Income Tax Severed Letters - 2022-10-12

Ruling

2021 Ruling 2021-0895071R3 F - Partnership Reorganization

Unedited CRA Tags
40(3.1), 40(3.12), 40(3.4), 97(2), 98(1), 98(3), 99(1), 245(2), 248(21)
Summary Under
Tax Topics - Income Tax Act - Section 98 - Subsection 98(3)
conversion of a carry to a straight-up interest
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.3)
refusal to rule where shares received on LP s. 98(3) wind-up immediately sold to Carry LP owned by owners of former general partner
Summary Under
Tax Topics - Income Tax Act - Section 40 - Subsection 40(3.12)
no s. 40(3.12) ruling given re loss on fund LP wind-up

Principal Issues: 1. Whether subsection 98(3) will apply to the wind-up of the limited partnership. 2. Whether subsection 248(21) will apply to the partition. 3. Whether subsection 245(2) will apply to the proposed transactions. 4. Whether subsection 40(3.4) applies to suspend a capital loss on the transfer of a capital property when the transferor partnership ceases to exist within 30 days after the disposition. 5. Whether an election under 40(3.12) can be made with respect to the last fiscal period of the partnership where the provisions of paragraph 98(1)(a) applied.

Position: 1. Yes. 2. The partition will not constitute a disposition within the meaning of subsection 248(1), of property by the former partners of the limited partnership. 3. No. 4. No conclusion reached; ruling withdrawn. 5. Unable to rule. The question does not relate to a proposed transaction and will be further analysed in XXXXXXXXXX, if necessary. May result in timing issues with respect to adjusted cost base adjustments to the partnership interest.

Reasons: See below.

Technical Interpretation - External

12 September 2022 External T.I. 2020-0863671E5 - 73(3) rollover property farmed but not owned

Unedited CRA Tags
73(3), 73(3.1)
Summary Under
Tax Topics - Income Tax Act - Section 73 - Subsection 73(3) - Paragraph 73(3)(c)
periods of farming use of a property as a rental property can count towards the principally-used test in s. 73(3)(c)

Principal Issues: Whether the time that a farm property was not owned by a taxpayer but was used in a farming business in which the taxpayer was actively engaged on a regular and continuous basis can be considered in determining whether the property was “before the transfer used principally in the business of farming in which the taxpayer, the taxpayer's spouse (or common-law partner), the taxpayer's child, or a parent of the taxpayer was actively engaged on a regular and continuous basis”.

Position: Yes.

Reasons: Wording of subsection 73(3). There is no requirement that the farm property must be owned by a taxpayer in those years where it is considered to be used principally in the business of farming in which the taxpayer, the taxpayer’s spouse (or common-law partner), the taxpayer’s child, or a parent of the taxpayer was actively engaged on a regular and continuous basis.

Technical Interpretation - Internal

18 July 2022 Internal T.I. 2021-0921671I7 - Loanbacks and the application of 118.1(17)

Unedited CRA Tags
110.1(6), 118.1(16), 118.1(17), 188.1(7), 188.1(8), 189(7)
Summary Under
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(17)
CRA can choose which gifts to apply loanbacks

Principal Issues: Whether subsection 110.1(6) applies in a particular scenario to reduce the FMV of a gift to a foundation.

Position: Yes.

Reasons: Pursuant to subsection 118.1(17), the FMV of a property described in subparagraph 118.1(16)(c)(ii) of the Act that has not been applied to a previous gift can be applied to reduce the FMV of a subsequent gift.

July 18, 2022