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Unformatted text preview: ers should consult their own tax advisers with respect to
their particular circumstances.
Taxation of the Partnership
The Partnership is not itself subject to income tax. However, the Partnership will be required to calculate its
income or loss for income tax purposes for each of its fiscal years as if it was a separate person resident in
Canada. The Partnership’s fiscal year end is December 31.
- 29 - In computing its income or loss for tax purposes, the Partnership will be entitled to deduct its expenses in the
taxation year in which they were incurred provided such expenses are reasonable and their deduction is
permitted under the Tax Act. The costs associated with the organization of the Partnership are not fully
deductible by the Partnership in computing its income; these costs qualify as eligible capital expenditures,
three-quarters of which may be deducted by the Partnership in computing income at the rate of 7% per year on
a declining balance basis. The expenses incurred by the Partnership in issuing its Units are deductible rateably
by the Partnership over a five-year period (subject to pro-ration in the case of a fiscal year of the Partnership
that is less than 365 days).
The characterization of the Partnership’s gains and losses from dispositions of the Partnership’s investments as
being capital gains or gains on income account will depend on the specific facts relating to each investment.
Accordingly, no conclusion can be made as to the nature of such gains and losses generally when allocated to
Taxation of Limited Partner’s Share of Income or Loss
Each Limited Partner will be required to include in income for each taxation year the Limited Partner’s share
of the income or loss of the Partnership for the fiscal period of the Partnership that ends in, or coincides with,
that taxation year, regardless of whether the Limited Partner has received distributions from the Partnership.
Subject to the foregoing, a Limited Partner will not be required to include in income a distribution of cash by
A Limited Partner may be entitled to deduct its share of losses realized by the Partnership in each fiscal period
against the Limited Partner’s income from other sources, subject to, and, in accordance with, detailed tax rules
including rules that limit the deduction by a Limited Partner of the Partnership’s losses to an amount not
greater than the Limited Partner’s “at-risk amount”. A Limited Partner’s share of any loss of the Partnership
that is not deductible by the Limited Partner as a result of the application of the “at-risk” rules is considered to
be a “limited partnership loss” in respect of the Partnership for that year. The limited partnership loss may be
deducted by the Limited Partner in a subsequent taxation year against income for that year to the extent that
the Limited Partner’s at-risk amount at the end of the Partnership’s fiscal period ending in that year exceeds
the Limited Partner’s share of any loss of the Partnership for that fiscal period.
At any time, a Limited Partner’s adjusted cost base of its Units will be the amount of capital contributed to the
Partnership, plus the Limited Partner’s share of the income of the Partnership (including the full amount of any
capital gains realized by the Partnership) for fiscal periods ended before that time, less the amount of cash
distributed to the Limited Partner before that time and less the Limited Partner’s share of losses of the
Partnership (including the full amount of any capital losses realized by the Partnership) for fiscal periods
ended before that time (other than losses not deductible by the Limited Partner by reason of the “at-risk” rules
If, at the end of a fiscal period of the Partnership, the adjusted cost base of the Limited Partner’s Units is a
negative amount, the Limited Partner will be deemed to realize a capital gain for tax purposes equal to such
negative amount, and the adjusted cost base will thereafter be increased by the amount of such deemed capital
Income or loss of the Partnership from a particular source and a particular place will be considered to be
income of a Limited Partner from the same source and place to the extent of the Limited Partner’s share
thereof. A Limited Partner’s share of any dividends received by the Partnership from taxable Canadian
corporations will be subject to the usual gross-up and dividend tax credit rules in the Tax Act in the case of a
Limited Partner that is an individual and may be subject to Part IV refundable tax in the case of Limited
Partners that are private (and certain other) corporations.
- 30 - Disposition of Units
On the disposition of a Unit by a Limited Partner, including on wind-up of the Partnership, the Limited Partner
will realize a capital gain (or capital loss) in the amount by which the Limited Partner’s proceeds of disposition
exceed (or are less than) the Limited Partner’s adjusted cost base of the Unit and the c...
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This document was uploaded on 02/19/2014.
- Spring '14