Subsection 103(1) - Agreement to share income, etc., so as to reduce or postpone tax otherwise payable
Cases
Canada v. 594710 British Columbia Ltd., 2018 FCA 166
Income account treatment of the profits realized by a condo-project limited partnership was avoided by the corporate partners (the Partnercos) of...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | allocation of most partnership profits to a lossco that acquired its interest at year end without economic risk was vacuous and abused ss. 96(1)(f), 103(1) and 160 | 634 |
| Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) | stock dividend followed by redemption of the stock dividend shares effected in combination a transfer of property for no consideration | 334 |
| Tax Topics - Income Tax Act - Section 152 - Subsection 152(8) | s. 152(8) cured an error in an assessment as to when the taxation year in question commenced | 371 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | purpose of s. 96 is for income allocation to be allocated in accordance with economic participation | 102 |
Signum Communications Inc. v. The Queen, 88 DTC 6427, [1988] 2 CTC 239 (FCTD)
S.103 did not apply to limit a limited partner's share of partnership losses to the amount of capital invested by him. "[W]hen there is a...
See Also
Pinnacle International Realty Group II Inc. v. The King, 2023 TCC 161
The taxpayer and another wholly-owned subsidiary (“Taylor”) of the same corporation (“PIRG”) were the 5% and 95% partners, respectively,...
Stow v. The Queen, 2010 TCC 406, 2010 DTC 1275 [at 3916]
The taxpayer bought an 80% share of a partnership from his wife's business corporation for $1 million and then reported 80% of the partnership's...
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| Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1.1) | 84 |
Jones Development Corp. v. The Queen, 2009 DTC 1452, 2009 DTC 1266
Capital gains realized by a partnership, of which the taxpayer was a partner, as a result of land being disposed of by the partnership which had a...
Penn West Petroleum Ltd. v. The Queen, 2007 DTC 715, 2007 TCC 190
In order to accomplish a sale of two oil and gas properties that were held by a partnership of which the taxpayer was a substantial partner, it...
XCO Investments Ltd. v. The Queen, 2005 DTC 1731, 2005 TCC 655
A partnership owned by the taxpayers admitted a third party ("Woodward") as a member of the -partnership with a view to selling an apartment...
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| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | GAAR could be applied to unreasonable partnership allocation | 180 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | 105 |
MacKinlay v. Arthur Young McClelland Moores & Co., [1989] S.TC 898 (HL)
In discussing the nature of a partnership, Lord Oliver stated (p. 900):
"A partner working in the business or undertaking of the partnership is in...
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| Tax Topics - Income Tax Act - Section 96 | partner salary is a draw | 82 |
Administrative Policy
30 October 2006 External T.I. 2006-0170071E5 F - Attribution de revenus - société en commandite
A limited partnership (LP) with various limited partners received a contribution of a building (with a UCC of $3 million and an FMV of $4 million)...
7 October 2016 APFF Roundtable Q. 19, 2016-0655841C6 F - Reimbursement of attributed income
Partner B (a corporation) is assessed under s. 103 on the basis that 40% rather than 10% of the income of the LP should have been included in its...
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| Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(1) | no domestic secondary adjustment doctrine | 218 |
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) | excess disposition proceeds not required to be repaid | 91 |
28 October 2014 Internal T.I. 2014-0529981I7 - Allocation of partnership loss to a former partner
The Taxpayer entered into the "Purchase Agreement" for the purchase of a limited partnership (the "Partnership") with substantial current losses...
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| Tax Topics - Income Tax Act - Section 80.01 - Subsection 80.01(6) | underwater debt funnelled through GP to avoid debt parking rules | 296 |
2 December 2014 CTF Roundtable, Q5
Does CRA accept the streaming of certain types of income (e.g., interest income) to a particular partner of a partnership where the partnership...
10 March 2014 Internal T.I. 2013-0493971I7 F - Application of section 120.4
The professional income generated by an individual was earned, at least in part, by a limited liability partnership (SENCRL) of which one of the...
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| Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1.1) | allocation of income to partner not responsible for expenses | 185 |
| Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Split Income - Paragraph (c) | LP income not from property provision or services | 128 |
2012 Ruling 2011-0421261R3 - Partnership Allocation
A majority of the shares of BCo (a taxable Canadian corporation) are held by ACo (also a taxable Canadian corporation), while the balance of the...
28 December 2011 Internal T.I. 2011-0422791I7 F - Fraction à risque
CRA continues to accept that where a partner has contributed knowledge or know-how to the partnership rather than making a financial contribution,...
20 August 2008 External T.I. 2008-0288561E5 F - Convention de partage d'une société de personnes
After indicating that an agreement to allocate income to a retired partner generally would be respected but for there being no partnership net...
