Background
LPco (a wholly-owned Canadian subsidiary of Parentco) acquired all the shares of GPco (holding all the Class “A” units of a Canadian limited partnership, namely, the “Partnership”) and all the Class “B” and “C” Partnership Units in the Partnership in an arm’s length transaction. Income or loss of the Partnership is annually allocated to the two partners in proportion to their Units. Partnership holds depreciable property used in a Canadian business and also appreciated shares of a subsidiary (Aco).
Proposed transactions
- LPco will transfer its Units to GPco under s. 85(1).
- Upon such transfer, Partnership will legally cease to exist and all its property will be distributed to GPco, and GPco thereupon and thereafter will carry on alone the Partnership business.
- GPco may make s. 98(5)(c) designations, e.g., for its Aco shares.
Rulings
Provided Partnership is a Canadian partnership at the time it ceases to exist and GPco continues to carry on the business of the Partnership, s. 98(5) will apply to the dissolution.
Pursuant to s. 99(1), Partnership’s fiscal period will be deemed to have ended immediately before the time that is immediately before the time Partnership ceased to exist. The income or loss of Partnership for its fiscal period so ended will, to the extent of a Partner’s share thereof, be included in computing the Partner’s ACB of its Partnership interest under s. 53(1)(e)(i) or 53(2)(c)(i). In particular: LPco’s share thereof will be included in determining its ACB of the LPco Partnership Interest immediately before its disposition to GPco; and GPco’s share thereof will be included in determining the ACB to GPco of the GPco Partnership Interest immediately before the time Partnership ceased to exist.