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.
CORPORATE MANAGEMENT TAX CONFERENCEROUND TABLEJUNE 1993
Characterization of Foreign Entities
Question 12
It is possible in certain U.S. states to incorporate a U.S. limited liability company. Such an entity may be characterized as a partnership for U.S. tax purposes such that the U.S. will tax the shareholders of the limited liability company as partners.
Will Revenue Canada treat U.S. limited liability companies as corporations for Canadian tax purposes or will they be considered to be partnerships? If they are treated as corporations, how will the surplus of a U.S. limited liability company be computed under the Canadian foreign affiliate regulations?
Department's Position
The appropriate treatment for purposes of the Income Tax Act (the "Act") will depend on the law under which the limited liability company is organized. There are presently over twenty-five states with such legislation. The limited liability companies in the two cases that we have reviewed, Wyoming and Florida, would be considered corporations rather than partnerships.
Where the U.S. limited liability company is considered a corporation for purposes of the Act and is a foreign affiliate pursuant to paragraph 95(1)(d) of the Act, a computation of its surplus accounts for purpose of the foreign affiliate regulations will be done in a manner similar to that of any other foreign affiliate.
Prepared by: J. Wilson
Date: May 19, 1993 (Control #931462)
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