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.
Principal Issues:
Is the common trust fund a flow-through entity as defined in subsection 39.1(1)?
Position TAKEN:
Yes.
Reasons FOR POSITION TAKEN:
Fund has elected to be treated as a partnership for tax purposes.
950992
XXXXXXXXXX T. Murphy
(613) 957-8953
Attention: XXXXXXXXXX
July 11, 1995
Dear Sirs:
Re: XXXXXXXXXX
This is in reply to your letter of March 30, 1995 wherein you enquired whether the above trust would be considered to be a flow-through entity as defined in (draft at the time of your letter) subsection 39.1(1) of the Income Tax Act. Attached to your letter was a copy of an opinion letter issued by Revenue Canada on February 22, 1980 wherein the Department agreed that the Fund would be entitled to use the modified partnership basis as described in Information Circular 73-13. We apologize for the delay of our response.
The election of the modified partnership basis as described in the circular means that for purposes of computing income for tax purposes the Fund is essentially treated as if it were a partnership and unitholders of the Fund are treated as if each owned a partnership interest.
We understand that the Fund has been using the modified partnership basis to report its income for tax purposes since its 1979 taxation year on the basis of the opinion letter from Revenue Canada and that the Fund has continued to comply with the conditions specified in paragraphs 14 and 15 of the circular. Therefore, in our opinion, as the Fund has "elected" to be treated as a partnership for tax purposes it would be considered to be a flow-through entity.
We trust our comments will be of assistance to you.
Yours truly,
R.S. Biscaro
Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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