| February 6, 1990 | |
| GAAR Committee | Bilingual Services |
| Mike Hiltz | Section 31 |
| Charles Thériault | |
| 957-8978 | |
| File No. 7-4660 |
Subject: Supplement - Information Circular 88-2
FACTS
Partnership A owns a depreciable asset. On the last day of A's fiscal year end, Partnership B acquires a 99.9% interest in A. In calculating its income, A deducts the maximum allowable CCA for that fiscal year. The following day A is dissolved and pursuant to subsection 98(3) at the act, B becomes the owner of a 99.9% undivided interest in that asset. In calculating its income for its fiscal year of 365 days ending two (2) days following the end of A's fiscal year, B also deducts the maximum allowable CCA regarding that asset. The primary purpose of that series of transactions is to double the amount of CCA allowable for the same asset for the investors in Partnership B and to avoid the application of subparagraph 13(21)(f)(iv) of the Act.
INTERPRETATION
As the purchase of the interest in A by B followed by the dissolution of A are part of an arrangement undertaken to be able to deduct the maximum allowable CCA regarding the same asset by two related parties within a short period of time (2 days)), subsection 245(2) would apply on the basis that the purchase of the interest in A by B and followed by the dissolution of A are undertaken to avoid the restriction on the CCA allowable for the asset for the year and the consequences of a straightforward disposition of the asset.
For the DirectorBilingual Services and Resource Industries DivisionRulings Directorate