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.
Please note that the following document, although believed to be
correct at the time of issue, may not represent the current
Position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut
ne pas représenter la position actuelle du ministère.
April 8, 1994
Thunder Bay District Office Head Office
Rulings Directorate
Attention: Mr. Dave A. Kannegiesser (613) 957-8953
7-933642
This is in reply to your memorandum dated December 13, 1993, in which you asked our opinion as to whether contributions to the Canada Pension Plan ("C.P.P.") should be made by a retired partner of an accounting firm with respect to income received by him from that firm after his retirement.
Section 10 of the Canada Pension Plan (the "Act"), R.S.C., c. C- 8, provides that every individual who is resident in Canada for the purposes of the Income Tax Act (the "I.T.A.") during a year and who has contributory self-employed earnings for the year shall make a contribution for the year under the Act. Section 13 of the Act provides, among other things, that the amount of the contributory self-employed earnings of a person is the amount of his self-employed earnings for the year. The expression "self- employed earnings" is defined in section 14 of the Act. Paragraph 14(a) of the Act provides that:
"14. The amount of the self-employed earnings of a person for a year is the aggregate of (a) an amount equal to
(i) his income for the year from all businesses, other than a business more than fifty per cent of the gross revenue of which consisted of rent from land or buildings, carried on by him,
minus
(ii) all losses sustained by him in the year in carrying on those businesses,
as such income and losses are computed under the Income Tax Act, except any such income or losses from the performance of services described in paragraph 7(1)(d) that has been included in pensionable employment by a regulation made under subsection 7(1) or by a regulation made under a provincial pension plan."
(our emphasis)
When an allocation of income is made by a partnership to a person in respect of a period in which that person was a partner, even if, at the time of allocation, that person is no longer a partner, that amount represents income from a business carried on by him and is subject to contributions under the Act to the extent that at that time he is not receiving C.P.P. benefits.
With respect to an allocation of business income by a partnership to a retired partner, in respect of a period in which that person was not a partner, it appears, as discussed with Mrs. Hélène Scantland ((613) 952-5433) of the C.P.P. & U.I. Programs (Source Deductions Division of Revenue Collection Programs Directorate), that the Department's position is that the amount allocated to the retired partner is subject to C.P.P. contributions unless, at the time of allocation, the retired partner is receiving C.P.P. benefits. According to Mrs. Scantland no distinction has been made by the Revenue Collection Programs Directorate between income from a business carried on by the taxpayer and income from a business not carried on by the taxpayer.
However, our initial impression was that an allocation of partnership income to a retired partner in respect of a period in which the retired partner is not a partner should not be subject to C.P.P. contributions since that income is not from a business carried on by the retired partner as section 14 of the Act seems to suggest. The I.T.A. may deem the income allocated to a retired partner to be business income for the purposes of the I.T.A. (see subsection 96(1.1) of the I.T.A.) but there is no provision that deems the retired partner to carry on a business (except subsection 96(1.6) of the I.T.A. that is applicable only with respect to non-resident of Canada)).
For any further assistance regarding the foregoing, you may consider contacting directly the C.P.P. & U.I. Programs at (613) 952-5422.
Marc Vanasse
Acting Section Chief
Merchandising, Manufacturing
and Partnerships Section
Manufacturing Industries,
Partnerships and Trusts Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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