28 September 1998 External T.I. 9817885 - LIMITED PARTNERSHIP - ITC

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: is a general partner entitled to the

ITCs denied to a limited partner.

Position: no.

Reasons: G\P only entited to its share of any excess
based on its investment and debt of partnership which it is

responsible for.

XXXXXXXXXX 981788
S. Tevlin
Attention: XXXXXXXXXX

September 28, 1998

Dear Sir:

Re: Investment Tax Credits and Limited Partnerships

We are writing in response to your letter dated July 7, 1998, wherein you requested our opinion with respect to above noted subject matter.

In particular you describe the situation wherein investment tax credits (“ITCs”) are calculated in respect of a particular partnership pursuant to subsection 127(8) of the Income Tax Act (the “Act”). Because the partnership is a “limited partnership” subsection 127(8.1) of the Act the ITC available to the limited partner(s).

You have asked us for our opinion as to whether the words “such portion of the excess as is reasonable in the circumstances” in the postamble to subsection 127(8.3) of the Act, applies to allow the entire ITC of the partnership to be allocated to the general partner(s).

It is your opinion that the intention of subsections 127(8.1) and (8.3) of the Act is not to deny a portion of the ITC altogether but merely to ensure that no limited partner is allocated ITC while the entire ITC is allocated to non-limited partners.

In this regard, we offer the following general comments.

Subsection 127(8.3) of the Act provides rules for the allocation of ITCs remaining after the allocation of such credits (if any) to limited partners. In such circumstances the remaining ITC (the “Excess”) may be allocated to those non-limited partners, who were members throughout the fiscal period of the partnership, in proportion to their investment (whether debt or equity) in the partnership.

As such, where because of the operation of subsections (8.1) and (8.2) of the Act a limited partner is denied any ITC which it otherwise would have been entitled, subsection 127(8.3) of the Act calculates a general partner’s ITC to be an amount that is a portion of the Excess that reflects a general partner’s percentage contribution to the partnership having regard to the investment in the partnership including debt obligations of the partnership.

Therefore, based on the criteria described in the postamble of subsection 127(8.3), it is our opinion, that the “Can Holdco” in your example would only be entitled to a 0.01% share of the total partnership ITC.

We trust our comments will be of assistance to you.

The foregoing comments are given in accordance with the practice referred to in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996 and are not binding on Revenue Canada, Taxation.

Yours truly,

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