13 July 1995 External T.I. 9518095 - 6363-1 FOREIGN AFFILIATES - DEF'N OF CORPORATION

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.

		951809
XXXXXXXXXX		Olli Laurikainen
(613) 957-2116
Attention:  XXXXXXXXXX

July 13, 1995

Dear Sirs:

Re: New York Limited Liability Company

This is in response to your request for a technical interpretation in reference to the classification for the purposes of the Income Tax Act (the "Act") of a limited liability company (a "NYLLC") created under the New York Limited Liability Company Law (the "NYLLCL").

You are particularly interested whether a NYLLC would be considered a corporation for the purposes of the Act in circumstances where all of its members are liable in their capacity as members for all debts, obligations or liabilities of the NYLLC as a result of a statement to such effect having been specifically entered into the articles of organization of the particular NYLLC.

Based on our review of the NYLLCL, we are of the opinion that a company formed under the NYLLCL would be a corporation for the purposes of the Act notwithstanding that all of its members are liable in their capacity as members for all its debts, obligations or liabilities as a result of a statement to such effect in the articles of organization thereof. However, this opinion should not be construed as having application to similar limited liability companies created under the limited liability laws of other U.S. states. A NYLLC would be a foreign affiliate of a resident of Canada provided the requisites of the definition thereof in subsection 95(1) of the Act are otherwise satisfied.

In accordance with Interpretation Bulletin IT-392, a NYLLC is considered to have capital stock consisting of 100 issued shares and each owner of a beneficial interest in the NYLLC is then considered to own a number of shares proportionate to his beneficial interest in the NYLLC. Each amount distributed on account of profits by the NYLLC to its owners will be considered dividends for the purpose of the Act and the Regulations made thereunder.

If the NYLLC is treated as a partnership for the purposes of the Internal Revenue Code (the "Code") such that the shareholders ("partners") rather than the NYLLC are liable to tax under the Code on the income of the NYLLC, such NYLLC will not be considered to be a resident of the U.S. pursuant to paragraph 1 of Article 4 of the Canada-U.S. Income Tax Convention (the "Convention"). If the NYLLC's mind and management is in Canada, it will qualify as a resident of Canada pursuant to paragraph 1 of Article 4 of the Convention. Being only a resident of Canada for purposes of the Convention, neither paragraph 3 of Article 4 of the Convention nor subsection 250(5) of the Act will apply. The company will not be a foreign affiliate but will be taxed under the Act as a resident of Canada.

On the other hand, where the mind and management of the NYLLC is situated in the U.S., resulting in the NYLLC not being considered a resident of Canada for purposes of the Act, it will not be considered as being a resident of either Contracting State for purposes of the Convention, if it is treated as a partnership for purposes of the Code. In such case a NYLLC that is a foreign affiliate of a resident of Canada would nevertheless qualify as being resident in a listed country for the purposes of the Regulations to the Act and resident in a "designated treaty country" for the purposes of the Draft Regulations to the Act issued by the Department of Finance in January 1995 by virtue of draft paragraph 5907(11.2)(b) of the Regulations.

We trust the above information will be of assistance to you.

Yours truly,
Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch