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.
Your memorandum of October 17 to Mr. J. G. Pilon has been referred to this Division for reply.
It is understood for your telephone conversation with Jacques Grise that it has not been conclusively determined that XXX is a partnership. The Canadian administrators of XXX have indicated that the owners hold an undivided interest in the office building. We will consider both situtaitons in our opinions on the application of Part XIII tax on the mortgage payments being made by XXX to a XXX resident. We assume the mortgage in question has been in existence since 1969 with no modifications.
If each of the owners simply have an undivided interest in the property, it will be necessary to look at each individual's residence in applying Part XIII on the proportion of the payments equal to his interest in the property. Withholding tax would be required on the Canadian resident's share of the mortgage payments to the XXX resident. Paragraph 212(13)(f) of the Income Tax Act would not apply on the share of the non-resident owners since the mortgage was not entered into or issued or modified after March 31, 1977.
In view of the coming into force provisions, paragraph 212(13.1)(a) of the Act would not appaly if we are dealing with a partnership since the mortgage agreement was entered into before May 7, 1974. With the exception of subsection 212(13.1) of the Act, there is no provision in the Act which deems a partnership to be a person, notwithstanding that section 96 provides that the income of a member of a partnership is computed as if the partnership were a separate person resident in Canada. We would not look through the partnership to apply Part XIII tax on the proportion of the payments that would apply to the Canadian partners.
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