I-3 - Taxation Act

Section 637.4 Disposition versions

2015-10-21

637.4. The rules of the second paragraph apply in respect of a taxpayer’s particular interest in a partnership if

(a)  it may be reasonable to conclude that one of the purposes of a dilution, reduction or alteration of the particular interest was to avoid the application of section 637 in respect of the particular interest; and

(b)  as part of a transaction or event or series of transactions or events that includes the dilution, reduction or alteration of the particular interest, there is

i.  an acquisition of an interest in the partnership by a person or partnership described in any of paragraphs a to d of section 637.1, or

ii.  an increase in, or alteration of, an interest in the partnership held by a person or partnership described in any of paragraphs a to d of section 637.1.

For the purposes of section 637,

(a)  the taxpayer is deemed to have disposed of an interest in the partnership at the time of the dilution, reduction or alteration;

(b)  the taxpayer is deemed to have a capital gain from the disposition equal to the amount by which the fair market value of the particular interest immediately before the time of the dilution, reduction or alteration exceeds the fair market value of the particular interest immediately after that time; and

(c)  the person or partnership referred to in subparagraph b of the first paragraph is deemed to have acquired an interest in the partnership as part of the transaction or event or series of transactions or events that includes the disposition referred to in subparagraph a.

2015, c. 21, s. 211.