7 June 1995 External T.I. 9513685 - GRANDFATHERING FROM LIMITED RECOURSE PROVISIONS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

				951368
XXXXXXXXXX						Cal Brown
(613) 957 8980

Attention: XXXXXXXXXX

Dear XXXXXXXXXX:

This is in reply to your facsimile transmission of May 17, 1995 concerning the application of the April 26, 1995 Technical Amendments.

You have asked us to consider whether investment loans to be provided from an arm's length commercial bank to subscribers for partnership units would be grandfathered from the application of subparagraph 143.2(7)(a) of the Income Tax Act (the "Act"), which was proposed in the April 1995 Amendments to the Income Tax Act and Related Statutes issued by the Department of Finance (the "Draft Amendments"), under the following circumstances.

The new rule requires that the debt arrangement not exceed a ten year repayment period. This rule will not apply if the indebtedness arises before July 1995 pursuant to the terms of a document that is a prospectus, preliminary prospectus, offering memorandum or registration statement filed before April 26, 1995 with a public authority in Canada pursuant to and in accordance with the securities legislation of Canada or of any province and, where required by law, accepted for filing by such public authority, and the funds so raised are expended before 1996 on expenditures contemplated by the document.

You have stated that the offering memorandum for the

XXXXXXXXXX

It is our opinion, that provided that clause 70(2)(c)(i)(C) of the Draft Amendments is legislated as proposed any indebtedness that arises before July 1995 would not be denied grandfathering solely as a result of the offering memorandum being temporarily withdrawn in the manner described above.

You have also asked us to comment on a possible amended and restated Offering Memorandum to investors. The effect on the grandfathering status will depend on the particular facts and we have not examined the draft offering memorandum that you provided. It is our opinion that the issue to be decided, in such cases, is whether the amended and restated offering memorandum constitutes a new offering. Usually, Revenue Canada would not consider the amended documents to be a new offering if the purpose and the structure of the arrangements have not significantly changed, the amount of the offering has not increased and any other changes are not substantive. For example, additional information about features of the investment, revised accounting or legal opinions, revised investment analysis and similar refinements would not be considered substantive.

Yours truly,
for Director
Manufacturing Industries,
Partnerships and Trusts Division
Income Tax Rulings
and Interpretations
Directorate
Policy and Legislation Branch