Reviewing the connected person definition in relation to partnerships
Paragraph (c) of the definition of connected person in section 1 of the Income Tax Act provides that, in the context of a partnership or foreign partnership (as defined in section 1), each member of the partnership is a connected person in relation to any other member of the partnership and any connected person in relation to any member of such partnership or foreign partnership. Therefore, partners are connected to each other as well as to all connected persons of the partners in the partnership. It has come to governments attention that limited partners in an en commandite partnership (a partnership carried out in the name of only some of the partners; the undisclosed partners contribute a fixed sum and are not liable for more than their capital contribution in the case of a loss) are affected by the wide ambit of paragraph (c) of the definition of connected person. It is proposed that the status of connected persons in relation to a qualifying investor as defined be reviewed in the definition of connected person in the Income Tax Act.
Limiting interest deductions in respect of reorganisation and acquisition transactions
It is proposed that the definition of adjusted taxable income and the formula applied to limit an interest deduction in section 23N of the Income Tax Act be reviewed for closer alignment with the changes made to the definition of the adjusted taxable income and the formula applied for the interest limitation rules for debts owed to persons not subject to tax in section 23M of the Income Tax Act.
Relaxing the assessed loss restriction rule under certain circumstances
When a company is in the process of liquidation, deregistration or being wound up, it cannot make use of the full assessed loss. It is proposed that the legislation be amended to exempt companies from applying the assessed loss restriction rule while in the process of liquidation, deregistration or winding up.