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.

Principal Issues:

Is their partnership grandfathered from our position concerning the timing of adjustments to the adjusted cost base of partnership interests, which was announced in Technical News No.5?

Position:

Yes, for partnership interests acquired before July 28, 1995.

Reasons:

July 28, 1995 was the announcement date of our new position.

		952849
XXXXXXXXXX                  	Allan Nelson
(613) 957-9768

Attention: XXXXXXXXXX

November 27, 1995

Dear Sirs:

Re: XXXXXXXXXX (the "Partnership")
Calculation of Partnership Interest Adjusted Cost Base

We are writing in reply to your October 27, 1995 letter, wherein you asked us to confirm that the position outlined in Income Tax Technical News No. 5, would not affect the method of calculating the adjusted cost base of a member of the Partnership.

Background

Until very recently, our Directorate had been issuing advance income tax rulings that subparagraphs 53(1)(e)(i) and 53(2)(c)(i) of the Act would apply such that a partner's share of partnership income or losses incurred in respect of a particular fiscal period would be included in computing the adjusted cost base of their partnership interest at the end of that fiscal period (this position is referred to herein as our "Old Position").

These rulings were consistent with our publicized position in both Interpretation Bulletin IT-353R2, Partnership Interest - Some Adjustment to Cost Base and Interpretation Bulletin IT-242R, Retired Partners.

On July 28, 1995, the Department issued Income Tax Technical News No. 5, which gave notice that the Department's Old Position was being withdrawn from the respective Interpretation Bulletins. For fiscal periods ending after July 28, 1995, the adjustments to the adjusted cost base of a partnership interest in respect of the income or loss of the partnership will be made in accordance with the law. That is, in calculating the adjusted cost base of a partner's partnership interest at the end of a fiscal period of the partnership, only the partnership's income or loss for the fiscal periods ending before that time will be taken into account (this position is referred to herein as our "Present Position").

In the Partnership's instance, the parties did not obtain an advance income tax ruling. They relied on our Old Position, as outlined in the Interpretation Bulletins noted above.

Our Comments

Generally speaking, it is our view that our Old Position will still apply in calculating the adjusted cost base of partnership interests in the Partnership, acquired prior to July 28, 1995.

These comments are based on the Act in its present form and do not take into account the effect of any proposed amendments. Except as expressly stated, our comments do not imply acceptance, approval or confirmation of any income tax implications of the facts or transactions undertaken by the Partnership.

We trust these comments will be of assistance.

Yours truly,

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