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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: In a 97(2) roll by a taxpayer who is a majority interest partner (but is not a corporation controlled by the partnership) and where no benefit is intended to be conferred on any related partners, whether 85(1)(e.2) would apply to excess on the basis that the partnership is a person related to the taxpayer.
Position: No.
Reasons: The partnership is not considered a person related to the taxpayer solely because the taxpayer is a majority interest partner.
2003-000483
XXXXXXXXXX B.G. Dodd
(613) 957-8953
June 9, 2003
Dear XXXXXXXXXX:
Re: Transfer of Property to a Partnership
We are writing in reply to your letter dated February 11, 2003 concerning paragraph 85(1)(e.2) of the Income Tax Act (the "Act").
You describe a disposition of property to a partnership by a taxpayer who is a "majority interest partner", as defined in subsection 248(1) of the Act. The transfer is subject to the provisions of paragraph 97(2)(a) and subsection 85(1) in circumstances where the taxpayer contributes assets to the partnership in exchange for a nominal incremental partnership interest. The partnership interests of all the other partners have clearly defined economic rights that are both comparatively nominal and unaffected by the contribution. Assuming no benefit is intended to be conferred by the taxpayer on any related partner, you have asked if paragraph 85(1)(e.2) would apply on the basis that the partnership itself would be a "person related to the taxpayer" as referred to in that provision. We have assumed, for the purpose of our response, that the taxpayer is not a corporation controlled by the partnership.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5 dated May 17, 2002. If the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency.
The partnership would not be considered a person related to the taxpayer solely because the taxpayer was a majority interest partner in the partnership. Accordingly, paragraph 85(1)(e.2) would have no application in the circumstances described above.
We hope this will be of assistance to you.
Yours truly,
Daryl Boychuk, LL.B
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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