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.
XXXXXXXXXX 961068
F. Francis
Attention: XXXXXXXXXX
November 18, 1998
Dear Sirs:
Re: Meaning of Connected Person
This is in reply to your letter of February 22, 1996, wherein you requested our opinion as to whether a partnership could be considered to be connected with a shareholder of a corporation for the purpose of subsection 15(2) of the Income Tax Act (the "Act").
We are of the view that a partnership may be connected with a shareholder of a corporation, within the meaning of subsection 15(2.1) of the Act, notwithstanding that that subsection refers to a person and does not refer specifically to a partnership. As noted in the response to question 28 at the 1990 Canadian Tax Foundation Round Table, it is the Department's practice, relying on the provisions of subsection 96(1) of the Act, to consider a partnership to be a person when the computation of income at the partnership level under Division B of Part 1 of the Act is involved. Accordingly, a partnership would be considered a person for purposes of subsection 15(2.1) of the Act and will be connected with a shareholder of a corporation where the partnership does not deal at arm's length with that shareholder. The determination as to whether a partnership deals at arms' length with an unrelated shareholder is a question of fact. We direct your attention to Interpretation Bulletin IT-419R which discusses the criteria that are relevant in determining whether persons deal with each other at arm's length.
We trust our comments will be of assistance to you. However, as noted in paragraph 22 of Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996, our comments are not binding on the Department.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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