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| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1.1) | no income could be allocated under s. 96(1.1) where aggregate income was nil | 119 |
| Tax Topics - Income Tax Act - Section 53 - Subsection 53(2) - Paragraph 53(2)(c) - Subparagraph 53(2)(c)(v) | payment to a retired partner in excess of partnership income is treated as a constructive withdrawal of capital by the other partners, reducing their ACB | 127 |
10 January 2008 External T.I. 2007-0227191E5 F - REVENUS D'UNE SOCIÉTÉ DE PERS. - PART PRIVILÉGIÉE
In connection with a query on the implications of holding a preferred unit in a partnership, i.e., a unit that confers on its holder a preferred...
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| Tax Topics - Income Tax Act - Section 53 - Subsection 53(1) - Paragraph 53(1)(e) - Subparagraph 53(1)(e)(i) | division of partnership interest into preferred and common units does not affect determination of partnership interest’s ACB | 116 |
14 June 2007 External T.I. 2006-0209341E5 F - Utilisation d'un bien d'une société de personnes
A partnership in whose farming business the partners are actively involved owns the residence of one of the partners, who does not pay rent, but...
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| Tax Topics - Income Tax Act - Section 96 - Subsection 96(2.2) - Paragraph 96(2.2)(d) | personal use of property could engage s. 96(2.2)(d) | 104 |
| Tax Topics - Income Tax Act - Section 246 - Subsection 246(1) | conferral-of-benefit provisions do not apply to a partner’s personal use of partnership property other than car | 71 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose | partner’s use of partnership property is addressed by denying partnership income deductions and under s. 103, rather than through benefit-conferral provisions | 112 |
10 October 2006 Internal T.I. 2006-0169051I7 - Successor Pool Issues
Adverse comments on a situation where all the income allocable to one of the two partners of a resource partnership comprised income purportedly...
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| Tax Topics - Income Tax Act - Section 66.7 - Subsection 66.7(5) | 89 |
Income Tax Technical News, No. 30, 21 May 2004
Although there is no impediment to the creation of partnership interests that carry different entitlements to share in the income or other...
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| Tax Topics - Income Tax Act - Section 111 - Subsection 111(1) - Paragraph 111(1)(a) | dollar amounts not artificial; parent lossco must have independent income source | 135 |
| Tax Topics - Income Tax Act - Section 111 - Subsection 111(5) - Paragraph 111(5)(a) | 25 | |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | no reserve if substantial peformance | 105 |
| Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Subparagraph 212(1)(b)(vii) | 108 | |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 92 | |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | general partner cannot contract on its own account with partnership | 163 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(g) | 36 |
25 March 1997 External T.I. 9634905 - SERVICES PARTNERSHIPS AND PROFESSIONAL FIRMS
The use of a services partnership (the members of which includes inter vivos trusts for the benefit of members of the families of various members...
2 August 1995 Internal T.I. 9513447 - ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES
S.103(1) or (1.1) likely would apply where a corporation that was carrying on an R&D project formed a general partnership, transferred its assets...
Rulings Directorate Discussion and Position Paper on Motion Picture Films and Video Tapes as Tax Shelters, Version 29/3/93 930501 (C.T.O. "Motion Picture Films - C.C.A.")
"Revenue Canada could argue that it is not reasonable to allocate to the limited partners the losses referable to the partnership property for...
92 C.R. - Q.13
Whether or not a partnership is used for estate-freezing purposes, the allocation of income should recognize the partners' respective capital and...
30 November 1991 Round Table (4M0462), Q. 6.1 - Contribution of Knowledge vs. Financial Contribution (C.T.O. September 1994)
A payment made, or a credit made to a partner's 'capital' account, in consideration of its commitment to perform work for the partnership will be...
91 C.R. - Q.4
One of the considerations in determining the reasonableness of profit allocation is any personal use by a partner of partnership property.
17 July 1991 T.I. (Tax Window, No. 6, p. 14, ¶1356)
A minimum return on capital paid to a partner may be considered interest income of the partner even though no deduction is available to the...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c) | 28 |
90 C.P.T.J. - Q.8
Generally partnership agreements provide for the sharing of profits and losses on the same basis from year to year, and any deviation from this...
88 C.R. - Q.18
RC will not ordinarily apply s. 103 to challenge an allocation where it is clear that the profits and losses of the partnership are determined...
79 C.R. - Q.36
Generally, partnership agreements provide for the sharing of profits and losses on the same basis, and a deviation from this pattern should be...
IT-338R2
Allocation of deferred s. 97(2) gain to the partner who rolled in generally is acceptable
5. A partnership agreement may provide that partnership...
IT-138R "Computation and Flow-through of Partnership Income"
Salaries paid by a partnership to its members are a method of distributing partnership income. Such distributions are to be allocated as taxable...
Subsection 103(1.1) - Agreement to share income, etc., in unreasonable proportions
Cases
Filion v. Canada, 2004 DTC 6579, 2004 FCA 135
There was no patently unreasonable error in the finding of the Tax Court judge that the individual taxpayer had income of the partnership...
See Also
Aquilini (Estate) v. The Queen, 2019 TCC 132
The real estate rental and development business for the family of Luigi Aquilini and his wife, Elisa, was reorganized such that most of the assets...
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| Tax Topics - Income Tax Act - Section 96 - Subsection 96(2) | s. 96(2) reinforced application of s. 102(2) | 36 |
Paajanen v. The Queen, 2011 DTC 1229 [at 1333], 2011 TCC 310 (Informal Procedure)
The taxpayers were a married couple. Mrs. Paajanen ran a retail business, and formed a partnership with her sister, whose husband had died and...
Stow v. The Queen, 2010 TCC 406, 2010 DTC 1275 [at 3916]
The taxpayer bought an 80% share of a partnership from his wife's business corporation for $1 million and then reported 80% of the partnership's...
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| Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) | 80 |
Krauss v. The Queen, 2009 DTC 1394 [at 2155], 2009 TCC 597
The taxpayer and her son transferred real estate on a rollover basis to a partnership in consideration for Class A units of the partnership having...
Fraser v. R., 97 DTC 1305, [1997] 3 C.T.C. 2073 (TCC)
The taxpayer borrowed $707,000 from a bank, contributed this sum to a partnership between her, her husband and her sister (but without any...
Archbold v. The Queen, [1995] 1 CTC 2872 (TCC)
A partnership between the taxpayer and his wife provided that she was to receive a commission equal to 10% of sales, and 30% of residual profits,...
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| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(g) | 47 |
Administrative Policy
5 October 2018 APFF Roundtable Q. 12, 2018-0768831C6 F - Tax on Split Income and Partnership
CRA confirmed that the tax on split income is inapplicable to a family partnership that invested in the stock market where the children had not...
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| Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Split Income - Paragraph (a) - Subparagraph (a)(i) | family partnership investing in designated stock exchange shares not subject to TOSI rules | 136 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1.8) | having non-contributing children in a family portfolio investment partnership subject to potential challenge under ss. 74.1 and 96(1.8) | 93 |
9 October 2015 APFF Roundtable Q. 18, 2015-0595821C6 F - Ss. 96(1.01) and s. 103
On September 1, 2015, Mr. X, who held 50% of the units of an LP (“SENC”), transferred his units to a wholly-owned corporation ("Xco"). On...
9 October 2015 APFF Roundtable Q. 13, 2015-0595781C6 F - Reimbursement of attributed income
Most of the income of a partnership has been allocated and distributed to a partner which is a personal trust, but CRA reallocates most of such...
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| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | no secondary adjustments are required for the operation of most income attribution provisions | 132 |
10 March 2014 Internal T.I. 2013-0493971I7 F - Application of section 120.4
The professional income generated by an individual was earned, at least in part, by a limited liability partnership (SENCRL) of which one of the...
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| Tax Topics - Income Tax Act - 101-110 - Section 103 - Subsection 103(1) | income-splitting partnership terms | 158 |
| Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Split Income - Paragraph (c) | LP income not from property provision or services | 128 |
5 October 2012 Roundtable, 2012-0454001C6 F - Travail d'un associé d'une société de personnes
CRA was asked whether, in the determination of the reasonableness of income allocated to one of the partners of a partnership, CRA considers that...
7 October 2011 Roundtable, 2011-0399411C6 F - Société de personnes - 103(1.1)
A parent donates money to the parent’s adult children, who jointly invest those amounts in a family partnership newly-formed by them, with...
8 October 2010 Roundtable, 2010-0373361C6 F - Gel successoral - société de personnes
A father and son effect the equivalent of an estate freeze on their 50-50 partnership, so that each receives a preferred partnership interest,...
4 October 2010 External T.I. 2010-0367231E5 F - Convention de partage d'une société de personnes
A couple (Mr. and Mrs. A), who hold 80% and 20%, respective interests in, and devote themselves full time to the business of, a general...
14 January 2004 External T.I. 2003-0029571E5 F - Attribution - société de personnes
A couple (Monsieur and Madame) formed a farming partnership. Monsieur contributed all of the farming business (which previously had been carried...
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| Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(1) | s. 74.1(1) would not apply where farming income is transferred to spouse where she subscribed a nominal amount for farm partnership interest | 206 |
80 C.R. - Q.40
RC will challenge income allocation where one spouse neither actively engages in or invests his or her property in the partnership business.
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| Tax Topics - Income Tax Act - Section 67 | 8 |