24 July 1995 External T.I. 9515905 - PARTNERSHIPS UNDER 60(J.1)

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:

Whether Dept. accepts that a corporation can be a "person related to the employer" under 60(j.1)(v) where the current employer is a partnership.

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

Although a "partnership" is not a "person" under the Act we have already agreed (in 9123365) that a partnership can be an "employer" for purposes of 60(j.1) and that two partnerships can be "related" persons under this provision; therefore, as contemplated by 60(j.1)(iv) and (v), it is acceptable that a former non-partnership employer can be a "person related to the (partnership) employer" where the conditions of those provisions are satisfied under the Act.

XXXXXXXXXX 951590

Attention: XXXXXXXXXX

July 24, 1995

Dear Sirs:

Re: "Employer" and "Person Related to the Employer"
As Used in paragraph 60(j.1) of the Income Tax Act

This is in reply to your letter of June 14, 1995, in which you ask for our comments concerning the above-noted topic. In particular you ask whether the Department would accept a partnership as an "employer" and a previous employer as a "person related to the employer" where the previous employer is a corporation and the employee's service with the corporation is recognized in determining pension benefits under the partnership's pension plan.

In your letter you refer to a previous opinion (document number 912336) concerning two partnerships and comment that from the views expressed in this opinion it appears that the Department is willing to accept a partnership as an "employer" for purposes of paragraph 60(j.1) of the Income Tax Act (the "Act").

The aforementioned opinion refers to paragraph 1 of Interpretation Bulletin IT-90 where it is stated that a "partnership is not a person, nor is it deemed to be within the meaning of the Act, notwithstanding that section 96 provides that the income of a member of a partnership is computed as if the partnership were a separate person resident in Canada".

The opinion then goes on, however, to state that where all members of a partnership (former employer) are related, within the meaning of subsection 251(2) of the Act, to all members of the partnership (current employer), then the former employer will be considered to be a "person related to the employer" for purposes of paragraph 60(j.1).

In addition, in the circumstances where either subparagraph 60(j.1)(iv) or (v) of the Act apply, namely where the partnership has acquired or continued a corporation's business or where the partnership's pension plan will provide benefits based on the employee's former service with a corporation, the Department will accept that that corporation is a "person related to the employer" (i.e., the partnership) for the purposes of paragraph 60(j.1) of the Act.

We trust the foregoing comments are of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch