24 July 1985 Income Tax Severed Letter B-6236 - [850724]

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.

July 24, 1985

Audit Directorate Specialized Audit Division

Non-Corporate Rulings Division A.G. Thornley

S.C. Lemelin

XXXX

This is in reply to your T2003 of July 9, 1985, and further to a telephone conversation with David Aldridge of your Division on July 22, 1985, concerning the issuance of Notices of Determination in respect of the above-noted taxpayer.

We understand that you are requesting our opinion on the following two matters.

(1) Is the income or loss of a partnership taxable in the hands of the partners for the purposes of Part I of the Income Tax Act periodically as it accrued, or on the last day of the fiscal year of the partnership?

It is our view, which we have stated previously, that pursuant to subsection 96(1) of the Act, where a member of a partnership is resident in Canada when the partnership's taxation year (fiscal period) ends he is subject to tax under Part I of the Act on his full share of the partnership income (loss) for that fiscal period. (The amount is included in his income for his taxation year in which the partnership's fiscal period ends.) We note that the same result is obtained in the case of a proprietor, pursuant to subsection 11(1) of the Act.

(2) Is the taxpayer entitled to use the accrual method to declare interest received in 1985 on an overpayment of income taxes as a result of a reassessment?

Interest paid or credited in respect of an overpayment of tax under subsection 164(3) of the Act is taxable under paragraph 12(1)(c) of the Act (see paragraph 14 of IT-396R ). Pursuant to that paragraph interest is required to be included in income as "received or receivable by him in the year...." Since a taxpayer has no entitlement to the interest provided for in subsection 164(3) of the Act until a notice of assessment (or reassessment) is issued by the Department, such interest is not required to be included in the taxpayer's income by virtue of paragraph 12(1)(c) of the Act before such time. The taxpayer in question has not included the interest in income for a previous year (and unless the Department would administratively accept revised returns from the taxpayer for the preceding years) the interest is taxable when received or receivable as paragraph 12(1)(c) of the Act provides.

for Director Non-Corporate Rulings Division ss 96(1) & 164(3) para. 12(1)(c)