CRA provides no-disposition rulings respecting the squeeze-out merger of a Delaware limited partnership with a newly created Delaware LP with no assets

A Canadian-resident individual holds an interest in a Delaware limited partnership (USLP2) governed by the DRULPA directly and through a Canadian and Delaware limited partnership. In order to squeeze out minority partners with limited partnership interests in USLP2 of under 1% (the “de minimis partners”), a new subsidiary limited partnership (“New LP”) will be formed under the DRULPA which will be wholly owned by USLP2 directly and through an LLC general partner and which will have no assets.

USLP2 and New LP will then be merged under the DRULPA, with USLP2 designated as the survivor of the merger, and with the partnership interests of the de minimis partners cancelled on the merger in exchange for cash consideration. The ruling letter states that, under Delaware law, USLP2 will remain the same legal entity immediately following the merger as it was before the merger and that, under the limited partnership agreement, this transaction will not cause a dissolution of USLP2.

CRA ruled that the merger will not result in any disposition of any relevant partnership interests in USLP2 or a disposition of any of the assets of USLP2, other than its interest in New LP and its disposition of cash to the de minimis partners.

Neal Armstrong. Summary of 2023 Ruling 2022-0924531R3 under s. 248(1) – disposition.