CRA indicates that a nominee potentially could qualify as an operator for purposes of the GST JV election if it also has a “marginal” beneficial ownership interest
Until CRA announced that it would start challenging such arrangements, it was somewhat common for nominee corporations to be designated as operators under an ETA s. 273 JV election for a real estate co-ownership. Can the CRA position be addressed by providing that the nominee will also have a marginal interest (e.g. 0.001%) in the joint venture?
CRA responded that although it is “a question of fact whether such an arrangement is a joint venture at law,” a “corporation with a marginal financial contribution to a joint venture in exchange for a co-ownership interest and proportionate share of profit (or losses) as well as other necessary attributes may be a ‘participant’ as defined in paragraph (a) of … P-106 … .
It went on to indicate that the earning by the corporation of “its own income brings into question whether the corporation is a nominee corporation; in other words, whether the nominee corporation is a trustee of a bare trust.” (This latter point presumably is pointing only to the need for clear documentation that the nominee is holding, except as to the marginal interest, as nominee and agent.)