FORM 20-F/A Brookfield Property Partners L.P. - Brookfield Asset ...

On October 31, 2003, the Department of Finance released for public comment Tax Proposals under which ataxpayer would be considered to have a loss from a source that is a business or property for a taxation year only if,in that year, it is reasonable to assume that the taxpayer will realize a cumulative profit (excluding capital gains orlosses) from the business or property during the period that the business is carried on or that the property is held. Ingeneral, these Tax Proposals, or the REOP Proposals, may deny the realization of losses by Canadian LimitedPartners from their investment in our company in a particular taxation year, if, in the year the loss is claimed, it isnot reasonable to expect that an overall cumulative profit would be earned from the investment in our company forthe period in which the Canadian Limited Partner has held and can reasonably be expected to hold the investment.The BPY General Partner and the Property General Partner do not anticipate that the activities of our company andthe Property Partnership will, in and of themselves, generate losses, but no assurance can be given in this regard.However, Canadian Limited Partners may incur expenses in connection with an acquisition of units in our companythat could result in a loss that could be affected by the REOP Proposals. As part of the 2005 federal budget, theMinister announced that an alternative proposal to reflect the REOP Proposals would be released for comment at anearly opportunity. No such alternative proposal has been released to date. There can be no assurance that suchalternative proposal will not adversely affect Canadian Limited Partners, or that any revised proposal may not differsignificantly from the REOP Proposals described herein.On March 4, 2010, the Minister announced as part of the 2010 Canadian federal budget that theoutstanding Tax Proposals regarding investments in “foreign investment entities”, referred to as the FIEProposals, would be replaced with revised Tax Proposals under which the existing rules in section 94.1 of theTax Act relating to investments in “offshore investment fund property” would remain in place subject to certainlimited enhancements. The Minister released draft legislation to implement the revised Tax Proposals onAugust 27, 2010. Existing section 94.1 of the Tax Act contains rules relating to investments in non-residententities that could, in certain circumstances, cause income to be imputed to Canadian Limited Partners, eitherdirectly or by way of allocation of such income imputed to our company or the Property Partnership. These ruleswould apply if it is reasonable to conclude, having regard to all the circumstances, that one of the main reasonsfor the Canadian Limited Partner, our company or the Property Partnership acquiring or holding an investment ina non-resident entity is to derive a benefit from “portfolio investments” in such a manner that taxes under the TaxAct on income, profits and gains for any year are significantly less than they would have been if such income,profits and gains had been earned directly. In determining whether this is the case, existing section 94.1 of theTax Act provides that consideration must be given to, among other factors, the extent to which the income,profits and gains for any fiscal period are distributed in that or the immediately following fiscal period. Noassurance can be given that existing section 94.1 of the Tax Act as proposed to be amended will not apply to aCanadian Limited Partner, our company or the Property Partnership. If these rules apply to a Canadian LimitedPartner, our company or the Property Partnership, income will be imputed directly to the Canadian LimitedPartner or to our company or to the Property Partnership and allocated to the Canadian Limited Partner inaccordance with the rules in existing section 94.1 of the Tax Act as proposed to be amended. The rules inexisting section 94.1 of the Tax Act as proposed to be amended are complex and Canadian Limited Partnersshould consult their own tax advisors regarding the application of these rules to them in their particularcircumstances.Dividends paid by the CFAs to the Property Partnership will be included in computing the income of theProperty Partnership. To the extent that any of the CFAs or any direct or indirect subsidiary that itself is acontrolled foreign affiliate of the Property Partnership, or Indirect CFA, thereof earns income that ischaracterized as FAPI, in a particular taxation year of the CFA or Indirect CFA, the FAPI allocable to theProperty Partnership must be included in computing the income of the Property Partnership for Canadian federalincome tax purposes for the fiscal period of the Property Partnership in which the taxation year of that CFA orIndirect CFA ends, whether or not the Property Partnership actually receives a distribution of that FAPI. If anamount of FAPI is included in computing the income of the Property Partnership for Canadian federal income taxpurposes, an amount may be deductible in respect of the “foreign accrual tax” as defined in the Tax Actapplicable to the FAPI. Any amount of FAPI included in income net of the amount of any deduction in respect of“foreign accrual tax” will increase the adjusted cost base to the Property Partnership of its shares of the particular182