10 February 1998 External T.I. 9801865 - partnership

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:

is the right to partnership income inventory

Position:

No

Reasons:

not relevant in computation of income

XXXXXXXXXX 980186

Attention: XXXXXXXXXX

February 10, 1998

Dear Sirs:

Re: Subsection 97(2) of the Income Tax Act (the "Act")

This is in reply to your letter of January 20, 1998 wherein you informed us that your letter dated November 17, 1997 was in fact in respect of a hypothetical situation. We are therefore prepared to offer the following general comments.

You have asked that we confirm that where a retired partner has an income interest in a partnership pursuant to subsection 96(1.1) of the Act, that interest can be considered "inventory" and therefore eligible for "rollover" treatment, pursuant to subsection 97(2) of the Act, upon readmission to the partnership.

In our opinion it is the amount of the income or loss that is allocated to a taxpayer from a partnership pursuant to subsection 96(1.1) of the Act that is "relevant in the computation of income" and not the right, per se, to that income.

It is therefore our conclusion that the subsection 96(1.1) of the Act continuing income interest in a partnership cannot be considered inventory for purposes of subsection 97(2) of the Act.

Yours truly,

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