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: For purposes of the Ontario Apprenticeship Tax Training Credit, can a limited partnership allocate 100% of its credit to its general partner who is also a limited partner?
Position: Yes.
Reasons: A limited partnership may allocate 100% of its apprenticeship tax training credit to a dual partner as long as the allocation is done so in the partner's capacity as general partner, and all of the conditions of section 89 of the Ontario Taxation Act are met, all partners base their claim on subsection 89(17) if one partner is being allocated more than its pro-rata share, all partners agree to the disproportionate allocation where the claim is based on subsection 89(17), and not more than 100% of the apprenticeship tax training credit available to the limited partnership is claimed.
XXXXXXXXXX
2010-038060
XXXXXXXXXX
XXXXXXXXXX , 2011
Dear XXXXXXXXXX :
Re: Advance Income Tax Ruling
XXXXXXXXXX
I am writing in reply to your letter of XXXXXXXXXX , wherein you requested an advance income tax ruling on behalf of the above named group of companies (the "Group"). We also acknowledge additional information you provided to us during a telephone conversation (XXXXXXXXXX ) in connection with your ruling request.
This letter is based solely on the facts and proposed transactions described below.
We understand that, to the best of your knowledge and that of any member of the Group or a related person, none of the issues involved in this ruling request are:
(i) dealt with in an earlier return of any member of the Group, or a related person;
(ii) being considered by a tax services office or a taxation centre in connection with a previously filed tax return of any member of the Group or a related person;
(iii) under objection by any member of the Group or a related person;
(iv) before the courts, or if a judgment has been issued, the time limit for appeal to a higher court has expired, nor
(v) the subject of a previous ruling issued to any member of the Group or a related person by the Income Tax Rulings Directorate or the Ontario Ministry of Revenue.
Unless otherwise stated, all references to a statute are to the Ontario Taxation Act, 2007, S.O. 2007, Sch. A., as amended to the date of this letter (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
Our understanding of the facts, proposed transactions and the purpose of the proposed transactions is as follows:
Definitions and Abbreviations
a) "ATTC" means the apprenticeship training tax credit as described in section 89 of the Act.
b) "Corporations Act" means the Business Corporations Act, R.S.O. 1990, c. B. 16, as amended.
c) "Group" means XXXXXXXXXX
d) "Income Fund" means XXXXXXXXXX , which was formed under the laws of the Province of Ontario pursuant to an amended and restated declaration of trust and is publicly traded on the XXXXXXXXXX Stock Exchange ("XXXXXXXXXX )").
e) "Trust" means XXXXXXXXXX , which is an unincorporated, limited purpose trust established under the laws of the Province of Ontario pursuant to a declaration of trust of which the Income Fund is the sole beneficiary.
f) "Parentco" means XXXXXXXXXX which was incorporated on XXXXXXXXXX under the Ontario Corporations Act and is wholly owned by the Trust.
g) "Subco" means XXXXXXXXXX , which is wholly owned by the Income Fund, and was incorporated under the Ontario Corporations Act.
h) "Limited Partnership A" means XXXXXXXXXX , which is a limited partnership established under the laws of the Province of XXXXXXXXXX , of which the Trust is the sole limited partner with a XXXXXXXXXX % interest and Subco is the sole general partner with a XXXXXXXXXX % interest in the partnership. Limited Partnership A has a XXXXXXXXXX fiscal year- end.
i) "Dual Partner" means XXXXXXXXXX , which was incorporated under the Ontario Corporations Act and which is a wholly owned subsidiary of Limited Partnership A.
j) "Limited Partnership B" means XXXXXXXXXX which is a limited partnership established under the laws of the Province of XXXXXXXXXX . Dual Partner is the sole general partner of Limited Partnership B with a XXXXXXXXXX % interest in the partnership as a general partner and also owns a XXXXXXXXXX % limited partnership interest in Limited Partnership B. Limited Partnership A owns the remaining XXXXXXXXXX % limited partnership interest in Limited Partnership B.
k) "LPA Sub1" means XXXXXXXXXX , a wholly owned subsidiary of Limited Partnership A, which was incorporated under the Ontario Corporations Act.
l) "LPA Sub2" means XXXXXXXXXX , a wholly owned subsidiary of Limited Partnership A, which was incorporated under the Ontario Corporations Act.
m) "LPA Sub1A" means XXXXXXXXXX , a wholly owned subsidiary of LPA Sub1, which was incorporated under the Ontario Corporations Act.
n) "LPA Sub 2A means XXXXXXXXXX , a wholly owned subsidiary of LPA Sub2, which was incorporated under the Ontario Corporations Act.
o) "Fair market value" means the highest price available in an open and unrestricted market between informed prudent parties acting at arm's length;
Facts
1. Historically, the Income Fund has not been liable for any amounts of income tax under the federal Income Tax Act because it generally is entitled to deduct distributions to unitholders in computing its income that would otherwise be subject to tax.
2. Throughout XXXXXXXXXX , Limited Partnership A, Limited Partnership B, LPA Sub1A, and LPA Sub2A each carry on their respective businesses of XXXXXXXXXX .
