1 May 1990 Income Tax Severed Letter AC70442 - Disposition of Partnership Property by Non-resident Partners

David Burton                      Head Office
International Audits              Specialty Rulings
  Division                          Directorate
                                  Roberta Albert
                                  (613) 957-2098

Section 116 of the Act and Partnerships

We are writing in reply to your round trip memorandum of April 18, 1990 wherein you requested that we provide responses to questions to be used during an upcoming meeting between officials of the Vancouver D.O. and a group of Vancouver tax practitioners. The questions addressed to us concerned the application of section 116 of the Act where partnerships are involved.

We would suggest reversing the two questions so that your question b) becomes a), and question a) becomes b), and responding as follows:

a) With respect to the application of the provisions of section 116 of the Act to the disposition of partnership property,

         i)   the assumptions in subsection 96(1) of the Act are  
              not applicable,

         ii)  on the disposition of partnership property, each
              member of the partnership is considered to have
              disposed of his share of that property, and

         iii) each non-resident partner is a non-resident person
              referred to in section 116.

In accordance with this position, section 116 would have application on the disposition of partnership property by a partnership which has non-resident partners.

b) The Department also considers that section 116 applies to a non-resident partner who disposes of his partnership interest which is taxable Canadian property by virtue of subparagraph 115(1)(b)(v) to the partnership in return for certain partnership property. Each remaining partner is considered to be the person referred to in subsection 116(1)(a).

We trust that these responses will be of assistance.

for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch