of the interest held in the Canadian partnership by a foreign partnership for shares in a corporation.
In the 1986 Canadian Tax Foundation Conference, the Department stated that “an interest in a partnership is not considered to be an interest in its underlying assets for purposes of section 85...”. Accordingly, an election under subsection 85(2) of the Act in respect of an interest in such a partnership that is held by its owner (including a foreign partnership), whether as capital property or inventory, would not be denied solely because of the partnership’s ownership of real property.
The comments above represent an expression of our opinion which, as indicated in paragraph 22 of Information Circular 70-6R3, is not an advance income tax ruling and, accordingly, is 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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