13 April 2012 Ruling 2012-0440191R3 - limited partnership financing arrangement

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.

Principal Issues: Rulings request on application of subsection 96(2.2)

Position: No ruling issued.

Reasons: Policy is to no longer rule on such arrangements due to uncertainties.

XXXXXXXXXX
								2012-044019

April 13, 2012

Dear XXXXXXXXXX :

Re: Request for an Advance Income Tax Ruling
XXXXXXXXXX

We are writing in reply to your letter dated XXXXXXXXXX , requesting an advance income tax ruling on behalf of the above taxpayer.

This will confirm that we will not be issuing an advance income tax ruling with respect to the arrangement. Following an in-depth review of the request itself, an examination of our general policy on the scope of the advance ruling program and consultations with other areas, we have concluded that the nature of the arrangement being proposed is such that the provision of a binding commitment by the Canada Revenue Agency with respect to the tax consequences of its implementation would not be appropriate. Your deposit will be refunded under separate cover.

An advance ruling consists of representations of fact and future transactions by a taxpayer, and the CRA's interpretation of how the Income Tax Act will apply to those representations. The purpose of a ruling is to provide certainty to the taxpayer. The taxpayer is responsible for the completeness and accuracy of the representations, and the CRA caveats that we may assess in a way other than as described in the ruling if the facts, viewed retrospectively, differ from the representations.

So, the value of a ruling is only as good as the representations. Although the CRA does not verify the representations of fact, they should be capable of verification at the time of the ruling. In your proposal, the major uncertainty is not a question of interpretation of the law, but of knowing the intentions of the participants in a series of complex, and to some extent unknown, future transactions. Since one of the main determining factors of intention is the way in which the participants transact with one another, it is impossible for your client or the CRA to know now what the intentions of the parties will be. We cannot provide the certainty your client seeks. A ruling that sets out the tax consequences that would apply based on one assumption about intention, and caveated that we do not know if that will be the parties' intention, would be merely repeating your question back to you. It would be at best useless and at worst misleading.

This is not a new position. The Round Table at the 2005 Annual Conference of the Canadian Tax Foundation covered this topic ("Review of the Advance Income Tax Process" question 4). You note that we have issued rulings similar to this request; however, all of them predated that Conference. The position appears to be well-known in the tax community.

I would like to emphasise that this decision does not mean that we disagree with your interpretation of the tax consequences of the transactions. It means only that we are not able to provide an assurance of those consequences in advance.

Yours truly,

Phil Jolie
Director General
Income Tax Rulings Directorate