1999 Ruling 991531A - XXXXXXXXXX RULING

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 								1-991531

Attention: XXXXXXXXXX

XXXXXXXXXX , 1999

Dear Sirs:

Re: Supplementary Ruling Request
XXXXXXXXXX (the "Partnership")

This is in reply to your facsimile transmission dated XXXXXXXXXX wherein you requested a supplementary advance income tax ruling on behalf of the above named Partnership. Accordingly, this letter is supplemental to our advance income tax ruling, number 991046 dated XXXXXXXXXX, 1999 (the "Original Ruling"). We also acknowledge our numerous telephone conversations concerning this request.

Unless otherwise used as proper names or defined herein, the capitalized terms used in this letter have the meanings assigned in the Original Ruling.

All of the facts and proposed transactions otherwise outlined in the Original Ruling remain the same. However, you requested changes to the Original Ruling to reflect:

(a) a ruling in the form requested at paragraph (i) of your letter of XXXXXXXXXX, and

(b) that as the Units will be bought and sold on the XXXXXXXXXX Stock Exchanges, the Units will not, in fact, be redeemable.

Accordingly, Ruling A and the comments following Ruling A in the Original Ruling are being revised to include a ruling in respect of paragraph 98.1(1)(b) of the Act and to substitute the terms "disposed of" and "Disposition Year" for the terms "redeemed" and "Redemption Year", respectively, as follows:

"A. For the purpose of avoiding double taxation, where a Limited Partner,

(i) held Units as capital property,

(ii) ceased to be a member of the Partnership because all of the Limited Partner's remaining Units were disposed of during a particular fiscal year of the Partnership (the Disposition Year) and,

(iii) received, before the end of the Disposition Year, full payment of all of the Limited Partner's rights to receive any property of or from the Partnership in satisfaction of the Limited Partner's interest in the Partnership held immediately before the time of cessation as a member of the Partnership,

pursuant to paragraph 98.1(1)(b) of the Act, the Limited Partner will be deemed not to have disposed of all such remaining Units until the end of the Disposition year, and

subparagraphs 53(1)(e)(i) and 53(2)(c)(i) of the Act will be applied, as the case may be, so that any portion of the Partnership's income or loss for tax purposes (computed at the end of the Disposition Year) that is allocated to that Limited Partner, in accordance with paragraphs 15 to 17 above, and that is attributable to that Limited Partner's Units disposed of during the Disposition Year, will, in the Disposition Year, be included in calculating the Limited Partner's adjusted cost base of those Units disposed of, and as a consequence, will, in the same year, be included in the calculation of the Limited Partner's gain or loss on the disposition of such Units.

For greater certainty, this ruling does not apply where some of the Units owned by a Limited Partner are disposed of in a particular year, and at the end of that year the Limited Partner still owns other Units. In that situation, subparagraphs 53(1)(e)(i) and 53(2)(c)(i) of the Act would apply so that in computing the Limited Partner's adjusted cost base of the Limited Partner's Units disposed of at a particular time, only the Partnership's income or loss for fiscal periods ending before the time the particular Units were disposed of would be taken into account.

Also, this ruling does not apply where a Limited Partner ceases to be a member of the Partnership during the Disposition Year, but it is not until the following year that the Limited Partner receives full payment of all of the Limited Partner's rights to receive any property of or from the Partnership in satisfaction of the Limited Partner's interest in the partnership held immediately before the time that the Limited Partner ceased to be a member thereof. Where, for example, all of the Limited Partner Units are disposed of in the Disposition Year, but only receives payment for these Units disposed of in the subsequent year (and assuming all other rights, referred to above are satisfied by that time), paragraph 98.1(1)(a) of the Act would deem the Limited Partner to have a residual interest until final payment is received. Subparagraphs 53(1)(e)(i) and 53(2)(c)(i) of the Act would apply such that the retired Limited Partner's share of the Partnership's income or loss, as the case may be, for the Disposition Year would be included in computing the adjusted cost base of the retired Limited Partner's Units in the year subsequent to the Disposition Year."

Yours truly,

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