Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether income received by a corporation who ceased to be a member of a partnership in accordance with subsection 96(1.1) of the Income Tax Act (the "Act") can be considered "specified partnership income" or "aggregate investment income" under subsection 125(7) or 129(4) of the Act, respectively.
Position: No.
Reasons: The Act.
XXXXXXXXXX
2012-043824
André Gallant
May 16, 2012
Dear XXXXXXXXXX:
Re: Retired Partner Income
We are writing in reply to your correspondence dated February 27, 2012, wherein you enquire whether income received by a corporation that ceased to be a member of a partnership in accordance with subsection 96(1.1) of the Income Tax Act (the “Act”) can be considered “specified partnership income” or “aggregate investment income” under subsection 125(7) or 129(4) of the Act, respectively.
As we understand it, you envisage a hypothetical situation whereby a Canadian-controlled private corporation, having ceased to be a member of a Canadian partnership that carries on an active business in Canada, is receiving retirement income from the partnership in accordance with subsection 96(1.1) of the Act.
Subsection 96(1.1), which in general deems a taxpayer who has ceased to be a member of the partnership to be deemed to be a member of the partnership, applies for the purposes of subsection 96(1) and sections 34.1, 34.2, 101, 103 and 249.1 of the Act.
Subsection 96(1.6) of the Act in turn deems a taxpayer to carry on a business in Canada if that taxpayer is deemed to be a member of a partnership by virtue of paragraph 96(1.1)(a). Subsection 96(1.6) only applies for the purposes of subsection 2(3), sections 34.1 and 150 and (subject to subsection 34.2(7)) section 34.2 of the Act.
We refer you to Rulings document 9531565. In our view, the income received by the retired corporate partner in your hypothetical situation would not be considered to be “specified partnership income” or “aggregate investment income” under subsection 125(7) or 129(4) of the Act, respectively.
We trust our comments will be of assistance to you.
Yours truly,
G. Moore
for Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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