3. Limited Partnership A and Limited Partnership B each amended their limited partnership agreements to specify that tax credits which cannot be claimed by limited partners are to be allocated to the general partner(s) of the particular partnership, based on each general partner's pro-rata share of the aggregate general partner income or loss allocation.
Proposed Transactions
The following transactions will be implemented in the order presented below unless otherwise noted.
4. Limited Partnership A, Limited Partnership B, LPA Sub1A, and LPA Sub2A will have obtained sponsorship and will complete the remaining required registration of qualifying apprentices such that LPA Sub1A and LPA Sub2A should be entitled to claim the ATTC for Ontario income tax purposes in XXXXXXXXXX, and Limited Partnership A and Limited Partnership B should be entitled to allocate the ATTC earned by each partnership to their respective partners for Ontario income tax purposes in XXXXXXXXXX .
5. On XXXXXXXXXX , Limited Partnership A will allocate 100% of its ATTC to its sole general partner, Subco.
6. On XXXXXXXXXX , Limited Partnership B will allocate 100% of its ATTC to its sole general partner, Dual Partner.
7. On XXXXXXXXXX , LPA Sub1, LPA Sub2, LPA Sub1A, LPA Sub2A and Dual Partner will amalgamate in one or more transactions and continue as an amalgamated corporation ("Amalco");
8. On XXXXXXXXXX , the Income Fund will convert to corporate form (the "Conversion"). Upon completion of the Conversion, the Income Fund will be dissolved and will be replaced by Parentco as the publicly traded entity listed on the XXXXXXXXXX , and the Trust will also be dissolved. Therefore, immediately after the Conversion, the sole limited partner of Limited Partnership A will be Parentco, with a XXXXXXXXXX % partnership interest. Subco will remain the sole general partner of Limited Partnership A with a XXXXXXXXXX % partnership interest.
9. On XXXXXXXXXX , Limited Partnership A and Amalco will transfer the Limited Partnership A business, the LPA Sub1A business, and the LPA Sub2A business, respectively, to Limited Partnership B for fair market value consideration including limited partnership units of Limited Partnership B. As a result, all employees within the structure who are registered under qualifying apprenticeship programs will be employees of Limited Partnership B; and Amalco will transfer all of its general partnership interest in Limited Partnership B to Subco.
10. After the Conversion, but no later than XXXXXXXXXX , Limited Partnership B will register the qualifying apprenticeship programs previously carried on in Limited Partnership A and predecessors of Amalco in order to qualify for the ATTC with respect to the employees transferred to Limited Partnership B as a result of the transfer of the Limited Partnership A business, the LPA Sub1A business, and the LPA Sub2A business.
11. On XXXXXXXXXX , Limited Partnership B will allocate 100% of its ATTC to its sole general partner, Subco.
Purpose of the Proposed Transactions
12. The proposed transactions are being considered to convert the Income Fund into a public corporation and to simplify the Group structure by combining all operating businesses into a single entity in order that all services are provided by a single entity and all operating transactions occur within that entity.
Rulings Given
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions, and assuming all other conditions of section 89 of the Act are met, we rule as follows:
A. Limited Partnership A may allocate 100% of its XXXXXXXXXX ATTC to its sole general partner, Subco, allowing Subco to claim 100% of Limited Partnership A's XXXXXXXXXX ATTC for Ontario tax purposes, as long as all its partners base their claim on subsection 89(17) if one partner is being allocated more than its pro-rata share, all its partners agree to the disproportionate allocation where the claim is based on subsection 89(17), and not more than 100% of Limited Partnership A's available XXXXXXXXXX ATTC is claimed by all its partners.
B. Limited Partnership B may allocate 100% of its XXXXXXXXXX ATTC to its sole general partner, Dual Partner, allowing Dual Partner to claim 100% of Limited Partnership B's XXXXXXXXXX ATTC for Ontario tax purposes, as long as the allocation is done in Dual Partner's capacity as a general partner, all its partners base their claim on subsection 89(17) if one partner is being allocated more than its pro-rata share, all its partners agree to the disproportionate allocation where the claim is based on subsection 89(17), and not more than 100% of Limited Partnership B's available XXXXXXXXXX ATTC is claimed by all its partners.
C. Limited Partnership B may allocate 100% of its XXXXXXXXXX ATTC that is earned subsequent to implementing the restructuring described in paragraphs 7 to 10, to its sole general partner, Subco, allowing Subco to claim 100% of Limited Partnership B's XXXXXXXXXX ATTC for Ontario tax purposes, as long as all its partners base their claim on subsection 89(17) if one partner is being allocated more than its pro-rata share, all its partners agree to the disproportionate allocation where the claim is based on subsection 89(17), and not more than 100% of Limited Partnership B's available XXXXXXXXXX ATTC is claimed by all its partners.
Nothing in this letter should be construed as implying that the Canada Revenue Agency ("CRA") has reviewed, accepted or otherwise agreed to any tax consequences relating to
the Facts and Proposed Transactions described herein other than those specifically described in the rulings given above. The above advance income tax ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 Advance Income Tax Rulings, dated May 17, 2002, and is binding on the CRA provided that the proposed transactions outlined above are completed by XXXXXXXXXX .
Yours truly,
XXXXXXXXXX
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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