Principal Issues: Whether unclaimed limited partnership losses can be claimed after the particular limited partnership winds up?
Position: No.
Reasons: Limted partnership losses can only be claimed to the extent that the at-risk amounts exceeds certain amount, as provided in paragraph 111(1)(e). Once the limited partnership winds up, the taxpayer will not be able to increase his or her at-risk amount in respect of the partnership.
November 23, 2010
Toronto East TSO HEADQUARTERS Appeals Division J. Gibbons, CGA (819) 458-3538 Attention: Dilip Lakhani 2010-037990
Limited Partnership Losses
This is in response to your email dated September 9, 2010, regarding the above-noted issue. In particular, you are seeking our views on whether a taxpayer can apply previously unclaimed "limited partnership losses" after the particular limited partnership has wound-up.
The meaning of "limited partnership losses" is set out in paragraph 96(2.1)(e) of the Income Tax Act (the "Act"). In general terms, where in a taxation year a partner has a loss from a limited partnership that cannot be claimed in the year pursuant to the rules in that paragraph, (i.e., they exceed the amount of the partner's at-risk amount less certain other amounts for that taxation year), these losses become limited partnership losses that may be carried forward indefinitely and applied in subsequent years to the extent permitted by the rules in paragraph 111(1)(e) of the Act. Under the latter rules, limited partnership losses can only be claimed in a taxation year to the extent that the partner's "at-risk amount" (as defined in subsection 96(2.2) of the Act), in respect of the partnership for the fiscal period of the partnership ending in the taxation year exceeds the partner's share of investment tax credits, farm losses and certain resource expenses for that year. In our view, once a limited partnership winds up, any limited partnership losses that could not be claimed before the wind-up are lost.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Mrs. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.
Yours truly,
G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch