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.
Question 21
As a result of the decision in the Ward case, at least one commentator has wondered whether Revenue Canada will apply the "at-risk" principles outlined in subsections 96(2.2) through to 96(2.7) in respect of joint ventures and co-ownerships even in circumstances where the parties expressly disclaim a "partnership". What is Revenue Canada's position with respect to the "atrisk" rules applying in circumstances of co-ownership agreements, joint ventures and other non-partnership business arrangements?
Department's Position
It is a question of fact whether a partnership exists and a disclaimer that a partnership does not exist is not in itself a decisive factor in making that determination. As indicated in paragraph 2 of Interpretation Bulletin IT-90 and Q. 15 of the Revenue Canada Round Table on page 53:38 in the 1988 Conference Report of the Canadian Tax Foundation, the Department will view provincial partnership law as persuasive in determining whether a particular arrangement constitutes a partnership.
In the Federal Government Budget of February 26, 1986, the explanatory notes for the at-risk rules indicated the following:
"While the budget sets out rules which apply specifically to limited and certain other partnerships, it may be necessary to extend these rules to apply to joint ventures and other similar arrangements where the investor has limited liability or otherwise enjoys an indemnity with respect to his investment. Advance tax rulings will continue not to be available for such arrangements where one of the main reasons for the arrangement can reasonably be considered to be to circumvent the at-risk rules."
This position was confirmed in Q. 6 of the Revenue Canada Round Table on page 47:10 in the 1987 Conference Report of the Canadian Tax Foundation.
It is our opinion that the "at-risk" rules in subsections 96(2.2) to (2.7) of the Act apply only to those arrangements where a partnership exists. In our opinion, most syndicates or other co-ownership arrangements would constitute partnerships under provincial laws.
Canadian Tax Foundation - B.C. ConferenceSeptember 1991C. BowenSection 22CCM# 912404
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