Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether units of XXXXXXXXXX Partnership are not foreign property.
Position: Do not know.
Reasons: We would need more information; however, we can provide general rules.
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to reply to your letter of October 16, 1998, concerning your investment in XXXXXXXXXX Partnership Units.
Although the Department cannot provide definitive comments on the particular investments you describe, we can provide you with the following general information. These comments outline the rules regarding the classification of property as “foreign property” for purposes of the Income Tax Act in respect of certain property acquired by trusts governed by Deferred Income Plans, for example registered retirement savings plans (RRSP)). As you are aware, foreign property investments by an RRSP in excess of 20 per cent of the RRSP’s assets will give rise to an excess foreign property tax.
Generally, under the Act, any interest in a partnership is considered foreign property. However, an interest of a limited partner in a qualified limited partnership or in a small business investment limited partnership is prescribed not to be foreign property. Thus, the interest must be owned by a limited partner, that is, not a general partner, and the interest must be issued by an eligible partnership that is a qualified limited partnership or small business investment limited partnership.
Generally, the definitions of qualified limited partnership and small business investment limited partnership in subsections 5000(7) and 5102(1) of the Income Tax Regulations outline the required structure of the partnership as well as the investments that can be made by the partnership. Thus, an investment in Canadian business activities through a partnership will only be excluded from foreign property classification if the above requirements are met. The principals of the partnership would be in the best position to advise you if this is the case.
I trust you will find my comments helpful.
Yours sincerely,
Bill McCloskey Assistant Deputy Minister Policy and Legislation Branch
Fouad Daaboul
982961
957-2087
December 18, 1998