3 May 2001 External T.I. 2001-0069115 - ELECTION BY JOINT VENTURERERS AS LESSEES

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: Section 16.1 election by joint venturers as lessees

Position: Joint venturers can make an election as a lessee under section 16.1 with a lessor independently of the other joint venturers.

Reasons: Because of their legal status, each joint venturer, as a lessee, would be able to make an election under section 16.1 independently of the co-joint venturers on their respective proportional interest in the assets leased through the joint venture.

XXXXXXXXXX 						2001-006911
							Yves Leclerc
May 3, 2001

Dear XXXXXXXXXX:

Re: Section 16.1 election by a joint venture as lessee

This is in reply to your letter dated January 31, 2001 in which you requested a technical interpretation with respect to the application of section 16.1 in the context of a joint venture. Particularly, you are inquiring as to whether or not all the joint venturers (i.e. lessees) in a joint venture, which leases a tangible property through the joint venture, have to elect under section 16.1 or whether a particular lessee may make such an election independent of whether the other lessees choose to make the election.

Our comments

The facts in your letter appear to relate to a factual situation involving specific taxpayers. As explained in Information Circular 70-6R4, it is not this Directorate’s practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. Nevertheless, we offer the following general comments in connection with your request.

Joint ventures are formed pursuant to a contractual agreement between two or more persons and are not, in and of themselves, a separate person. Accordingly, it is generally our view that each joint venturer in a joint venture that has leased property from a lessor through the joint venture would make a separate election in respect of its interest in the lease. It would not matter whether or not other joint venturers made such an election in respect of their interests in the lease. However, where the election is not made by every joint venturer, it would be expected that each joint venturer would keep its own account of its interest in the lease for income tax purposes such that deductions associated with the lease would not enter into the computation of the income of the joint venture.

The above comments are an expression of opinion only and, as explained in paragraph 22 of Information Circular 70-6R4, are not binding on the Canada Customs and Revenue Agency.

We hope that these comments will be of assistance.

for Director
Financial Industries Division
Income Tax Rulings Directorate