Background
The limited partner and general partner units in the Partnership are held by Holdco II and by a wholly-owned subsidiary of Holdco II (GP), respectively. "Deferred Revenue" refers to the Partnership's liabilities that arose as a result of payments, received by it in a taxation year and included in income under s. 12(1)(a), for services to be rendered by it after the end of its current taxation year.
Proposed transactions
After the transfer of certain assets by it to a newly-incorporated corporation (Newco) under s. 85(2) in consideration for the assumption of liabilities and the issuance of Newco shares, and in connection with a wind-up of the partnership as described in s. 98(3), GP and Holdco II will assume, pro-rata to their respective interest in the Partnership, the Partnership's obligations, including the Deferred Revenue obligations. As consideration for the assumption of the Partnership's Deferred Revenue obligations, the Partnership will transfer to each of GP and Holdco II an undivided interest in Newco shares owned by the Partnership having a fair market value equal to the amount of the Deferred Revenue, with a joint s. 20(24) election being made.
Shortly after the cessation of the Partnership, GP will be amalgamated with Holdco II (resulting in "Amalco").
Shortly thereafter, Newco will be wound up into Amalco pursuant to s. 88(1).
Rulings
Including that the Partnership will be entitled to a s. 20(24)(a) deduction and that GP and Holdco II may claim a s. 20(1)(m) reserve for services that will have to be rendered after the taxation year in which they received the s. 20(24) payment.