Changes in relative interest of partnership not recognized as acquisition of separate property

Tax court of Canada | Tax | Income tax | Capital gains and losses

Corporate taxpayer formed limited partnership with another corporation in taxpayer’s group of companies. Taxpayer transferred shopping centres to partnership and then taxpayer disposed of its interests in partnership to another corporation in its group of companies, in exchange for shares. Subsequently, taxpayer transferred all of its shares in partnership to same corporation, and corporation wound up partner with result that corporation was sole partner in partnership. Taxpayer claimed capital loss on basis that that partnership interest increased by both fair market value of property and elected amount, arguing that s. 97(2)(b) of Income Tax Act (ITA) applied at any time after transfer of assets and did not preclude ordinary adjusted cost base (ACB) rules in s. 54 of ITA at time of transfer. Minister denied capital loss based on taxpayer’s reasoning and reassessed transaction as realization of capital gain instead – Taxpayer appealed. Appeal dismissed. Taxpayer’s counsel admitted that result of taxpayer’s interpretation of s. 97(2)(b) of ITA was absurd and that this result must not have been intended by Parliament. There was no possibility of successful argument that cost of increase in partnership interest should be captured under s. 54 in addition to s. 97(2) adjustment. Subsections (i) and (ii) under s. 97(2)(b) of ITA did not recognize changes in relative interest of partnership as acquisition of separate property nor issuance of additional units in partnership. There was no room for taxpayer’s interpretation of text of s. 97(2) of ITA and definition of ACB in s. 54 of ITA, if read in context and having regard to their purpose.

Iberville Developments Limited v. The Queen (2018), 2018 CarswellNat 2658, 2018 TCC 102, Patrick Boyle J. (T.C.C. [General Procedure]).

Free newsletter

Our daily newsletter is FREE and keeps you up to date on all the developments in the Ontario legal community. Please complete the form below and click on subscribe for daily newsletters from Law Times.

Recent articles & video

Open schedule at Competition Tribunal presents opportunity for commissioner, lawyer says

Students raise alarm on future of university legal clinics

CICB to cease accepting applications on Oct. 1

Stikeman Elliott, Rubin Thomlinson, McCarthy Tétrault win HR awards

Insurance lawyers reveal their referral philosophies

Court of Appeal rules auto insurer not liable for parental negligence claim stemming from accident

Most Read Articles

New equality measure approved by Law Society of Ontario as the statement of principles gets repealed

Judges call out lack of support for legal aid, pro bono amid MAG presence

Chasm in opinions remains after statement of principles repeal

Law students, paralegals can continue working on the same summary conviction matters