| 19(1) | File No. 5-9016 |
| D. Turner | |
| (613) 957-2094 |
March 26, 1990
Dear Sirs:
Re: Sale of Partnership Interest
We are writing in reply to your letter of October 31, 1989, regarding the sale of a partnership interest.
In your letter you outline the following hypothetical situation in which a partnership interest is sold:
1) Partnership X has a fiscal year-end of December 31.
2) Partnership X carries on the business of renting "leasing property" as that term is defined by subsection 1100(17) of the Income Tax Regulations (the "Regulations").
3) The sole partners of Partnership X are Corporation A and Corporation B.
4) Corporation A is a "principal leasing business corporation" as defined in subsection 1100(16) of the Regulations. Corporation B is not a "principal leasing business corporation".
5) Corporation C intends to purchase the partnership interest held by Corporation B immediately after Partnership X's December 31, 1989 year-end and upon the commencement of the January 1, 1990 partnership fiscal period.
6) Corporation C is a "principal leasing business corporation".
Based on the above hypothetical situation, you have requested our confirmation of the following opinions:
1) The transactions will result in an allocation of income or loss from Partnership X to Corporation A and Corporation B at December 31, 1989.
2) During the 1990 fiscal year of Partnership X, subsection 1100(15) of the Regulation will not apply to the partnership since two "principal leasing business corporations" will be the only partners of Partnership X "throughout" the 1990 year of Partnership X (ie. the exception in paragraph 1100(16)(b) of the Regulations will apply).
Our Comments
We offer the following comments concerning the above hypothetical situation and the related opinions:
1) In our opinion, the change in ownership which occurs on January 1, 1990, will not affect the allocation of income or loss from Partnership X to Corporation A and Corporation B for the fiscal year ending December 31, 1989.
2) In our opinion, the fact that the transaction occurred on January 1, 1990, will not in itself cause the Partnership X not to be a partnership each member of which was a corporation described in paragraph 1100(16)(a) of the Regulations "throughout" the year.
The above comments represent the general view of the Department on the subject matter. They are not rulings and in accordance with the guidelines explained in Information Circular 70-6R, are not binding on the Department.
We trust that our comments will be of assistance.
for Director Business and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch