CRA confirms that a two-partnership structure would not constitute a tiered partnership

In 2014-0528001E5, the CRA was asked to consider a situation where an existing partnership (Partnership A), having an off-calendar fiscal year end, formed a second partnership (Partnership B) indirectly through a subsidiary of Partnership A (A Co).  The other partners of Partnership B dealt at arm’s length with the members of Partnership A.  The CRA confirmed that s. 249.1(1)(c) would not apply to force Partnership A to have a fiscal year end of December 31.  Partnership A’s indirect investment in Partnership B – through A Co – would not in and of itself engage s. 249.1(1)(c), because that provision contemplates a membership interest in one partnership that is held, directly or indirectly through one or more partnerships, by another partnership.  Here the interposition of A Co would break the required link between Partnership A and Partnership B.