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.
JAN 25 1989 Glen Thornley (613) 957-2101
Dear Sirs:
Re: Definition of a "Small Business Corporation"
This is in reply to your letter of November 7, 1988 and further to our telephone conversation (Thornley XXXX of January 9, 1989 concerning the effect of owning an investment in a partnership on the calculation of "all or substantially all of the fair market value of the assets" as that expression is used in subsection 248(1) of the Act with reference to the definition of "small business corporation".
Our Comments
As discussed with you over the telephone, paragraph 6 of Interpretation Bulletin IT-486R would appear to address the question of whether the total fair market value of the assets of a corporation would include the corporation's share of the fair market value of the assets of the partnership. Paragraph 6 of IT-486R states:
"Where a corporation has a partnership interest as one of its assets, it is the underlying partnership assets (to the extent of the corporation's interest therein) that are used in determining whether all or substantially all of the corporation's assets are used in an active business. Provided that these assets are used in an active business carried on primarily in Canada by the partnership, they will qualify."
Thus in the circumstances of your question it is the corporation's proportionate share of the fair market value of the underlying assets of the partnership, in addition to all of the other assets of the corporation, that is taken into consideration in determining if the 90% requirement set out in the definition of "small business corporation" in section 248, is met and, by extension, if the same requirement in the definition of "qualified small business corporation share" in section 110.6 is met.
We trust this is the information you require.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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