28 November 1995 External T.I. 9505645 - KENTUCKY LLC

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 a LLC formed under the laws of Kentucky be considered a corporation for purposes of the Act

Position:

Yes

Reasons:

see issue sheet on file 950564

		950564
XXXXXXXXXX	S. Leung

Attention: XXXXXXXXXX

November 28, 1995

Dear Sirs:

Re: Kentucky Limited Liability Company

We are writing in response to your letter of February 28, 1995 wherein you requested our view as to whether the Department would consider a limited liability company ("LLC") formed under Chapter 275 Limited Liability Companies (known and cited as the "Kentucky Limited Liability Company Act") to be a corporation for purposes of the Income Tax Act (the "Act").

We are of the opinion that a LLC formed under the Kentucky Limited Liability Company Act ("Kentucky LLC") would be a corporation for purposes of the Act. A Kentucky LLC 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 Kentucky LLC is considered to have capital stock consisting of 100 issued shares and each owner of a beneficial interest in the Kentucky LLC is then considered to own a number of shares proportionate to his beneficial interest in the Kentucky LLC. Each amount distributed on account of profits by the Kentucky LLC to its owners will be considered dividends for the purpose of the Act and the Regulations made thereunder.

Where the mind and management of the Kentucky LLC is situated in the U.S., the Kentucky LLC will be considered resident in the United States for purposes of the Act. However, if the Kentucky LLC is treated as a partnership for the purposes of the Internal Revenue Code (the "Code") such that the shareholders ("partners") rather than the Kentucky LLC are liable to tax under the Code on the income of the Kentucky LLC, such Kentucky LLC will not be considered to be a resident of the U.S. under paragraph 1 of Article 4 of the Canada-U.S. Income Tax Convention (the "Convention"). In such case a Kentucky LLC 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.

If the Kentucky LLC's mind and management is in Canada, the company will not be a foreign affiliate but will be taxed under the Act as a resident of Canada.

We trust you will find the above comments to be of assistance to you.

Yours truly,

for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch