7 November 1989 Ministerial Letter 58638 F - Joint Venture Year Ends

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.

November 7, 1989

Dear Sirs:

Re:  Joint Venture Year Ends

We are writing in reply to your letter of August 31, 1989 in which you requested a technical interpretation as to whether a joint venture would continue to exist if it disposed of its principal property.

In the letter you have given examples, situations in which joint ventures have sold their principal properties and have taken mortgages or notes receivable, or have undertaken to provide warranty work for years subsequent to the sale.  You have requested our comments as to whether the joint ventures end at the time of the sale of the principal properties, or at the time when the mortgages or notes receivable have been collected, or the warranty agreement completed.

Our comments

As stated at the 1989 Corporate Management Tax Conference (and quoted in your letter), it is the Department's view that the fiscal period of a joint venture will generally end at the time of disposition of the property which is the subject matter of the venture.  Generally, some of the more important criteria which characterize the existence of a joint venture are:

1)     A joint property interest in the subject matter of the venture.

2)     A right of mutual control and management of the enterprise.

3)     A limitation of the objective to a singular or limited number of undertakings.

Where the principal property has been disposed of a joint venture would generally cease to exist as the subject matter of the joint venture is gone, the ongoing enterprise has ceased and the undertaking has ended.  In situations where a mortgage or note receivable exists or a warranty has been given, it is the Department's opinion that the passive activities involved would not generally met the definition of a joint venture.  No administrative policy exists which would allow the continued use of a separate fiscal year end in the above situations.

We trust our comments will be of assistance.

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch