7 February 1992 External T.I. 9131795 F - Penalties

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.

24(1)

Attention:  19(1)

February 7, 1992

Dear Sirs:

Re: Paragraph 96(6)(b) - Penalties

This is in response to your letter, dated November 7,1991, whereby you request an interpretation as to the proper method of calculation of the penalty under paragraph 96(6)(b) of the Income Tax Act (the "Act").

You are more particularly concerned with the calculation of the maximum penalty, established by subparagraph 96(6)(b)(ii) of the Act to be the product obtained by multiplying $100 by a number representing the sum of each part of a month in the period from the due date to the actual filing date of an election made under subsection 98(3) of the Act.

Although it has been indicated to you by Departmental officers that the amount in subparagraph 96(6)(b)(ii) of the Act is computed without reference to the number of former partners who are parties to the subsection 98(3) joint election, Form T2060 would appear, in your view, to require each partner to calculate and remit $100 of each month the joint election was late-filed.

In our opinion, subparagraph 96(6)(b)(ii) requires the calculation of one amount with respect to all persons that filed the joint election under subsection 98(3) of the Act. This is evidenced by the wording of paragraph 96(5)(b):

"an estimate of the penalty in respect of that election is paid... by the persons referred to in subsection 98(3)... when the election is made."

and by the fact that the amount computed under subparagraph 96(6)(b)(i) of the Act is computed as a percentage of the excess of the aggregate of all amounts of money and the fair market value of partnership property received by these persons over the aggregate of each such person's proceeds of disposition of his partnership interest as determined by paragraph 98(3)(a) of the Act.

Although a separate Form T2060 must be filed by each individual former partnership member, it is our view that only one election is made by all the former partnership members. The "Penalty For Late Filed Elections" calculation box on page 1 of Form T2060 refers to partnership property received by all former members in consideration of all interests in the partnership and to the sum of the proceeds of disposition of each former member's partnership interests.

We trust this will be satisfactory.

Yours truly,

for DirectorManufacturing Industries, Partnershipsand Trusts DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch