22 May 1990 Ministerial Letter 59148 F - Tax Shelter Registration and Reporting Requirements

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.

May 22, 1990

Dear Sirs:

Re:  Tax Shelter Registration and Reporting Requirements

We are writing in reply to your letter of November 28, 1989, wherein you  requested our comments on the definition of "tax shelter" in subsection 237.1(1) of the Income Tax Act (the "Act"). We apologize for the delay in responding to your letter.

Facts

Our understanding of the facts given to illustrate the issues is as follows:

24(1)

Your Questions

24(1)

Our Comments

While we are unable to provide confirmation of the particular situation outlined in your letter, we can offer the following general comments related to the application of the definition of "tax shelter" in subsection 237.1(1) of the Act.   The word "acquisition" appears in the definition of "promoter" in subsection 237.1(1) of the Act and in subsection 237.1(4) of the Act.  This word includes the situation where a partner (whether general or limited) acquires an interest in a partnership upon its creation. In this connection, we note that the latter subsection includes a contribution of capital or working capital that a partner makes to a partnership upon its creation.

1.     Where the general partner of a limited partnership does not acquire an interest in that partnership as a limited partner but does acquire the right to share in the profit or loss of the partnership by virtue of being the general partner, that right will be considered to be a property (as defined in subsection 248(1) of the Act).  However, before such a property would be considered to meet the definition of "tax shelter" there must be, inter alia, statements, representations or advertisements made that there will be amounts deductible in respect of that property in computing the general partner's income or taxable income.  In the case of a corporation created for the purpose of being the general partner of a limited partnership, there would not normally be written or verbal representations made to the public promoting the income tax deductions available to a person who would agree to act in the capacity of the general partner.  Therefore, where such statements or representations have not been made, the right of the general partner to share in the limited partnership's profit or loss would not normally be a property that meets the definition of "tax shelter".  This opinion is only applicable where the general partner does not acquire an interest in the limited partnership as a limited partner.

2.     The determination of whether a limited partner's acquisition  of an interest in a limited partnership will meet the definition of "tax shelter" is a determination which can only be made upon review of all of the relevant facts of the situation.  In the case of many limited partnership units, there are statements or representations made to the public promoting the income tax deductions available to the limited partners in order to recruit them.  However, where the amounts with respect to that property calculated in paragraph (a) of the definition of "tax shelter" do not exceed the amounts calculated in paragraph (b) of that definition, the definition of "tax shelter" will not be met.

3.     Where the acquisition of a limited partner's interest in a limited partnership does not meet the definition of "tax shelter", the requirements outlined in subsections 237.1(2) to (8) of the Act will not be applicable to that property. Such requirements will also not be applicable to the general partner's right to share in the profit or loss of a limited partnership, where that right does not meet the definition of "tax shelter" (as discussed in our response in paragraph 1 above).

We trust these comments will be of assistance.

Yours truly, 

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch