CRA confirms that the inclusion (or not) of partnership stub period earnings in a company’s retained earnings for thin cap purposes is governed by Canadian GAAP

Given that retained earnings of a Canadian company for thin cap purposes generally is to be determined in accordance with Canadian GAAP, those retained earnings could include the company’s share of stub period earnings of a partnership of which it was a member (if such inclusion occurred under GAAP), even if, under s. 96, income of the partnership for the stub period was not yet includible in the company’s income.

Neal Armstrong.  Summary of 24 December 2013 Memo 2013-0512551I7 under s. 18(4).