3 October 2000 External T.I. 2000-0041025 - Books and Records

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: keeping books and records

Position: comments provided.

Reasons: legislation.

									2000-004102
XXXXXXXXXX 								B.G. Dodd
(613) 957-8953
October 3, 2000

Dear XXXXXXXXXX:

We are writing in reply to your letter dated July 30, 2000 concerning the keeping of records for income tax purposes.

As both a member of a partnership and a shareholder of a corporation, you are concerned that the books and records of the partnership and those of the corporation have been combined and reflected as the records of the corporation for tax purposes. You indicate you are a locked-out partner and shareholder and that the matter is now before the courts. You have requested our comments on the "mixing" of records in this manner. We note below certain provisions of the Income Tax Act (the "Act") which you may find useful.

Pursuant to subsection 2(1) of the Act, an income tax is to be paid on the taxable income of every person resident in Canada. While an individual is clearly a person and, therefore, must pay an income tax on his or her taxable income, subsection 248(1) of the Act also provides that a corporation is a person and as such, it must pay an income tax on its taxable income.

Subsection 230(1) of the Act provides, among other things, that every person carrying on business and every person who is required to pay taxes under the Act shall keep records and books of account (including an annual inventory) at the person's place of business or residence in Canada (or at such other place as may be designated by the Minister of National Revenue) in such form and containing such information as will enable the taxes payable under the Act to be determined. A corporation, being a person for purposes of the Act, must, therefore, keep appropriate records such that its taxes payable can be determined. The same is true in the case of an individual.

A partnership is not a person. However, subsection 96(1) of the Act which sets out certain general rules regarding partnerships, provides, among other things, that a partner's income shall be computed as if: the partnership were a separate person resident in Canada; the taxation year of the partnership were its fiscal year; and each partnership activity were carried on by the partnership as a separate person. Through the operation of subsection 221(1) of the Act and section 229 of the Income Tax Regulations, an annual partnership information return is required to be filed, containing certain information such as the income or loss of the partnership for the year and each member's share thereof. The requirements in this regard, including those dealing with books and records, are described in our Guide for the Partnership Information Return as well as Information Circular 89-5R, both of which can be obtained from your local taxation services office or from our web site (www.ccra-adrc.gc.ca).

We hope this will be of assistance to you.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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