A limited partnership (LP) - whose 90% general partner is FA1 (held by Canco1) and whose 10% limited partner is FA2 (held by Canco2, which is related to Canco1) – receives a paid-up capital distribution (the “Distribution”) from its wholly-owned subsidiary (FA3). Canco1 and FA1 have November 30 taxation year ends and Canco2, FA2, FA3 and LP have calendar year ends. Is only LP required to make a s. 90(3) election respecting of the Distribution?
CRA responded:
[A] subsection 90(3) election in respect of the Distribution will be valid if made only by FA1 in its capacity of the general partner on behalf of LP because there is no “connected person or partnership” in respect of LP within the meaning of subsection 90(4).
… The election has to be made by FA1 by notifying the Minister in writing on or before the filing-due date of FA2 for its taxation year ended on December 31, 2021.
After discussing the manner of making the election (by letter with various relevant particulars), CRA noted:
If a joint election is made by LP, Canco1 and Canco2, CRA would accept it as valid and would accept the required election made by FA1 on behalf of LP, Canco1 and Canco2 provided such election letter includes all the required information as outlined [above].
… If an election is made jointly by Canco1, Canco2 and LP in respect of the Distribution, it is required to be made on or before the earliest of the filing-due dates of Canco1, Canco2, FA1 and FA2 for their respective taxation years that include December 31, 2021, in accordance with [Reg.] 5911(6)(b) … .