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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Can professional corporations choose a fiscal period end other than December 31, as long as it is no more than 53 weeks after the incorporation date and not after December 31 of the year in which the period began.
Position: No.
Reasons: Pursuant to subparagraph 249.1(1)(b)(iii) of the Act, professional corporations which are members of a partnership cannot have a fiscal period that ends after the calendar year in which the period began. Thus, for example, they cannot choose an October 31 fiscal period end, since the following fiscal period would end after the calendar year in which the period began. Accordingly, they have to adopt a December 31 fiscal period end.
XXXXXXXXXX 2001-012572
J. Gibbons, CGA
March 26, 2002
Dear XXXXXXXXXX:
We are replying to your letter dated February 27, 2002, in which you requested our comments concerning subsection 249.1(1) of the Income Tax Act (the "Act") and how it applies to the fiscal period of a newly-incorporated professional corporation.
Our comments are of a general nature only since we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4. In your letter, you described the following situation:
? An existing partnership of professionals has a December 31 year-end.
? Some professional partners will incorporate professional corporations ("Profcos") during 2002.
? Immediately after incorporation, the individual partners will transfer their interest in the partnership to their respective Profcos.
? The Profcos will then become members of the partnership.
Your Views
Profcos are free to choose a fiscal period end other than December 31, as long as it is no more than 53 weeks after the incorporation date and not after December 31 of the year in which the period began. For example, Profcos could use October 31 as their fiscal period end. The partnership would retain its December 31 year-end.
Pursuant to subparagraph 249.1(1)(b)(iii) of the Act, professional corporations which are members of a partnership cannot have a fiscal period that ends after the calendar year in which the period began. Thus, for example, Profcos cannot choose an October 31 fiscal period end, since the following fiscal period would end after the calendar year in which the period began. Accordingly, Profcos must adopt a December 31 fiscal period end. See page 16 of the 2001 T2 Corporation - Income Tax Guide.
We trust that these comments will be of assistance.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
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