11 January 1996 External T.I. 9520815 - RETIRED PARTNER CPP

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.

									Cal Brown
XXXXXXXXXX							(613) 957-8980
									952081

Attention: XXXXXXXXXX

January 11, 1996

Dear Sir\Madam:

Re: Subsection 96(1.1) of the Income Tax Act

This is in reply to your letter of August 3, 1995, concerning proposed subsection 33(4) of the Income Tax Act (the "Act") and its application to retired partners who are subject to subsection 96(1.1) of the Act. We apologize for the delay in replying to this request.

Your letter referred to a specific partnership arrangement. We are not prepared to provide comments with respect to a specific situation. However, the following comments may be of assistance.

Retired partners receiving an allocation of partnership income are receiving business income pursuant to the provisions of subsections 96(1.1) and 96(1.6) of the Act. However, since the partner, as a matter of fact, is retired, he or she would usually not be considered to personally "carry on the business" except for non-resident purposes under subsection 96(1.6), as presently, legislated where the partner is deemed to carry on the business.

The December 12, 1995 Notice of Ways and Means proposes amendments to subsections 96(1.1) and 96(1.6) of the Act. These amendments will expand the deeming provision under subsection 96(1.1) and deem a retired partner who is subject to the provisions of subsection 96(1.1) to carry on the business for purposes of proposed sections 34.1 and 34.2. Proposed sections 34.1 and 34.2 replace the amendments that were initially proposed under section 33 of the Act.

The proposed amendments to subsections 96(1.1) and 96(1.6) in conjunction with proposed sections 34.1 and 34.2 will ensure that such a retired partner will be able to claim the reserve formerly proposed under subsection 33(4) of the Act.

Yours truly,

for Director
Manufacturing Industries, Partnerships
and Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch