In a recent comfort letter, Finance states that it will recommend legislative amendments to allow a multi-tier corporate partnership structure that adds one or more new wholly owned partnerships to retain its aligned non-calendar year fiscal period for all of the partnerships (including the new partnerships). The taxpayer was concerned that, in this situation, creating new partnerships would automatically cause the expanded partnership group to have a December 31 fiscal period under paragraph 249.1(1)(c) of the Act.
Opco is part of a multi-tier partnership group for which each partnership has aligned its fiscal period to a day other than December 31 (say, June 30). The partnership group wants to create two wholly owned partnerships (Partnership 3 and 4) with the same fiscal period as the group (June 30).
The taxpayer is concerned that creating this new partnership would technically force the expanded partnership group to have a December 31 fiscal period under paragraph 249.1(1)(c).
The taxpayer argues that the purpose of the corporate partnership deferral rules in sections 34.2 and 249.1 of the Act is to minimize tax deferral and that the partnership group's plan to create two wholly owned partnerships with the same fiscal period as the group is not inconsistent with this policy.
Comfort letter request
At issue is whether the fiscal period rules in section 249.1 of the Act may be amended to allow a multi-tier corporate partnership structure to retain its aligned non-calendar year fiscal period.
Comfort letter response
Finance states that it will recommend the suggested legislative amendments to the Minister of Finance to allow a multi-tier corporate partnership structure, to retain its aligned non-calendar year fiscal period in this situation (June 30, in our example).
Finance said it will recommend that this change would apply to new partnerships created after March 2014.
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