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: Whether units of XXXXXXXXXX Partnership are not foreign property.
Position: Do not know.
Reasons: We would need more information; however, we can provide general rules.
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to reply to your letter addressed to the Honourable Paul Martin, Minister of Finance, concerning the classification of your investment in XXXXXXXXXX as foreign property, for income tax purposes. Mr. Martin sent a copy of your letter to Mr. Dhaliwal on July 20, 1998.
Although the Department cannot provide definitive comments on the particular investments you describe, I will provide you with the general information outlining the rules on the classification of property as foreign property for purposes of Part XI of the Income Tax Act for certain property acquire by trusts governed by Deferred Income Plans.
Under paragraph (i) of the definition of foreign property in subsection 206(1) of the Act, any interest in, or right to acquire an interest in a partnership, is foreign property except as prescribed by regulation. For purposes of this definition, subsection 5000(1.1) of the Income Tax Regulations provides that an interest of a limited partner in a qualified limited partnership or in a small business investment limited partnership is prescribed not to be foreign property. Thus, the interest must be owned by a limited partner, that is, not a general partner, and the interest must be issued by an eligible partnership that is either a qualified limited partnership (QLP), or a small business investment limited partnership (SBILP).
Subsections 5000(7) and 5102(1) of the Regulations define the meaning of QLP and SBILP, respectively. Generally, these definitions outline the required structure of the partnership as well as the investments that can be made by the partnership. Thus, an investment in Canadian business activities through a partnership will only be excluded from foreign property classification if these requirements are met. As noted in your letter, your broker should have sufficient details to determine whether or not these requirements are met.
I trust you will find my comments helpful.
Yours sincerely,
Bill McCloskey
Assistant Deputy Minister
Policy and Legislation Branch
Fouad Daaboul
982048
957-2060
August 25, 1998
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