12 April 1996 External T.I. 9520025 - PROVINCIAL OR TERRITORIAL JURISDICTION

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.

5-952002
XXXXXXXXXX J. Teixeira
(613) 957-8953

April 12, 1996

Dear Sir:

Re: Provincial or Territorial Jurisdiction where corporation earned its income

This is in reply to your letter of July 21, 1995 in which you requested our interpretation of how taxable income earned by a corporation is to be allocated to each jurisdiction. The situation described in your letter is in regard to a corporation which has a permanent establishment in each province and is also a limited partner in a limited partnership operating in two provinces.

It is our position that each member of a partnership has a permanent establishment in the province where the partnership has a permanent establishment. This applies to both general and limited partners.

For the purpose of Regulation 402(3) under the Income Tax Act, Regulation 402(6) provides that where a corporation conducts part of its operations in partnership with one or more persons, its gross revenue and salary and wages for the year include that proportion of the total gross revenue and salary and wages of the operations that its share of profit or loss from such operations is of the total loss or profit of the operations or partnership in the partnership year ending in the corporation's fiscal year. There is nothing in Regulation 402(3) to suggest that taxable income earned directly by a corporation is to be allocated separately from its taxable income earned through a partnership. Therefore, the allocation of taxable income earned by a corporation in such a situation would not be done, firstly, on the basis of its income from a partnership earned in a permanent establishment that the partnership has in a province and the residue on the basis of the corporation's income excluding the income from the partnership.

The foregoing comments are not rulings and, in accordance with the practice referred to in Information Circular 70-6R2 dated September 28, 1990, are not binding on Revenue Canada.

Yours truly,

for Director
Reorganization and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch