PRINCIPAL ISSUES: Whether different classes of units in a partnership constitute different properties for the member and whether they can have different ACBs?
POSITION: No
REASONS: CRA's longstanding position
FEDERAL TAXATION ROUND TABLE 10 OCTOBER 2014
2014 APFF CONFERENCE
ACB of «tracking units»
The CRA's position has been that even if a taxpayer holds units of separate classes of a partnership, the taxpayer has a single interest in the partnership and therefore, by the same token, a single ACB.
In fact, the CRA indicated in Income Tax Technical News No. 25 (October 30, 2002) and Technical Interpretation 2010-0373371C6 that all units held by a taxpayer in a partnership constitute one and the same property, and that this one and the same property represents its interest in the partnership for the purposes of the Income Tax Act.
In the situation presented, X Inc. And Y Inc. each hold A and B “tracking units” of S.E.N.C. AB. According to the S.E.N.C. AB Partnership Agreement, A units accord rights to the results of the interest in S.E.N.C. A, and B units accord rights to the results of the interest in S.E.N.C. B.
Question to the CRA
Since the A and B units are entitled to different results and assets, would the CRA consider X Inc. and Y Inc. to each holds two distinct holdings in S.E.N.C. AB, one for A units and one for B units, and by the same token have distinct ACBs for their A and B units?
CRA Response
The CRA does not intend to change its long-standing position to the effect that an interest in a partnership constitutes a single and identical property irrespective whether the capital of the partnership has one or several classes of interest. Consequently, the ACB of the Class A units in the example submitted will not be distinct from the ACB of the Class B units.
Hugo Gravel
(613) 957-2058
2014-053816