Global

Details

  • Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 8/22/2012

Canada - Proposed restriction of section 88 "bump" for partnership interests 

August 22:   The Department of Finance released on 14 August 2012 proposed amendments to limit the application of the section 88 "bump" in respect of a partnership interest.

The proposed changes would limit the bump to the extent that the accrued gain of the partnership interest is reasonably attributable to the unrealized gain or recapture of "ineligible" property, which includes depreciable property, Canadian and foreign resource property, inventory, eligible capital property, and other property held on income account.


Existing paragraph 88(1)(d) determines the amount by which the cost of non-depreciable capital property may be increased or "bumped" on the winding-up of a subsidiary into a parent corporation. The proposed legislation introduces subparagraph 88(1)(d)(ii.1), which provides for a reduction in the amount of bump available for an interest in a partnership held by the subsidiary.


The proposed amendments also introduce two anti-avoidance rules concerning the amounts used in determining the bump reduction in proposed subparagraph 88(1)(d)(ii.1):


  • New paragraph 88(1)(e), which applies to certain transfers of property before the acquisition of control of the subsidiary, after 13 August 2012 and
  • New subsection 97(3), which applies to certain transfers of property after the acquisition of control of the subsidiary made after 28 March 2012

Read an August 2012 report prepared by the KPMG member firm in Canada: Restriction of Section 88 Bump for Partnership Interests




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