2017-0724291C6 2017 CTF - Q 10 - Tax Shelters

Principal Issues: Does the Canada Revenue Agency provide advance income tax rulings with respect to limited partnership financing arrangements involving the application of the at-risk rules in the context of a tax shelter?

Position: No.

Reasons: The CRA will not give rulings with respect to limited partnership financing arrangements involving the application of the at-risk rules in the context of a tax shelter. See Rulings document 2012-0440191R3. This is not a new position.

Author: Moore, Gwen
Section: 237.1, 96(2.2)

2017 Canadian Tax Foundation Annual Conference

CRA Roundtable

Question 10: Tax Shelters

Does the Canada Revenue Agency provide advance income tax rulings with respect to limited partnership financing arrangements involving the application of the at-risk rules in the context of a tax shelter?

CRA Response

The Canada Revenue Agency (CRA) will generally not issue an advance income tax ruling (“Ruling”) with respect to a limited partnership financing arrangement involving the application of the at-risk rules in the context of a tax shelter, as defined in subsection 237.1(1) of the Income Tax Act.  Given the scope of the advance ruling program, the nature of such an arrangement is such that the provision of a binding commitment by the CRA with respect to the tax consequences of its implementation would not be appropriate. The nature of a Ruling is discussed in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations, dated April 22, 2016.

A Ruling consists of representations of fact and future transactions by a taxpayer, and the CRA’s interpretation of how the Income Tax Act will apply to those representations.  The purpose of a Ruling is to provide certainty to the taxpayer.  The taxpayer is responsible for the completeness and accuracy of the representations, and the CRA caveats that we may assess in a way other than as described in the Ruling if the facts, viewed retrospectively, differ from the representations. (See Rulings document 2012-0440191R3)

The Directorate's position regarding ruling on questions of fact remains as stated in the Information Circular. The Directorate will continue to refuse to rule when a matter on which a determination is requested is primarily one of fact and the circumstances are such that all the pertinent facts cannot be established at the time of the ruling request. The Directorate does not consider it helpful to rule on questions of fact that cannot be determined at the time and making the Ruling subject to a caveat saying that the Ruling is inapplicable if the facts prove otherwise. This is not a new position.

Although the CRA does not verify the representations of fact at the time of the Ruling, they should be capable of verification at that time. The CRA is concerned that in these arrangements there are crucial aspects, such as arm's length issues, impact of future events, or other significant questions of fact, about which there is a level of uncertainty which does not lend itself to the provision, in advance, of a binding commitment by the CRA to view the tax consequences in a particular manner.  It is more appropriate for these types of arrangements to be examined during the course of the audit process.

G. Moore
2017-072429
November 21, 2017

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