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Your File No. 16,549-24KEGT
J.C. Clark (613) 593-6201 November 18, 1982
Dear Sirs:
Re: Transfers of resource partnership interests to corporations under subsection 85(1) of the Income Tax Act
This is in reply to your letter of January 19, 1982 in which you requested clarification of the Department's position on subsection 85(1) rollovers of resource partnership interests to corporations. We regret the delay in issuing a reply.
In our view, subsection 98(5) of the Act sanctions simultaneous transfers of all interests in a partnership under subsection 85(1) to an existing bona fide corporate partner.
A purchaser corporation may temporarily become a partner, with no intention of carrying on a business in common with the other partners. Depending on the facts of the case, we would view this transaction as being in substance either:
a) A sale of resource assets at fair market value by the partnership for shares of the transferor, followed by a distribution of the shares to the partners on a winding up of the partnership; or
b) A wind-up of the partnership with a distribution of the partnership assets to the partners at fair market value, followed by a sale of assets by the partners to the purchaser corporation at the same value.
Yours truly,
for Director General Corporate Rulings Directorate Legislation Branch
c.c. Mr. Kaminetsky Calgary District Office