Suggested response to Green
Whether Finance chooses to respond to Green by providing that all portions of s. 96 apply to partnerships where they are members of lower-tier partnerships (which could have unintended consequences) or instead adopts the narrower approach of only clarifying that the at-risk rules apply through tiered partnerships, it is recommended that there be an ability to carry over unused limited partnership losses to future years in which the upper-tier partnership has an at-risk amount respecting the lower-tier partnership. For example, a provision could be added to allow partnerships to claim a deduction in computing their income in circumstances similar to where a taxpayer is allowed a deduction in computing taxable income under s. 111(1)(e).
Other comments on the at-risk rules
- A limited partner who ceases to be a limited partner when it has a positive at-risk amount but insufficient income to fully utilize the available limited partnership losses should be allowed to carry such losses forward.
- The ability to carry-forward limited partnership losses should not be lost when limited liability status is lost or where the units are transferred to a successor partner.
Desirability of extending relief from negative ACB gains
Although s. 40(3.12) is intended to address the problem of negative ACB arising from interim distributions before ACB is increased by year-end income, it is not an ideal solution. It is suggested that the s. 40(3.111) relief accorded to professional partnerships be extended.
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