Global

Details

  • Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 10/3/2012

Canada - Corporate partners lose deferral when partnership's business changes 

October 3:   The Canada Revenue Agency (CRA)—in a recent technical interpretation—noted that, when a partnership's activity which gave rise to a qualifying transitional income (QTI) reserve for its partners is no longer the partnership's principal activity, the CRA would deny the QTI reserve claimed by the corporate partners.

The QTI allows the partners of a partnership to transition their “stub” period income into taxable income over five years under the corporate partnership tax deferral rules (introduced in the 2011 federal budget).


The CRA noted that a determination of whether a partnership principally carries on the activities to which a QTI reserve relates is a question of fact that involves the consideration of various factors, which are to be considered on a case-by-case basis. For example, the CRA would deny the QTI reserve if a partnership were to dispose of more than 50% of its properties, and this disposition resulted in the partnership's principal activities no longer being the activities to which the QTI reserve related.


Read an October 2012 report prepared by the KPMG member firm in Canada: Corporate Partners Lose Deferral When Partnership's Business Changes




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